Denbury (DNRWW) DEF 14ADefinitive proxy

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (“our Board” or “the Board”) of Denbury Resources Inc., a Delaware corporation (“Denbury” or “the Company”), for use at the Company’s annual meeting of stockholders to be held on Thursday, May 28, 2020 at the Company’s corporate headquarters at 5320 Legacy Drive, Plano, Texas 75024, at 8:00 A.M. Central Daylight Time (CDT), or at any adjournment or postponement thereof. As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the annual meeting of stockholders may be held by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be made available. This proxy statement, proxy card and our 2019 Annual Report to Stockholders are being first made available to stockholders on or about April 16, 2020.

As permitted under the rules of the Securities and Exchange Commission (the “SEC”), the Company is making its proxy materials available to its stockholders electronically via the Internet. On or about April 16, 2020, the Company is sending a Notice Regarding the Internet Availability of Proxy Materials (the “Notice”) to its stockholders of record as of the close of business on March 31, 2020. The Notice includes (i) instructions on how to access the Company’s proxy materials and vote via the Internet, (ii) the date, time and location of the annual meeting, (iii) a description of the matters intended to be acted upon at the annual meeting, (iv) a list of the materials being made available electronically, (v) instructions on how a stockholder can request paper copies of the Company’s proxy materials, (vi) any control/identification numbers that a stockholder needs to access the proxy materials and (vii) information about attending the annual meeting and voting in person.

Our Board has fixed the record date for the annual meeting as of the close of business on March 31, 2020.  Only Denbury stockholders of record on the record date are entitled to receive notice of and to vote at the annual meeting.  If you are a holder of our common stock, you are entitled to one vote at the annual meeting for each share of common stock you held on the record date.  On the record date, there were 506,320,160 shares of Denbury common stock issued and outstanding and entitled to vote at the annual meeting.

You are considered a beneficial owner of shares held in “street name” if your shares are held by a broker, bank or other nominee (collectively referred to as a “broker”) on your behalf. If you are a beneficial owner of shares, you will receive instructions from your broker describing how to vote your shares. As a beneficial owner of your shares, you are entitled to direct your broker how to vote your shares. You may instruct your broker on how to vote by completing the voting instruction form provided to you by your broker. You may also vote by telephone or via the Internet if your broker makes such methods available, in which case applicable instructions will be provided to you by your broker. You may change your vote by submitting new voting instructions to your broker in accordance with your broker’s procedures. If you do not instruct your broker on how to vote your shares, your broker may vote your shares as it decides with respect to the matter for which it has discretionary authority (Proposal Five (the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm)) in the absence of timely instructions from you. There are also non-discretionary matters for which your broker does not have discretionary authority to vote unless it receives timely instructions from you: Proposal One (the election of directors), Proposal Two (the non-binding, advisory approval of named executive officer compensation), Proposal Three (amendment and restatement of our 2004 Omnibus Stock and Incentive Plan) and Proposal Four (amendment to the Company’s Second Restated Certificate of Incorporation to (i) effect a reverse stock split of our outstanding shares of common stock at a ratio determined by our Board of Directors from among certain designated alternatives and (ii) if and when the reverse stock split is effected, reduce the number of authorized shares of our common stock). A “broker non-vote” results when a broker does not have discretion to vote on a particular matter, you have not given timely instructions on how the broker should vote your shares and the broker indicates it does not have authority to vote such shares on its proxy. As the beneficial owner of shares, you are invited to attend the annual meeting; however, you may not vote your shares in person at the annual meeting unless you obtain a written proxy from your broker.

We must have present in person or represented by proxy at least one-third of our issued and outstanding shares of common stock entitled to vote at the annual meeting in order to have a quorum.  Abstentions and broker non-votes are counted as present at the annual meeting for purposes of determining whether a quorum is present. With respect to Proposal One (the election of directors), you will not be allowed to cumulate your votes.  You are entitled to vote “for” election of a director nominee, “against” election of a director nominee, or you may “abstain” from voting with respect to a director nominee. In order for a nominee to be elected as director, such nominee must receive the vote of the majority of the votes cast with respect to such nominee at the annual meeting, where a quorum is present. A majority of votes cast means that the number of shares voted “for” a nominee’s election must exceed the total number of shares voted “against” such nominee’s election. Abstentions and broker non-votes will not be counted as votes cast for purposes of the election of directors. With respect to Proposals Two, Three and Five, the affirmative vote of a majority of the shares having voting power present in person or represented by proxy at the annual meeting and entitled to vote on the proposals, where a quorum is present, is required for approval. With respect to Proposal Four, the affirmative vote by the holders of a majority of the outstanding shares of our common stock, entitled to vote thereon, where a quorum is present, is required for approval. Abstentions will be included in the vote total on Proposals Two, Three, Four and Five, such abstentions having the same effect on each such proposal as a negative vote; however, if there is a broker non-vote with respect to Proposals Two, Three or Four, it will not be included in the vote total and will not have any effect.

We are soliciting this proxy and will bear all costs incurred in connection with such solicitation for the annual meeting, including those incurred for the preparation, printing and mailing of the proxy materials.  Our directors, officers or employees may solicit proxies by personal interviews, telephone or other means of communication.  If they do so, these individuals will not receive any additional compensation for these services.  We may also retain a proxy solicitor to assist us with the distribution and solicitation of proxies for the annual meeting at our expense.

Our Second Amended and Restated Bylaws (“Bylaws”) provide that our Board shall consist of a minimum of three and a maximum of fifteen directors.  Each of the directors is elected annually and holds office until the next annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier resignation or removal.  We presently have eight directors, all of whom are serving terms that expire at the annual meeting.

Unless you mark your executed proxy to the contrary, we plan to vote all such proxies for the election of the eight nominees listed below as directors.  We do not foresee any reason why any of these nominees would become unavailable, but if any of them should, your proxy may be voted for a substitute that is nominated by the Board, or we may reduce the size of our Board accordingly.

The name, age, Board committee membership, period of time served as a director of Denbury and the principal occupation of each person nominated for election as a director are as follows:

As described above, in order for a nominee to be elected as a director, where a quorum is present, such nominee must receive the affirmative vote of a majority of the votes cast with respect to such nominee at the annual meeting. A majority of votes cast means that the number of shares voted “for” a nominee’s election must exceed the number of shares voted “against” such nominee’s election, with abstentions and broker non-votes not being counted as votes cast for purposes of the election of directors. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.

The business, properties and affairs of the Company are managed by the Chief Executive Officer under the direction of the Board.  The Board has responsibility for establishing broad corporate policies and for the overall performance and direction of the Company. Other than involvement by the Company’s Chief Executive Officer, the Board is not involved in the day-to-day operations of the Company.  Board members keep informed of the Company’s business by participating in Board meetings, attending committee meetings, reviewing regularly provided analyses and reports and engaging in thorough discussions with the Chief Executive Officer and other employees of the Company. Our Board and senior management spend significant time implementing corporate governance guidelines, policies and practices that uphold our core values, align with our corporate governance commitments and support our business sustainability.

John P. Dielwart serves as Chairman of the Board, and Christian S. Kendall serves as our President and Chief Executive Officer. The separation of the positions of Chief Executive Officer and Chairman of the Board allows our Chief Executive Officer to focus on the day-to-day leadership and performance of the Company and allows our Chairman of the Board to lead the Board in its fundamental role of providing advice and oversight to management. The Board recognizes that no single leadership structure is right for all companies, and depending on the circumstances, other leadership structures might be appropriate.  The Board believes the current leadership structure is effective and appropriate, creates a separation of executive powers by providing a Chairman with whom the Chief Executive Officer can discuss issues facing the Company, and provides a significant voice to non-management directors.

John P. Dielwart, our Chairman of the Board, is the presiding director at the meetings of non-management directors.  To contact him, please address your letters to:

Denbury Resources Inc.

Attn: Chairman of the Board of Directors

5320 Legacy Drive

Plano, Texas 75024

The Board also relies on, and has delegated certain aspects of its oversight responsibility to, its committees to assist the Board with its overall risk assessment and risk management responsibilities. Each committee reviews and assesses with management risk-related matters within the scope of its responsibilities and reports regularly to the Board on such risk-related matters. For example: the Audit Committee oversees our guidelines and policies with respect to risk assessment and risk management, as well as our financial reporting and regulatory compliance risk exposures and the steps management has taken to monitor and control such exposures; the Risk Committee oversees our principal business and operational risks, and our other material risks and exposures, and the actions, activities and initiatives we undertake to mitigate such risks and exposures; the Nominating/Corporate Governance Committee oversees risks relating to our corporate governance matters and legislative affairs and activities and matters related thereto; the Compensation Committee oversees the extent to which risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on us; and the Reserves and Health, Safety and Environmental Committee oversees the independent reserves engineers’ identification of issues and business risks and exposures, and our health, safety and environmental policies, practices and procedures and management’s assessments of high risk areas with respect thereto.

 The Board and the Nominating/Corporate Governance Committee aim to assemble a diverse group of Board members and believe that no single criterion, such as gender or minority status, is determinative in obtaining diversity on the Board.  The Board defines diversity as differences of viewpoint, professional experience, education and skills, such as serving on other public company boards, the balance of business interest and experience of the candidate as compared to the incumbent or other nominated directors, and the need for any particular expertise on the Board or one of its committees, among other things.  

Members of the Board will be asked to submit recommendations when there is an opening or anticipated opening for a director position.  The Nominating/Corporate Governance Committee may also use outside sources or third parties to find potential director candidates, and similarly may use the services of outside sources or third parties to evaluate or assist in evaluating nominees brought to their attention.

The Nominating/Corporate Governance Committee will also consider nominees for election to the Board submitted to it by stockholders using substantially the same criteria it applies to nominee recommendations by directors, officers, employees and others. To recommend a prospective nominee for the Nominating/Corporate Governance Committee’s consideration, submit the candidate’s name and qualifications in writing to the following address: Denbury Resources Inc., Attention: Nominating/Corporate Governance Committee, 5320 Legacy Drive, Plano, Texas 75024.

The Company’s Bylaws provide that at least two-thirds of the members of the Board will be independent as determined under the rules of the New York Stock Exchange (“NYSE”) and its corporate governance listing standards.  Additionally, each of the Board committee charters requires that members of that committee be independent. The Board has affirmatively determined that all nominees for director, with the exception of Mr. Kendall, the Company’s President and Chief Executive Officer, qualify as independent directors under these standards based on its review of all relevant facts and circumstances.

The Company has a Code of Conduct and Ethics that applies to its officers, employees and directors.  This code assists employees in resolving ethical issues that may arise in complying with Denbury’s policies.  Our Code of Conduct and Ethics is a values-based document organized around our five core values: Integrity, Teamwork, Innovation, Excellence and Respect. It exemplifies our commitment to “Doing Right” in the conduct of our business.

Our Chief Executive Officer and Senior Financial Officers are also subject to the Code of Ethics for Senior Financial Officers.  The purpose of both codes is to promote, among other things:

As the only U.S. public company of scale where injecting carbon dioxide into the ground to produce oil is our primary business, Denbury is a key part of the solution to reducing atmospheric carbon emissions, while at the same time providing a vital energy source for the world’s economy. Carbon capture, transportation and secure geologic storage is becoming an essential business, and our assets and expertise position us to be a leader as this market develops.

The Board has approved a process by which stockholders or other interested parties may contact the members of the Board.  All parties wanting to communicate with the Board should address letters to:

The Board met 13 times during the year ended December 31, 2019, including telephonic meetings. All directors attended at least 75% of the Board meetings held in 2019.  Mr. Dielwart, Chairman of the Board, acted as chairman of each Board meeting in 2019. At each in-person meeting, the Board holds an executive session with the non-management Board members, which is chaired by the Chairman of the Board. The Board took all other actions by unanimous written consent during 2019 in accordance with the terms of the Company’s Bylaws.  

All directors attended at least 75% of all meetings of each of the committees on which they served. Additionally, although the Company does not have a formal policy requiring all directors to attend the annual meeting of stockholders, the Company encourages the directors to attend the meeting, and all of the directors, except for Dr. Meyers who could not attend due to unforeseen circumstances, attended last year’s annual meeting of stockholders.

During 2019, the Board had an Audit, Compensation, Nominating/Corporate Governance, Reserves and HSE and Risk Committee. At each Board meeting in 2019, the Chairperson of each committee provided a report on their committee’s activities and findings from their most recent meetings. The Board committees had the following number of meetings during 2019, including telephonic meetings:

The table below shows the Committee memberships at March 31, 2020.

The Audit Committee is comprised of four independent directors: Messrs. McMichael and Stein, Dr. Meyers and Ms. VanDeWeghe, with Mr. Stein acting as chairman.  The primary purpose of the Audit Committee, which is discussed in detail in its charter, is to assist with the Board’s oversight of the:

The NYSE and SEC have adopted standards with respect to independence and financial literacy of the members of audit committees of public companies (including our Audit Committee).  The standards require that all of the members of such audit committees be independent and that they all be able to read and understand fundamental financial statements, including balance sheets, income statements and cash flow statements.  Additionally, the Audit Committee charter requires that at least one member of the audit committee must qualify as an “audit committee financial expert.”  The financial expert must be knowledgeable in the application of generally accepted accounting principles, the understanding and preparation of financial statements, accounting for estimates, accruals and reserves, internal controls over financial reporting and audit committee functions in accordance with SEC rules.  Such knowledge is to have been obtained through past education and experience in positions of financial oversight.  Mr. Stein and Ms. VanDeWeghe have such experience and have been designated as “audit committee financial experts.”  All members of the Audit Committee satisfy the criteria for both independence and financial literacy.

The Compensation Committee is comprised of four independent directors: Messrs. Decker, Dielwart, McMichael and Peterson, with Mr. Peterson acting as chairperson.  These directors are also independent under the additional independence requirements of the NYSE applicable to compensation committee members. The primary purpose of the Compensation Committee is to provide assistance to the Board in discharging its oversight responsibilities relating to the compensation and development of the Chief Executive Officer and other officers, and to oversee and administer the Company’s equity and other compensation and benefit plans. The Compensation Committee’s duties and responsibilities, which are discussed in detail in its charter, include:

The Nominating/Corporate Governance Committee is comprised of four independent directors: Messrs. Decker, McMichael and Stein and Ms. VanDeWeghe, with Mr. Decker acting as chairman.  The primary purpose of the Nominating/Corporate Governance Committee is to provide assistance to the Board in discharging its oversight responsibilities relating to effective corporate governance. The Nominating/Corporate Governance Committee’s duties and responsibilities, which are discussed in detail in its charter, include:

The Reserves and HSE Committee is comprised of three independent directors: Mr. Dielwart, Dr. Meyers and Ms. VanDeWeghe, with Dr. Meyers acting as chairman. The primary purpose of the Reserves and HSE Committee is to provide assistance to the Board in discharging its oversight responsibilities relating to (a) the Company’s independent reserves engineer, (b) information regarding the Company’s reserves and (c) the Company’s health, safety and environmental policies, practices and procedures.  The Reserves and HSE Committee’s duties and responsibilities, which are discussed in detail in its charter, include:

The Risk Committee is comprised of four independent directors: Messrs. Dielwart, McMichael, Peterson and Stein, with Mr. McMichael acting as chairman. The primary purpose of the Risk Committee is to provide assistance to the Board in discharging its oversight responsibilities relating to the Company’s principal business, financial and operational risks, and other material risk exposures, and the actions, activities and initiatives of the Company to mitigate such risks and exposures, in each case to the extent such oversight is not otherwise the duty or responsibility of other committees of the Board. The Risk Committee’s duties and responsibilities, which are discussed in detail in its charter, include:

The following Compensation Discussion and Analysis (“CD&A”) should be read in conjunction with the Summary Compensation Table on page 49, as well as the related tables and narrative disclosures. We have reviewed and discussed the CD&A included in this proxy statement with management and have recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

This Compensation Discussion and Analysis (“CD&A”) provides you with a detailed description of our executive compensation objectives, philosophy and programs, the compensation decisions we have made under those programs, and the rationale and details supporting specific compensation decisions. These decisions were made prior to the outbreak of the coronavirus (COVID-19) pandemic, the substantial decline in the price of oil, the significant downturn in the global economy and the reduced market price of our common stock. This CD&A focuses on the compensation of our named executive officers for 2019 (our “named executive officers” or “NEOs”). We review the roles and responsibilities of our officers and key employees on an annual basis and determine which of those individuals qualify as named executive officers by meeting the definition of “executive officer” for purposes of Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), Item 402(a)(3) of Regulation S-K and Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We evaluate which individuals meet the definition of “executive officer” on an annual basis. In 2019, we had three officers who met the definition of “named executive officer” under SEC rules. Our named executive officers for 2019 are shown in the table below.

This CD&A should be read in conjunction with the Summary Compensation Table on page 49 which details the compensation of our named executive officers in 2019, 2018 and 2017, as reported in accordance with SEC rules.

As part of our corporate strategy, we are committed to strong financial discipline, efficient operations and creating long-term value for our stakeholders through the following key principles:

We had a number of important business developments and accomplishments in 2019. The discussion below summarizes our results for 2019 and how those results reflect the execution of our strategy.

We believe that our strategy aligns compensation with both individual and Company short-term and long-term results. In 2019, incentive-based awards were approximately 58% of our named executive officer’s target compensation. Additionally, approximately 63% of our 2019 named executive officer target compensation was tied to the value of our common stock, which aligns the interests of our named executive officers with those of our stockholders. All of our equity-based awards have three-year vesting provisions. The following illustrates the compensation components of our 2019 target compensation for our named executive officers. The percentage amounts in the graphic below represent average numbers for the named executive officers as a group.

Our executive compensation policies and programs are designed to:

We are committed to continuously maintaining an open dialogue with our stockholders and engaging in a robust process to solicit feedback from our stockholders. Stockholders involved in our engagement efforts were invited to meet with members of our senior management. Additionally, as part of our annual engagement process, members of the Board, including the Chairperson, are generally available to meet with our stockholders. As part of our stockholder engagement campaign, we reached out to several of our largest institutional stockholders in an effort to obtain input on how our executive officer compensation program, disclosure practices, sustainability program and corporate governance may be better aligned with stockholder expectations.

We believe that we have addressed and utilized the feedback that we received from our stockholders to enhance our disclosures and implement positive changes to our compensation, governance and sustainability programs in 2019 and 2020.

Our compensation policies are designed to ensure that salary levels and compensation incentives attract and retain top level individuals in key positions and are commensurate with each individual’s level of executive responsibility, the type and scope of our operations, and our Company-wide financial condition and performance. Our overall compensation philosophy is that we:

The Compensation Committee, which consists of four independent directors, provides assistance to the Board in discharging its oversight responsibilities relating to the compensation of our Chief Executive Officer and other executive officers. The Compensation Committee is responsible for the review and approval of all aspects of our executive compensation program. Among its primary duties, the Compensation Committee reviews and approves, on at least an annual basis, the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluates the Chief Executive Officer’s performance in light of these goals and objectives, and determines and approves our Chief Executive Officer’s compensation based on this evaluation. Additionally, in consultation with the Chief Executive Officer, the Compensation Committee evaluates the performance of, and reviews and approves the compensation of, all other executive officers on an annual basis.

Other duties of the Compensation Committee with respect to setting executive officer compensation include:

Within the framework of the compensation programs approved by the Compensation Committee, each year our Chief Executive Officer recommends the level of base salary, annual incentive bonus amounts and equity and/or cash award amounts for our other executive officers. These recommendations are based, in part, upon his assessment of each executive officer’s performance, the performance of the individual’s respective department or function, the performance of the Company as a whole, and officer retention considerations. The Compensation Committee reviews our Chief Executive Officer’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion. Our Chief Executive Officer is not involved in setting or approving his own compensation.

For 2019, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) to serve as its independent compensation consultant and to advise the Compensation Committee on compensation-related matters. Meridian reports directly to the Compensation Committee. The Compensation Committee retains sole authority to approve Meridian’s compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement. A representative of Meridian attends meetings of the Compensation Committee as requested and communicates with the Compensation Committee periodically between meetings.

Meridian provides various executive compensation services to the Compensation Committee pursuant to a written consulting agreement with the Compensation Committee. Generally, these services include (i) advising the Compensation Committee on the principal aspects of our executive compensation program and evolving industry practices and (ii) providing market information and analysis regarding the competitiveness of our compensation program design and our award values in relation to Company and executive officer performance.

At the direction of the Compensation Committee, Meridian performed the following services, among others, related to our 2019 compensation program:

Other than Meridian’s services mentioned herein and other services performed at the request of the Compensation Committee, including an analysis of the compensation paid to the Company’s directors and general educational presentations related to compensation-related matters, Meridian provided no other material services to the Company during 2019. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that no conflict of interest exists that would prevent Meridian from serving as an independent compensation consultant to the Compensation Committee.

In making 2019 executive officer compensation decisions, the Compensation Committee considered compensation data from a select group of peer companies. In consultation with Meridian, the Compensation Committee adjusted the compensation peer group for 2019 from the group used for 2018 compensation by removing two companies (Energen Corporation and Murphy Oil Corporation) and adding one company (SRC Energy Inc.). The peer companies were selected from a group of independent publicly traded oil and gas companies with similar operations using several criteria, such as market capitalization, revenues, assets, enterprise value and production volumes. The 2019 compensation review peer group is set forth below.

We believe that the selected companies were the most appropriate for executive officer compensation comparisons for 2019 compensation decisions. The differences and similarities between us and the companies in our compensation peer group are taken into consideration when considering peer group data for executive officer compensation. The Compensation Committee reviews the peer group composition annually in consultation with Meridian.

The Company’s 2019 named executive officer (NEO) compensation program included the following primary components:

The graph below details the percentage each compensation component contributed to total 2019 targeted compensation for our named executive officers as a group. Each component is discussed in more detail below.

To limit potential dilution and conserve available shares under the 2004 Incentive Plan, the Compensation Committee set a stock price floor of $2.25 per share in determining the total number of shares granted for equity awards in 2019. As a result, our named executive officers (as a group) were granted a cumulative reduction in value of approximately $1,665,165 than would have been granted if the actual NYSE closing stock price of (i) $2.13 per share on April 1, 2019 had been used for the TSR and Debt-Adjusted Reserves Growth per Share (“Reserves Growth”) awards and (ii) $1.12 per share on July 17, 2019 had been used for the time-vested restricted stock. The table below illustrates the difference in values of total target equity compensation and total equity compensation granted for our named executive officers.

We strive to provide our named executive officers with a level of cash compensation in the form of base salaries and annual incentive bonuses, at appropriate levels given their positions, professional status and accomplishments. Adjustments to target cash-based compensation for 2019 are depicted in the table below.

We believe that base salaries should be competitive with the salaries of similar management positions at our compensation peer companies. Similar to previous years, base salaries for 2019 were approximately 17% of total targeted compensation for our named executive officers and were adjusted as depicted in the table above. These adjustments were made to (i) maintain similar levels of target cash compensation for our named executive officers (as compared to 2018) when combined with the decreases in target annual incentive bonus percentages described further below and (ii) more closely align each named executive officer’s base salary with the base salary of similar management positions at our compensation peer companies.

The 2019 annual incentive bonus was calculated for all of our employees, including our named executive officers, as follows:

Annual incentive bonuses were determined for all of our employees, including our named executive officers, based on objective criteria. The annual incentive bonus had a potential payout range from 0% to 200% of target and was based entirely on Company performance. Seventy-five percent (75%) of the annual incentive bonus payment was tied to quantitative metrics related to the Company’s performance targets with respect to (i) Total Production, (ii) Lease Operating Expenses, (iii) General and Administrative Expenses, (iv) EBITDAX, (v) Reserves Replacement and (vi) HSE Performance. Twenty-five percent (25%) of the annual incentive bonus payment was based on metrics related to the Company’s performance on Other Strategic Initiatives, such as operating within cash flow, liquidity, balance sheet management, portfolio management and rate of return on capital projects.

The table below depicts the annual incentive bonus metrics, their respective weightings for 2019 and the thresholds, targets and maximums for each metric.

Equity awards were a significant focus of our total compensation program for our named executive officers in 2019. All awards granted under our 2004 Incentive Plan are designed to align the interests of our named executive officers with those of our stockholders.

For 2019, the Compensation Committee determined that the equity awards granted to our named executive officers would be allocated as depicted below, all of which vest over a three-year period.

We continued to place a great emphasis on incentive-based equity awards (the TSR and Reserves Growth awards) to further align the interests of our named executive officers with those of our stockholders. For 2019, long-term incentive-based awards comprised 60% of our equity award mix. The remaining 40% of the equity award mix was time-vested restricted stock, vesting ratably over three years.

Generally, the target number of shares that can be earned under the incentive-based equity awards will be earned if the Company ranks at the 50th percentile of its peer group or performs at the mid-point of the designated vesting levels. If performance is below designated minimum levels, no shares are earned.

Each of the target levels and the formulas employed to reward achievement was determined and defined by the Compensation Committee at the time of grant of the incentive-based awards, based upon year-end targets and goals. Achievement of discretionary factors and confirmation of performance levels are determined by the Compensation Committee. Any portion of the shares which are not earned by the end of the performance period are forfeited.

Each of the equity awards is discussed in greater detail below.

Time-vested restricted stock grants vest ratably over a three-year period. To limit potential dilution and conserve available shares under the 2004 Incentive Plan, the Compensation Committee set a stock price floor of $2.25 per share in determining the total number of shares of restricted stock that could be granted. As a result, our named executive officers (as a group) were granted 1,282,461 fewer shares of restricted stock than would have been granted if the actual NYSE closing stock price of $1.12 per share on July 17, 2019 had been used (a cumulative reduction in value of approximately $1,436,357). In July 2019, our named executive officers received time-vested restricted stock grants as shown in the table below.

The TSR award is based on comparing the average of the Company’s total shareholder return during each year within the three-year performance period to that of the Company’s peers. The stock prices used to compare TSR are based on the increase or decrease in the Company’s or a peer company’s average common stock price (assuming reinvestment of any dividends) between the last ten trading days of one calendar year and the last ten trading days of the next calendar year. The peer group of 14 companies for the 2019 TSR award, as selected by the Compensation Committee in consultation with Meridian, is primarily weighted toward oil production and oil reserves, and includes eight companies from the Company’s peer group used for the Compensation Committee’s overall review in setting 2019 compensation. For this particular award, it was determined that having a peer group whose members were more aligned with the Company’s heavily-weighted oil production and reserve mix, as opposed to natural gas, was more appropriate than a peer group based on the relative size of each member. The peer group of companies used for the 2019 TSR award is shown in the table below.

The TSR achievement percentage is determined based on where the Company ranks relative to its peers at the end of the three-year performance period based on the following chart. The TSR award contains a feature such that if the Company’s three-year average TSR is negative, the award payout is capped at 100% of target regardless of the Company’s earned payout percentage.

The Reserves Growth award measures the growth in proved reserves over an average of four equally-weighted periods: (i) annually for each of the three years in the performance period and (ii) the growth over the three-year period in the performance period. Award payout will be based on per-share proved reserves growth against pre-set target levels, with per-share determinations made after conversion of outstanding debt into common stock equivalents. The Reserves Growth award contains a feature such that if the Company’s reserves replacement is less than 100% of production, the award payout is capped at 100% of target regardless of the Company’s debt-adjusted reserves growth per share compared to the performance scale.

For the performance period ended 2019, our named executive officers were eligible to earn equity and cash under three incentive-based awards: the (i) three-year TSR award granted in 2017, (ii) three-year Oil Price Change vs. TSR award granted in 2017 and (iii) 2019 annual incentive bonus. The Compensation Committee certified the TSR award and Oil Price Change vs. TSR award at 59% and 50%, respectively, of the targeted levels (target equal to 100%). The 2019 annual incentive bonus was certified at 112% of target based on the Company’s results with respect to the predetermined performance metrics.

Below are summaries of the results of the (i) three-year TSR award granted in 2017 (ii) three-year Oil Price Change vs. TSR award granted in 2017 and (iii) 2019 annual incentive bonus.

The table below depicts the annual incentive bonus metrics, their respective weightings for 2019 and the thresholds, targets, maximums and results for each metric.

In February 2020, the Compensation Committee certified the results of the 2019 annual incentive bonus. Seventy-five percent (75%) of the annual incentive bonus payment was tied to quantitative metrics related to (i) Total Production, (ii) Lease Operating Expenses, (iii) General and Administrative Expenses, (iv) EBITDAX, (v) Reserves Replacement and (vi) HSE Performance. Based on the Company’s results, the Compensation Committee determined that a total of 87 percentage points were earned for the quantitative metrics.

The remaining twenty-five percent (25%) of the annual incentive bonus payment was based on the Company’s performance on Other Strategic Initiatives, such as operating within cash flow, liquidity, balance sheet management, portfolio management and rate of return on capital projects. Based on the Company’s performance on Other Strategic Initiatives, the Compensation Committee determined that 25 percentage points were earned for that metric. In making its determination with respect to the number of percentage points earned for the Other Strategic Initiatives metric, the Compensation Committee considered, among other things, the results described below.

The chart below shows the cash amounts earned by our named executive officers under the incentive-based awards vesting in 2019, as compared to target.

The average amount realized under the TSR award demonstrates the impact of the decline in commodity prices and corresponding reduction in our stock price, which has led to significant shortfalls between targeted equity compensation levels and realized equity compensation.

The following CEO Realized Compensation Table discloses the compensation actually realized by our Chief Executive Officer, Mr. Kendall, which is different than the compensation that SEC rules require to be reported in the Summary Compensation Table above. We consider this CEO Realized Compensation Table to be relevant to investors because it shows how our compensation program affects the realized compensation of our Chief Executive Officer in a given year. The primary difference between the CEO Realized Compensation Table values and the Summary Compensation Table values is the method and timing used to value equity awards. SEC rules require companies to report the grant-date fair value of all equity awards in the Summary Compensation Table for the year in which such equity awards were granted and to report incentive-based equity at the grant-date fair value at 100% of the target level. Additionally, incentive-based cash awards are reported in the Summary Compensation Table as of the date of grant at 100% of the target level. As a result, approximately 59% of the total compensation amount reported in our Summary Compensation Table for 2019 relates to awards that have not yet vested or been earned to date, and for which the value, if any, is consequently uncertain. The CEO Realized Compensation Table values contain the following differences from the Summary Compensation Table values:

This section describes compensation actions taken with respect to 2020 compensation for our named executive officers. We include this disclosure because we believe it enhances the understanding of our executive compensation practices and our objectives, philosophy and programs going forward. Named executive officer compensation for 2020 is described below.

The annual incentive bonus target amounts are based on a percentage of base salary. The Compensation Committee did not increase the annual incentive bonus target percentages for our named executive officers in 2020, as depicted in the table below.

The table below depicts the annual incentive bonus metrics and their respective weightings for 2020.

For 2020, the Compensation Committee determined that the equity awards granted to our named executive officers would be allocated as depicted below.

The Compensation Committee eliminated the Reserves Growth award (and proportionately increased the TSR award) for 2020 in order to more closely align (i) the interests of our named executive officers with those of our stockholders and (ii) our equity program with those of our compensation peer group. The table below shows changes to our equity award allocations to named executive officers for 2020.

The following equity award amounts were granted to our named executive officers in 2020. It is currently anticipated that time-vested restricted stock awards for 2020 shown in the table below will be granted mid-year, ratably vesting over a three-year period.

Our named executive officers participate in our benefit plans on the same terms as our other employees. These plans include medical, dental, vision, disability and life insurance and partial matching contributions to our 401(k) plan. Additionally, our named executive officers received a cash perquisite in 2019 of $25,000. Our only retirement benefit is our 401(k) plan. We do not offer any pension or post-retirement medical benefits.

Our Board has approved stock ownership and retention guidelines for our officers, based on the recommendation of the Compensation Committee and a review of our peer company stock ownership guidelines performed by Meridian. Under our stock ownership and retention guidelines, all officers are expected to hold stock with the following values:

When calculating an officer’s holdings for purposes of determining whether these guidelines are satisfied, an officer’s holdings include shares of common stock owned directly by the officer or immediate family members, plus restricted stock, both vested and unvested. Until the guideline amount is achieved, officers are required to retain at least one-third of the shares obtained through the 2004 Incentive Plan other than awards of SARs.

We do not believe that our compensation policies and practices are reasonably likely to have a material adverse effect on the Company’s risk profile. Although portions of our compensation program are incentive-based, we believe that we have allocated our compensation among (i) base salary (ii) short-term compensation opportunities and (iii) long-term compensation opportunities in such a way as to discourage unreasonable risk taking. Further, one of the main factors we take into consideration in setting compensation is the performance of the Company as a whole, which we believe encourages decision making that is in the best long-term interests of the Company and our stockholders. Finally, the time-based vesting over a multi-year period for all of our incentive-based awards, as well as our stock ownership guidelines for our directors and officers, ensures their interests align with those of our stockholders for the long-term performance of the Company.

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-based 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. Our policy will be revised, if appropriate, to conform to any final listing standards that may be adopted by the NYSE under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).

The following table sets out a summary of executive compensation for our named executive officers for the years indicated below.