CABOT OIL & GAS CORPORATION - DEF 14A
United States
Securities and Exchange
Commission
Washington, D.C.
20549
Schedule 14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed
by the Registrant |
Filed
by a Party other than the Registrant |
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Check the appropriate
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Preliminary Proxy Statement |
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS
PERMITTED BY RULE 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to
ss.240.14a-12 |
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Date Filed:
Notice of 2015 Annual Meeting of Stockholders and Proxy Statement |
840 Gessner Road, Suite 1400,
Houston, Texas
77024
Thursday, April 23, 2015,
8:00 a.m. (Central Time)
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Cabot Oil & Gas Corporation to be held on Thursday, April 23, 2015, at 8:00 a.m., Central Time, in our offices, located
at 840 Gessner Road, Suite 1400, Houston, Texas 77024.
The attached Notice of Annual Meeting of Stockholders and Proxy
Statement cover the formal business of the meeting. To better acquaint you with the directors, the Proxy Statement contains biographical
information on each nominee for director. Directors and officers of the Company will be present at the meeting to respond to your
questions.
Whether or not you plan to attend the Annual Meeting, it is important
that your shares be represented. Please complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided,
or if your proxy card or voting instructions form so indicates, vote electronically via the Internet or telephone.
If you plan to attend the Annual Meeting, please bring a valid
government-issued photo identification. If your shares are held in the name of a broker or other nominee, please bring with you
a letter (and a legal proxy if you wish to vote your shares) from your broker or nominee confirming your ownership as of the record
date.
Sincerely,
Dan O. Dinges
Chairman, President and
Chief Executive Officer
March 12, 2015
Notice of Annual Meeting of Stockholders |
April 23, 2015
8:00 a.m., Central Time,
840 Gessner Road, Suite 1400, Houston, Texas 77024
Purpose of the Meeting:
1. | To elect each of the six persons named in this proxy statement to the Board of Directors
of the Company for a one-year term. |
2. | To ratify the appointment of the firm PricewaterhouseCoopers LLP as the independent
registered public accounting firm for the Company for its 2015 fiscal year. |
3. | To approve, by non-binding advisory vote, the compensation of our named executive
officers. |
4. | To consider two shareholder proposals, if properly presented at the meeting. |
5. | To transact such other business as may properly come before the meeting or any adjournments
or postponements thereof. |
Each of these items is fully described in the attached proxy statement,
which is made a part of this Notice.
Record date:
Only holders of record of our common stock on March 2, 2015 will
be entitled to notice of and to vote at the Annual Meeting.
Voting Procedures:
Please vote your shares as promptly as possible, even if you plan
to attend the Annual Meeting, by one of the following methods:
• | By internet, using the instructions on the proxy card or voting instruction form received
from your broker or bank; |
• | By telephone, using the instructions on the proxy card or voting instruction form
received from your broker or bank (if available); or |
• | By mail, by completing and returning the enclosed proxy card or voting instruction
form in the postage-paid envelope provided. |
You may also vote in person if you attend the Annual Meeting.
If you plan to attend the Annual Meeting: Registered stockholders
will be asked to present a valid government-issued photo identification. If your shares are held in the name of your broker, bank
or other nominee, you must bring to the meeting a valid government-issued photo identification and an account statement or letter
(and a legal proxy if you wish to vote your shares) from the nominee indicating that you beneficially owned the shares on the record
date for voting. For safety and security reasons, cameras, camera phones, recording equipment, electronic devices, large bags,
brief cases or packages will not be permitted in the meeting.
March 12, 2015
By Order of the Board of Directors,
Deidre L. Shearer
Corporate Secretary and
Managing Counsel
Table of Contents
PROXY SUMMARY
This summary highlights information described in other parts of
this proxy statement, and does not contain all of the information you should consider in voting. Please read the entire proxy statement
before voting. For more complete information regarding our 2014 financial and operating performance, please review our Annual Report
on Form 10-K for the fiscal year ended December 31, 2014, which accompanies this Proxy Statement.
Annual Meeting Information
Date and Time |
Place |
April 23, 2015 |
840 Gessner Road, Suite 1400 |
8:00 a.m. Central Time |
Houston, Texas 77024 |
Record Date |
Voting |
March 2, 2015 |
Only holders of record of our common stock will be entitled to notice of and to vote at the Annual Meeting. |
Voting Methods
Method |
Instruction |
|
log onto www.proxyvote.com and use the instructions on the proxy card or voting instruction form received from your broker or bank; |
By internet |
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dial 1.800.690.6903 and use the instructions on the proxy card or voting instruction form received from your broker or bank (if available); or |
By telephone |
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by completing and returning the enclosed proxy card or voting instruction form in the postage-paid envelope provided. |
By mail |
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Matters to be Voted on and Recommendation
Proposal |
Matter |
Board
Vote
Recommendation |
Page
Reference |
1. |
The election of director candidates named herein; |
FOR |
13 |
2. |
Ratification of the appointment of the firm PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for its 2015 fiscal year; |
FOR |
59 |
3. |
The approval on an advisory basis of executive compensation; |
FOR |
59 |
4. |
A shareholder proposal to provide a report on the Company’s
political contributions, if properly presented at the meeting; and |
AGAINST |
60 |
5. |
A shareholder proposal to adopt a “proxy access” bylaw, if properly presented at the meeting. |
AGAINST |
63 |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 8 |
Director Nominees
|
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Independent |
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|
|
Years |
|
|
|
Committee |
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Other
Public Company |
Name |
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Director |
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Age |
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Served |
|
Primary Occupation |
|
Memberships(1) |
|
Boards |
Dan
O. Dinges |
|
N |
|
61 |
|
13 |
|
Chairman,
President and CEO of Cabot Oil & Gas Corporation |
|
E |
|
United
States Steel
Corporation |
Rhys
J. Best |
|
Y |
|
68 |
|
6 |
|
Non-Executive
Chairman of the Board of Austin Industries, Inc. and former Chairman and CEO of Lone Star Technologies, Inc. |
|
A, C |
|
Trinity Industries,
Inc. MRC Global Inc. Commercial Metals
Company |
James
R. Gibbs |
|
Y |
|
70 |
|
4 |
|
Retired
Chairman, President and CEO of Frontier Oil Corporation |
|
C,
CG, E |
|
None |
Robert
L. Keiser |
|
Y |
|
72 |
|
8 |
|
Retired Chairman
of the Board of Kerr-McGee Corporation and former Chairman and CEO of Oryx Energy Company |
|
A, S |
|
None |
Robert
Kelley |
|
Y |
|
69 |
|
11 |
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Retired
Chairman and former President and CEO of Noble Affiliates, Inc. (now Noble Energy Inc.) |
|
A,
S |
|
OGE
Energy
Corporation |
W.
Matt Ralls |
|
Y |
|
65 |
|
3 |
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Chairman and former
CEO and President of Rowan Companies plc |
|
CG, S |
|
Rowan Companies
plc Superior Energy
Services, Inc. |
Average
director tenure: 7.3 years |
(1) | | Bold font indicates Chairman of Committee |
| | |
A | | Audit Committee |
| | |
C | | Compensation Committee |
| | |
CG | | Corporate Governance & Nominations Committee |
| | |
S | | Safety & Environmental Affairs Committee |
| | |
E | | Executive Committee |
Governance Highlights
• |
Proxy access for stockholders holding
5% of our stock continuously for at least three years |
|
• |
Separate Board committee devoted entirely to safety
and environmental matters |
• |
A declassified Board |
|
• |
Political contributions disclosures on our website |
• |
Majority voting for director elections |
|
• |
Annual Board and committee self-assessments |
• |
Average director tenure is 7.3 years |
|
• |
Active Board oversight of Company risks |
• |
The CEO is the only non-independent director |
|
• |
Sustainability disclosures on our website |
• |
An independent lead director chairs executive sessions of independent directors at each Board meeting |
|
• |
Stockholders may act by written consent |
• |
Mandatory director retirement at age 73 |
|
• |
No poison pill |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 9 |
2014 Financial and Operational Highlights
In spite of the downturn in the industry during the last half
of 2014, our business strategy of delivering value by growing reserves and production in a cost-effective manner continued to deliver
outstanding operational results in 2014. Specifically:
• | Total year-end proved reserves grew to 7.4 Tcfe in 2014, a 36% increase over 2013; |
| |
• | Absolute production was 531.8 Bcfe, 28.6% higher than the level recorded in 2013;
and |
| |
• | The Company’s “all sources” finding cost was $0.71 per Mcfe for
2014 and $0.68 per Mcfe over the last three year period. |
These recent achievements are consistent with the positive trend
in these operating metrics experienced over the last several years, as highlighted below.
This substantial growth in reserves and production over the last
three years has been accompanied by a 41% decline in our finding costs per unit and a 37% decline in our total operating costs
per unit. These achievements translated into top tier performance for this period, not only in these categories, but also in total
shareholder return, as indicated below.
* | | Cimarex Energy Company, Concho Resources Inc., EQT Corporation, EXCO Resources
Inc.,
Newfield Exploration Company, Noble Energy Inc., Pioneer Natural Resources Company, QEP Resources Inc.,
Quicksilver Resources
Corporation, Range Resources Corporation, Southwestern Energy Company, SM Energy Company, Ultra Petroleum Corp., WPX Energy, Inc. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 10 |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 11 |
GENERAL INFORMATION
This Proxy Statement is furnished in connection
with the solicitation by the Board of Directors of Cabot Oil & Gas Corporation (the “Company”) of proxies for use
at its 2015 Annual Meeting of Stockholders, to be held at the Company’s offices, 840 Gessner Road, Suite 1400, Houston, Texas
77024 on Thursday, April 23, 2015, at 8:00 a.m. Central Time, or any adjournment or postponement thereof (the “Annual Meeting”),
for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. You may revoke your proxy at any time
prior to its use by a written communication to Ms. Deidre L. Shearer, Corporate Secretary of the Company, or by a duly executed
proxy bearing a later date.
Stockholders attending the Annual Meeting
may vote their shares in person even though they have already executed a proxy. Properly executed proxies not revoked will be voted
in accordance with the specifications thereon at the Annual Meeting and at any adjournment or postponement thereof. At the meeting,
stockholders will be asked to consider and act upon the following matters discussed in the attached proxy statement. Proxies delivered
by record stockholders without voting instructions marked will be voted:
PROPOSAL 1 |
The election of director candidates named herein; |
FOR |
PROPOSAL 2 |
Ratification of the appointment of the firm PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for its 2015 fiscal year; |
FOR |
PROPOSAL 3 |
The approval on an advisory basis of executive compensation; |
FOR |
PROPOSAL 4 |
The shareholder proposal, if properly presented at the meeting; and |
AGAINST |
PROPOSAL 5 |
The shareholder proposal, if properly presented at the meeting. |
AGAINST |
Proxies will be voted in the best judgment
of the proxy holders on any other matters that may properly come before the meeting.
Only holders of record of the Company’s
Common Stock, par value $0.10 per share (“Common Stock”), as of the close of business on March 2, 2015, are entitled
to vote at the Annual Meeting. As of that date, the Company had outstanding and entitled to vote 413,601,343 shares of Common Stock.
Each share of Common Stock is entitled to
one vote per share. There is no provision for cumulative voting. A quorum for the consideration of business at the Annual Meeting
consists of a majority of all outstanding shares of stock entitled to vote at the Annual Meeting. The Proxy Statement and form
of Proxy are being first sent or given to shareholders on or about March 12, 2015.
In accordance with Delaware law, a stockholder
entitled to vote for the election of directors can vote against all nominees for director or can vote against certain nominees
for director. Abstentions and broker non-votes (proxies submitted by brokers that do not indicate a vote for a proposal because
they do not have discretionary voting authority and have not received instructions from the beneficial owners of the shares as
to how to vote on that proposal) are counted as present in determining whether the quorum requirement is satisfied. For purposes
of determining the outcome of any question as to which the broker has physically indicated on the proxy that it does not have discretionary
authority to vote, these shares will be treated as not present and not entitled to vote with respect to that question, even though
those shares are considered entitled to vote for quorum purposes and may be entitled to vote on other questions.
Brokers holding shares must vote according
to specific instructions they receive from the beneficial owners of those shares. If brokers do not receive specific instructions,
brokers may in some cases vote the shares in their discretion. However, the New York Stock Exchange (the “NYSE”) precludes
brokers from exercising voting discretion on certain proposals without specific instructions from the beneficial owner. Importantly,
NYSE rules prohibit brokers holding shares in “street name” for their beneficial holder clients from exercising voting
discretion on certain proposals without specific instructions from those clients. Under NYSE rules, brokers will have discretion
to vote only on Proposal 2 (ratification of appointment of auditor). Brokers cannot vote on any of the other proposals without
instructions from the beneficial owners. If you do not instruct your broker how to vote on each of the other proposals, your
broker will not vote for you.
Because the vote required for Proposal 1
(election of directors) is a majority of the votes present in person or by proxy at the meeting and entitled to vote on the proposal,
with “majority” meaning that the number of shares voted “for” a director’s election
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 12 |
exceeds the number of shares voted “against”
such director’s election, abstentions and broker non-votes will have no effect on the outcome of the voting on the proposal.
Because the vote required for approval of Proposal 2 (ratification of auditors), Proposal 3 (executive compensation), Proposal
4 (shareholder proposal) and Proposal 5 (shareholder proposal), is a majority of the shares present in person or by proxy at the
meeting and entitled to vote on the proposal, abstentions will have the same effect as votes against the proposal, but broker non-votes
will not affect the outcome of the voting on the proposal.
PROPOSAL 1 |
ELECTION OF DIRECTORS |
The size of the Board of Directors is currently
set at seven members, each of whose terms expire in 2015. Effective upon the date of the 2015 Annual Meeting, however, the size
of the Board of Directors will be reduced to six to reflect the retirement of P. Dexter Peacock, one of our current directors,
pursuant to our mandatory director retirement policy. Accordingly, the Board of Directors has nominated only six directors to be
elected at the 2015 Annual Meeting. This is the first meeting at which the Board will be fully declassified and all directors will
stand for election for one-year terms.
Each of the nominees are currently directors
and have been nominated for election at the 2015 Annual Meeting for terms of one year, each to hold office until the expiration
of his term in 2016 and until his successor shall have been elected and shall have qualified. The business experience of each nominee
as well as the qualifications that led our Board to select each nominee for election to the Board is discussed below.
The Board believes that the combination of
the various qualifications, skills and experiences of the 2015 director nominees would contribute to an effective and well-functioning
Board. The Board and the Corporate Governance and Nominations Committee believe that, individually and as a whole, the Board possesses
the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s
management.
It is the intention of the persons named
in the enclosed form of proxy to vote such proxies FOR the election of each of the nominees for terms of one year. If any
one of the nominees is not available at the time of the Annual Meeting to serve, proxies received will be voted for substitute
nominees to be designated by the Board of Directors or, in the event no such designation is made by the Board, proxies will be
voted for a lesser number of nominees. In no event will the proxies be voted for more than the number of nominees set forth above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS.
Certain Information Regarding Nominees
Set forth below, as of March 1, 2015, for
each nominee for election as a director of the Company, is biographical information and information regarding the business experience,
qualifications and skills of each director nominee that led the Board to conclude that the director is qualified to serve on our
Board. Mr. Dinges, Chairman, President and Chief Executive Officer, is the only employee or former employee of the Company on the
Board of Directors.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 13 |
Rhys J. Best
Age: 68
Director Since: 2008
Committee Memberships: Audit and Compensation (Chairman)
Business Experience:
• |
Austin Industries, Inc. |
|
- |
Non-Executive Chairman of the Board – 2012 to present |
|
|
|
• |
Crosstex Energy L.P. |
|
- |
Chairman of the Board (non-executive) – 2009 to March 2014 |
|
|
|
• |
Lone Star Technologies, Inc. |
|
- |
Chairman and Chief Executive Officer – 1999 to 2007 |
|
|
|
Other Directorships: |
|
|
|
• |
Crosstex Energy L.P. (until 2014) |
|
|
• |
Trinity Industries, Inc. |
|
|
• |
MRC Global Inc. |
|
|
• |
Commercial Metals Company |
Key skills, attributes and qualifications:
Mr. Best brings over 30 years of significant
management, leadership, transactional and financial experience to our Board. Most recently, he served as Non-executive Chairman
of the Board of Crosstex Energy L.P., a large publicly traded midstream company, from 2009 through its combination with the midstream
assets of Devon Energy Corporation in March 2014 to create EnLink Midstream Partners, LP, one of the largest midstream companies
in the United States. This tremendous experience enables him to provide valuable insights into the transportation aspects of our
business and enhances the overall strategic oversight capabilities of our Board. Mr. Best’s distinguished career includes
serving as Chairman and CEO of Lone Star Technologies, Inc., a former publicly traded company servicing the oil and natural gas
industry, and holding positions of leadership in the banking industry. In addition to his considerable management and financial
expertise, Mr. Best brings to bear an extensive corporate governance background from his current and former service on public company
boards. This diverse experience enables Mr. Best to bring unique and valuable perspectives to the Board and make him particularly
qualified to serve as the Chairman of the Compensation Committee and a member of the Audit Committee of the Board. In recognition
of his exemplary service on corporate boards, the National Association of Corporate Directors named Mr. Best “2014 Director
of the Year.”
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 14 |
Dan O. Dinges
Age: 61
Director Since: 2001
Committee Memberships:
Executive
Position: Chairman, President and
Chief Executive Officer
Business Experience: |
|
• |
Cabot Oil & Gas Corporation |
|
- |
Chairman, President and Chief Executive Officer – May 2002 to present |
|
|
|
Other Directorships: |
|
• |
United States Steel Corporation |
|
|
Private/Non-profit Directorships: |
|
• |
Spitzer Industries, Inc. (private company) |
|
|
• |
American Exploration & Production Council |
|
|
• |
America’s Natural Gas Alliance |
|
|
• |
Foundation for Energy Education |
|
|
• |
Boy Scouts of America – Sam Houston Area Council |
Key skills, attributes and qualifications:
Mr. Dinges brings to the Board over 30 years
of executive management experience in the oil and gas exploration and production business, and as our Chief Executive Officer for
the last 13 years, a deep knowledge of our business, operations, culture and long-term strategy and goals. Mr. Dinges joined the
Company in September 2001, after a successful 20 year career in various management positions with the predecessor to Noble Energy,
Inc., and has overseen an era of tremendous growth for the Company. His steadfast leadership as Chairman of the Board provides
the Board with extensive institutional knowledge and continuity, as well creating a vital link between management and the Board.
Mr. Dinges also possesses a diversity of corporate governance experience gained from service on the Board of United States Steel
Corporation and several charitable and industry organizations.
James R. Gibbs
Age:
70
Director Since: 2010
Committee Memberships:
Compensation, Corporate Governance and Nominations (Chairman) and Executive
Business Experience:
• |
Frontier Oil Corporation (now HollyFrontier Corporation) |
|
- |
Chairman – 2009 to 2010 |
|
- |
Chairman, President, Chief Executive Officer – 1999 to 2009 |
|
|
|
Other Directorships/Trusteeships: |
|
• |
Smith International, Inc. (until 2010) |
|
|
• |
Frost National Bank – Houston (Advisory Director) |
|
|
• |
Southern Methodist University |
Key skills, attributes and qualifications:
Mr. Gibbs brings to the board a wealth of experience gained from
a lifelong career dedicated to diverse aspects of the oil and gas industry. Prior to his retirement in 2010, Mr. Gibbs served as
Chairman, President and CEO of the Frontier Oil Corporation, at the time the fourth largest publicly held independent refining
company in the United States. His career at Frontier and its predecessor spanned 28 years and also included serving as CFO, providing
deep knowledge of the upstream energy business, as well as transactional and financial expertise. Mr. Gibbs also held positions
of leadership at a worldwide supplier of primarily geophysical oilfield services and equipment, and as a Senior Vice President
for Texas Commerce Bank, where he utilized his PhD in Economics. His extensive public company board experience, as well as distinguished
service on the Board of Trustees of Southern Methodist University, allows him to bring diverse corporate governance perspectives
to the Board and enhances his effectiveness as Chairman of the Corporate Governance and Nominations Committee.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 15 |
Robert L. Keiser
Age: 72
Director Since: 2006
Committee Memberships: Safety and Environmental Affairs (Chairman)
and Audit
Business Experience:
• |
Retired June 1999 |
|
|
• |
Kerr-McGee Corporation |
|
- |
Chairman of the Board – February 1999 to June 1999 |
|
|
|
• |
Oryx Energy Company (merged with Kerr-McGee Corporation)- Chairman and Chief Executive Officer – 1995 to February 1999 |
Key skills, attributes and qualifications:
Mr. Keiser brings to the Board his extensive
business, senior management and technical industry experience gained from his executive management experience as Chairman and CEO
of Oryx Energy Company and from the entire 34 years in various leadership roles for that company and its predecessors and successor,
Kerr-McGee Corporation. Mr. Keiser’s diverse background includes international operational experience as CEO and COO of Oryx
UK and Oryx International, as well as an Electrical Engineering degree. This strong operational and technical background provides
valuable insight and expertise for his service as the Chairman of our Safety and Environmental Affairs Committee, a position he
has held for over six years, providing continuity of leadership for that important committee. Mr. Keiser brings a deep knowledge
of our business through over eight years of service on our Board and the strong governance experience from those years of service
as well as service on many other public energy company boards throughout his career.
Robert Kelley
Age: 69
Director Since: 2003
Committee Memberships: Audit (Chairman)
and Safety and Environmental Affairs
Business Experience:
• |
Kellco Investments, Inc. (private investment company) |
|
- |
President – April 2001 to present |
|
|
|
• |
Noble Affiliates, Inc. (now Noble Energy Inc.) |
|
- |
Chairman of the Board – 1992 to April 2001 |
|
- |
President and CEO – 1986 to October 2000 |
|
|
|
Other Directorships: |
|
• |
OGE Energy Corporation |
|
|
• |
Smith International, Inc. (until 2010) |
Key skills, attributes and qualifications:
Mr. Kelley’s extensive experience in
the financial, accounting and executive management of public energy companies, as well as corporate governance experience as a
director of several public energy companies, makes him particularly valuable as a member of our Board and as our Audit Committee
Chairman for the past six years. Mr. Kelley’s experience as President and CEO and later Chairman of the Board of Noble Energy
Inc. provides him with valuable operational, leadership and management experience. Mr. Kelley’s accounting and finance background
gained while serving industry clients as a CPA for a national public accounting firm and while serving in positions of senior leadership
in accounting and finance roles at a predecessor to Noble Energy also brings vital financial expertise to our Audit Committee.
Mr. Kelley’s 11 years of service to our Board provides a continuity of leadership and an understanding of our business and
strategy that is crucial to the effective functioning of our Board.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 16 |
W. Matt Ralls
Age: 65
Director Since: 2011
Committee Memberships:
Corporate Governance and Nominations and Safety and Environmental Affairs
Business Experience:
• |
Rowan Companies plc |
|
- |
Executive Chairman – April 2014 to present Chief Executive Officer – 2013 to April 2014 |
|
- |
President and Chief Executive Officer – 2009 to 2013 |
|
|
|
Other Directorships: |
|
• |
Rowan Companies plc |
|
|
• |
Superior Energy Services, Inc. |
|
|
• |
El Paso Pipeline Partners L.P. (until 2009) |
|
|
• |
National Ocean Industries Association |
Key skills, attributes and qualifications:
Mr. Ralls’ diverse operational, financial and executive
management experience in various roles in the oil and gas industry, including most recently within the drilling segment of the
industry, provides the Board with a wealth of expertise from which to draw. Mr. Ralls’ recent service as President and CEO
of Rowan Companies, and his combined fifteen years’ executive management experience at Rowan and GlobalSanteFe Corporation,
both international contract drilling companies, provides valuable management and financial expertise and insight into an aspect
of our business that represents a significant portion of our capital expenditure budget. Prior to his drilling industry experience,
Mr. Ralls served as Executive Vice President of a public upstream oil and gas company, which gave him a thorough understanding
of our core business. In his service to the Board, Mr. Ralls is also able to draw from his 17 years of experience in various banking
management positions with three large Texas-based commercial lenders to the energy industry. Mr. Ralls’ extensive public
company board experience makes him an invaluable member of the Corporate Governance and Nominations Committee. His effectiveness
on such committee is enhanced by his positions of leadership on the boards of several industry trade associations, including the
International Association of Drilling Contractors and the American Petroleum Institute.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 17 |
SECURITY OWNERSHIP
Principal Stockholders
The following table reports beneficial ownership of the Common
Stock by holders of more than five percent of the Company’s Common Stock. Unless otherwise noted, all ownership information
is based upon filings made by such persons with the SEC.
Name
and Address of
Beneficial Owner | |
Number
of Shares
of Common Stock
Owned | |
| Percent
of Class |
Capital
Research Global Investors | |
33,918,472 | (1) | |
| 8.20 | % |
The
Vanguard Group | |
31,911,218 | (2) | |
| 7.72 | % |
BlackRock,
Inc. | |
27,939,526 | (3) | |
| 6.80 | % |
FMR LLC, | |
25,730,966 | (4) | |
| 6.23 | % |
Mr. Edward C. Johnson 3d and Abigail P. Johnson | |
| | |
| | |
Neuberger
Berman Group LLC | |
24,862,859 | (5) | |
| 6.02 | % |
Neuberger
Berman LLC | |
| | |
| | |
State Street Corporation | |
22,962,625 | (6) | |
| 5.60 | % |
Ameriprise
Financial, Inc. | |
22,770,326 | (7) | |
| 5.51 | % |
Columbia
Management Investment Advisors, LLC | |
| | |
| | |
(1) | According to Schedule 13G, dated February 10, 2015, filed with the Commission by
Capital Research Global Investors (333 South Hope Street, Los Angeles, CA 90071), it has sole voting power and sole dispositive
power over all 33,918,472 of these shares. |
| |
(2) | According to Amendment No. 4 to a Schedule 13G, dated February 9, 2015, filed with
the Commission by The Vanguard Group (100 Vanguard Blvd., Malvern, PA 19355), it has sole voting power over 715,093 of these shares,
shared dispositive power over 683,075 of these shares and sole dispositive power over 31,228,143 of these shares. |
| |
(3) | According to Amendment No. 5 to a Schedule 13G, dated January 12, 2015, filed with
the Commission by BlackRock, Inc. (40 East 52nd Street, New York, NY 10022), it has sole voting power over 24,501,253 shares and
sole dispositive power over all 27,939,526 of these shares. |
| |
(4) | According to Amendment No. 3 to a Schedule 13G, dated February 13, 2015, filed
with the Commission by FMR LLC, Mr. Edward C. Johnson 3d and Abigail P. Johnson (82 Devonshire Street, Boston, MA 02109), FMR
has sole voting power with respect to 2,171,288 of these shares and sole dispositive power over all 25,730,966 shares as a result
of being a parent holding company or control person of several other entities in accordance with Rule 13d-1(b)(ii)(G). Mr. Edward
C. Johnson 3d and Abigail P. Johnson, together with members of their family, through direct or indirect ownership of voting common
shares of FMR, may be deemed to form a controlling group with respect to FMR and may, therefore, be considered to be beneficial
owners of the shares beneficially owned by FMR. |
| |
(5) | According to Amendment No. 7 to a Schedule 13G, dated February 12, 2015, filed
with the Commission by Neuberger Berman Group LLC and Neuberger Berman LLC (605 Third Avenue, New York, NY 10158), they each have
shared voting power over 20,812,874 of these shares, no voting power over the remainder of these shares, and shared dispositive
power over all of these shares. |
| |
(6) | According to Schedule 13G, dated February 11, 2015, filed with the Commission by
State Street Corporation (One Lincoln Street, Boston, MA 02111), it has shared voting power and shared dispositive power over
all 22,962,625 of these shares. |
| |
(7) | According to Schedule 13G, dated February 13, 2015, Ameriprise Financial, Inc.
(145 Ameriprise Financial Center, Minneapolis, MN 55474), or AFI, has shared voting power over 18,032,176 of these shares and
shared dispositive power over all of these shares. AFI may be deemed to beneficially own the shares reported by CMIA. The shares
reported by AFI include those shares separately reported by CMIA. Each of AFI and CMIA disclaims beneficial ownership of all of
the shares reported. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 18 |
Directors and Executive Officers
The following table reports, as of February 1, 2015, beneficial
ownership of Common Stock by each director and nominee for director, by each named executive officer listed in the “Summary
Compensation Table” below and by all directors, nominees and executive officers as a group. Unless otherwise indicated, the
persons below have sole voting and investment power with respect to the shares of Common Stock showed as beneficially owned by
them.
Name of Beneficial Owner | |
Number
of Outstanding Shares of Common Stock Held | |
Number
of Shares of Common Stock Beneficially Owned | |
Percent
of Class |
Rhys J. Best | |
| 10,000 | | |
| 90,429 | (1) | |
|
* |
James R. Gibbs | |
| 0 | | |
| 57,551 | (1) | |
|
* |
Robert L. Keiser | |
| 100,220 | | |
| 224,955 | (1) | |
|
* |
Robert Kelley | |
| 337,652 | | |
| 491,669 | (1) | |
|
* |
P. Dexter Peacock | |
| 101,040 | (8) | |
| 257,745 | (1) | |
|
* |
W. Matt Ralls | |
| 0 | | |
| 32,907 | (1) | |
|
* |
Dan O. Dinges | |
| 3,355,566 | | |
| 3,721,514 | (2)(3)(6) | |
|
* |
Scott C. Schroeder | |
| 1,296,677 | | |
| 1,434,083 | (2)(3)(7) | |
|
* |
Jeffrey W. Hutton | |
| 580,285 | | |
| 629,298 | (2)(3)(4) | |
|
* |
Phillip L. Stalnaker | |
| 202,706 | | |
| 237,002 | (2)(3)(4) | |
|
* |
G. Kevin Cunningham | |
| 62,330 | | |
| 106,172 | (2)(3)(4) | |
|
* |
All directors, nominees and executive
officers as a group (17 individuals) | 7,810,986 | (1)(2)(3)(4)(5)(6)(7) | |
2.00 |
% |
* | Represents less than 1% of the outstanding Common Stock. |
| |
(1) | Includes the following restricted stock units held as of February 1, 2015, as to
which the restrictions lapse upon the holders’ retirement from the Board of Directors: Mr. Best, 80,429; Mr. Gibbs, 57,551;
Mr. Keiser, 124,735; Mr. Kelley, 154,017; Mr. Peacock, 156,705; and Mr. Ralls, 32,907; and all directors, nominees and executive
officers as a group, 7,810,986. No executive officers hold restricted stock units. |
| |
(2) | Includes the following stock appreciation rights that are exercisable on or before
April 2, 2015: Mr. Dinges, 294,804; Mr. Schroeder, 109,218; Mr. Hutton, 39,642; Mr. Stalnaker, 26,720; Mr. Cunningham, 34,978;
and all directors, nominees and executive officers as a group, 626,104. No directors or nominees hold stock appreciation rights. The SARs were granted prior to
2013 and vest ratably over a three-year period after grant and have a seven year term. For more information on the SARs,
see footnote 1 to the “Outstanding Equity Awards at Fiscal Year-End 2014” table below. |
| |
(3) | Includes the following shares awarded pursuant to the hybrid performance share
awards granted in 2012, 2013 and 2014 that vested in February 2015, as a result of 2014 operating results meeting the performance
criteria established on the date of grant: Mr. Dinges, 71,144; Mr. Schroeder, 28,188; Mr. Hutton, 9,371; Mr. Stalnaker, 7,576;
Mr. Cunningham, 8,864; and all directors, nominees and executive officers as a group, 145,887. No directors or director nominees
hold hybrid performance shares. For more information on the hybrid performance shares see “Long-Term Incentives” in
the “Compensation Discussion and Analysis” below. |
| |
(4) | Includes the following shares held in the Company’s Savings Investment Plan
as of December 31, 2014 as to which the reporting person shares voting power with the trustee of the plan: Mr. Hutton, 6,739;
Mr. Cunningham, 15,420; Mr. Stalnaker, 16,390; and all directors, nominees and executive officers as a group, 73,148. |
| |
(5) | Includes the following shares awarded in 2012 pursuant to employee performance
awards that vested in February and March 2015, as a result of 2014 operating results meeting the performance criteria established
on the date of grant: all directors, nominees and executive officers as a group, 10,700. |
| |
(6) | Includes 911,880 shares held in trust for the benefit of an immediate family member,
with respect to which Mr. Dinges has shared voting and investment power. |
| |
(7) | Includes 11,820 shares held by immediate family members, with respect to which
Mr. Schroeder has shared voting and investment power. |
| |
(8) | Includes 48,000 shares held by Mr. Peacock subject to a pledge to secure indebtedness
as to which Mr. Peacock shares voting and investment power. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 19 |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company’s executive officers and directors to file initial reports of ownership and reports of changes in
ownership of Company Common Stock with the SEC and, pursuant to rules promulgated under Section 16(a), such individuals are
required to furnish the Company with copies of Section 16(a) reports they file. Based solely on a review of the copies of
such reports furnished to the Company, and written representations that those reports accurately reflect all reportable
transactions and holdings, all reports required by Section 16(a) were filed in 2014.
CORPORATE GOVERNANCE MATTERS
Board of Directors Independence
The Company’s Corporate Governance Guidelines require
that at least a majority of the Company’s directors be independent under the New York Stock Exchange (“NYSE”)
listing standards and all other applicable legal requirements. Additionally, all members of the audit committee, compensation committee
and corporate governance and nominations committee are required to be independent. The NYSE listing standards include objective
tests that can disqualify a director from being treated as independent, as well as a subjective element, under which the Board
must affirmatively determine that each independent director has no material relationship with the Company or management. In making
its independence determinations, the Board considered all material relationships with each director, and all transactions since
the start of 2012 between the Company and each director nominee, members of their immediate families or entities associated with
them.
The Board has adopted categorical standards to assist it
in making independence determinations. A relationship falls within these categorical standards if it:
| |
• | Is a type of relationship addressed in Section 303A.02(b) of the NYSE Listed Company
Manual, but under those rules does not preclude a determination of independence; |
| |
• | Is a type of relationship or transaction addressed in Item 404 of Regulation S-K,
but under that regulation does not require disclosure; or |
| |
• | Consists of charitable contributions by the Company to an organization where a director
is an executive officer and does not exceed the greater of $1 million or 2% of the organization’s gross revenue in any of
the last three years. |
The Board of Directors has determined that each director’s
relationship with the Company, with the exception of Mr. Dinges, the Chairman, President and Chief Executive Officer, falls within
the categorical standards and that all directors, with the exception of Mr. Dinges, are independent. In making its subjective determination
that each non-employee director is independent, the Board reviewed and discussed additional information provided by the directors
and the Company with regard to each director’s business and personal activities as they may relate to the Company and the
Company’s management. The Board considered the transactions in the context of the NYSE’s objective listing standards,
the categorical standards noted above, the additional standards established for members of audit committees, and the SEC, U.S.
Internal Revenue Service and NYSE standards for compensation committee members. Some members of the Company’s Board also
serve as directors of other entities with which the Company does business. Each of these relationships is reviewed by the Board,
which examines the amount of business done by the Company and the other entities and the gross revenue for each of the other entities.
This review is for each of the last three fiscal years for which financial data is available. This review applied to Messrs. Best
and Ralls.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 20 |
Based on all of the foregoing, the Board made a
subjective determination that, because of the nature of the transaction, the director’s relationship with the other
entity and/or the amount involved, no relationships exist that, in the opinion of the Board, would impair the
director’s independence. Further, the Board of Directors has determined that all members of the Audit Committee,
Compensation Committee and Corporate Governance and Nominations Committee are independent.
Director Nominations and Qualifications
Under its charter, the Corporate Governance and Nominations
(“CGN”) Committee seeks out and evaluates qualified candidates to serve as Board members as necessary to fill vacancies
or the additional needs of the Board, and considers candidates recommended by shareholders and management of the Company. The CGN
Committee generally identifies nominees through recommendations made by incumbent directors. A resume is reviewed and, if merited,
an interview follows. Any shareholder desiring to propose a nominee to the Board of Directors should submit such proposed nominee
for consideration by the CGN Committee, including the proposed nominee’s qualifications, to Ms. Deidre L. Shearer, Corporate
Secretary, Cabot Oil & Gas Corporation, 840 Gessner Road, Suite 1400, Houston, Texas 77024. Shareholders who meet certain requirements
specified in our by-laws may also nominate candidates for inclusion in our proxy materials for an annual meeting as described in
“Future Stockholder Proposals.” There are no differences in the manner in which the CGN Committee evaluates nominees
for director based on whether the nominee is recommended by a shareholder or the incumbent directors.
Whether nominated by a shareholder or through the activities
of the Committee, the CGN Committee seeks to select candidates who have personal and professional integrity, who have demonstrated
exceptional ability and judgment and who will be most effective, in conjunction with the other nominees and Board members, in collectively
serving the long-term interests of the Company and its shareholders. The CGN Committee’s assessment of candidates will include,
but not be limited to, considerations of character, judgment, diversity, age, expertise, industry experience, independence, other
board commitments and the ability and willingness to devote the time and effort necessary to be an effective board member. The
CGN Committee has adopted minimum criteria for Board membership that include (i) a strong commitment to his/her fiduciary responsibilities
to the Company’s shareholders, with no actual or perceived conflict of interest that would interfere with his/her responsibilities
to or relationships with the Company’s shareholders, employees, suppliers, and customers; (ii) the ability to think strategically
and the insight to assist management in placing the Company in a competitive position within the industry; (iii) a record of achievement,
and a position of leadership in his/her field, with the interest and intellect to be able to address energy industry challenges
and opportunities; and (iv) the time to attend Board meetings and the commitment to devote any reasonable required additional time
to deal with Company business.
Board of Directors Diversity
The Board of Directors encourages a diversity of
backgrounds among its members; however, it does not have a formal diversity policy. The Board considers candidates with
significant direct or indirect energy industry experience that will provide the Board as a whole the talents, skills,
diversity and expertise to serve the long-term interests of the Company and its shareholders. For more information on
specific minimum qualifications that the CGN Committee has established for board candidates, see “Director Nominations
and Qualifications” above.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 21 |
Board of Directors Leadership Structure
Mr. Dinges serves as the Chairman of the Board, President
and Chief Executive Officer of the Company. We believe that our Board of Directors is best served by combining the roles of Chairman
and CEO and that Mr. Dinges is highly qualified to serve in this role.
The Chairman and CEO is responsible to the Board for the
overall management and functioning of the Company. The Chairman is joined in the leadership of the Board by our Lead Director,
who is elected by the non-management directors. In February 2015, the CGN Committee recommended and the non-management directors
appointed, Mr. Kelley as the Lead Director, replacing Mr. Peacock who has served as Lead Director since 2005 and is retiring from
the Board this year. Mr. Kelley has significant board experience and has served on the Company’s Board since 2003 and on
other public company boards, as well as serving as the Company’s Audit Committee Chairman since 2008. Mr. Kelley performs
an important role in the leadership of the Board by presiding at executive sessions of the non-management directors at each regular
Board meeting and setting the agenda for these sessions. Mr. Kelley also serves as a mentor to Mr. Dinges and as a liaison between
Mr. Dinges and the other independent directors. Mr. Kelley’s longevity on the Board enhances this leadership role and provides
for continuity among the non-employee directors.
In addition to the Lead Director, our Corporate Governance
Guidelines also contain strong checks and balances regarding the combined role of CEO and Chairman. Those provisions include the
inability of the CEO to serve on any committees of the Board other than the Executive Committee, as only non-management directors
may do so, and the requirement that a substantial majority of the directors be independent, as discussed above under “Board
of Directors Independence.” All of our directors are independent, other than Mr. Dinges.
Our Board of Directors has determined that its current
leadership structure is appropriate. The Board believes that Mr. Dinges, acting in his capacity as CEO of the Company, is well
positioned to facilitate communications with the Board of Directors about our business. Mr. Dinges has served in this capacity
since May 2002, during which time the Company’s business has undergone signification changes. None of the returning independent
directors was serving at that time, so Mr. Dinges provides continuity and historical perspective to the Board. Under Mr. Dinges’
leadership, the Company has grown from a market capitalization of approximately $800 million with operations in onshore Texas and
Louisiana Gulf Coast, the Rocky Mountains, the Anadarko Basin and Appalachia to an over $12 billion market capitalization company
as of December 31, 2014, with most of its reserves in the Marcellus Shale area in northeast Pennsylvania. Mr. Dinges has the full
confidence of the Board. For all these reasons, the Board has determined that the most appropriate form of leadership for the Board
of Directors currently is for the CEO, who is responsible for the day-to-day operations of the Company, to serve as Chairman, with
strong and independent oversight by the Lead Director and the other non-management directors.
Board of Directors Oversight of Risk
The Board of Directors considers risk oversight to be
an integral part of its role, and discussions regarding risks faced by the Company are part of its meetings and deliberations
throughout the year. Our Corporate Governance Guidelines provide that the Board is responsible for assessing major risks facing
the Company and reviewing options for their mitigation. At the direction of the Board, management is responsible for implementing
an enterprise risk management process and reporting to the Board at least annually regarding its assessment of risks that could
have a significant impact on the Company and the strategies for their mitigation. In this way, the Board is engaged in risk oversight
at the enterprise level.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 22 |
The Board is also engaged in
risk oversight through regular reports from the Audit Committee. The Audit Committee is charged with reviewing with
management and the Company’s internal auditors the Company’s major financial exposures and the steps management
has taken to monitor and control those exposures. The Audit Committee receives periodic reports from management on these
areas of potential exposure, including litigation, commodity price hedging, liquidity and capital resources, financial
reporting and disclosures and regulatory risks, among others. The Audit Committee also receives reports from management
regarding compliance with our Code of Business Conduct. The Audit Committee reviews at least annually the Company’s
policies and guidelines concerning financial risk assessment and financial risk management, with the assistance of the
Company’s internal auditors, KPMG LLP. KPMG LLP conducts a process of assessing major risks, including management
interviews, and presents and discusses with the Audit Committee its conclusions regarding the Company’s major risks.
From this process, areas of concern are identified and considered and the internal audit plan is developed. Results of these
reviews and audits are presented to the Audit Committee throughout the year. At each regular Board meeting, the Audit
Committee Chairman reports to the Board regarding the activities of the Committee.
Corporate Governance Guidelines
The Cabot Oil & Gas Corporation Corporate
Governance Guidelines outline the functions and responsibilities of the Board, director qualifications, and various processes
and procedures designed to ensure effective and responsive governance. The guidelines are reviewed annually and revised as
appropriate to reflect changing regulatory requirements and best practices. The full text of the Corporate Governance
Guidelines can be found on the Company’s website at www.cabotog.com by choosing “About Cabot,” and
then choosing “Governance.”
Code of Business Conduct
All employees, officers and
directors are required to comply with the Company’s Code of Business Conduct to help ensure that the Company’s
business is conducted in accordance with the highest standards of moral and ethical behavior. The Code of Business Conduct
covers all areas of professional conduct, including conflicts of interest, customer relationships, insider trading, financial
disclosure, intellectual property and confidential information, as well as requiring strict adherence to all laws and
regulations applicable to the Company’s business. Employees, officers and directors are required annually to reply to a
Code of Conduct Questionnaire, which is designed to elicit information related to any known or possible violation of the
Code. The full text of the Code of Business Conduct can be found on the Company’s website at www.cabotog.com by
choosing “About Cabot,” and then choosing “Governance.” The Company will satisfy the requirement to
disclose any amendments to or waivers from certain provisions of its Code of Business Conduct by posting such information on
the website at that location.
Executive Sessions of the Board of Directors
The Board of Directors generally holds an executive session
of the non-management and independent directors during each of its regularly scheduled meetings. The executive sessions are presided
over by the Lead Director.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 23 |
Communications with the Board of Directors
The Company’s Board of Directors has a process for shareholders
and other interested parties to send communications to the Board. Communications should be addressed to the “Board of Directors,”
a specified committee of the Board, an individual director (including the Lead Director) or the “Non-management Directors”
in care of:
Corporate Secretary and Managing Counsel
Corporate Legal Department
840 Gessner Road, Suite 1400
Houston, Texas 77024
(281)589-4890
(281)589-4808 (fax)
(Outside the U.S. or U.S. long distance-call
collect)
Deidre.Shearer@cabotog.com (email)
All communications received as described above and intended for
the Board of Directors, a committee of the Board of Directors, an individual director, or the non-management directors as a group
will be relayed to the appropriate directors.
Annual Meeting Attendance
The Company’s policy is that it expects all members of
the Board of Directors to attend the Company’s annual meeting of stockholders. In 2014, all of the members of the Board attended
the annual meeting.
Board of Directors and Committee Meeting Attendance
The Board of Directors held seven meetings during 2014. All directors
attended 100% of the meetings of the Board of Directors and of the committees on which they served.
Director Compensation
Directors who are employees of the Company
receive no additional compensation for their duties as directors. During 2014, non-employee directors’ annual compensation
included an annual retainer fee of $75,000 each, payable quarterly, for their service on the Company’s Board of Directors
and its committees. The Lead Director received an additional $20,000 annual retainer, the Audit Committee Chairman and Compensation
Committee Chairman received an additional $15,000 annual retainer and the remaining committee chairmen received an additional
$10,000 annual retainer, each payable quarterly, for this additional service. Additionally, each non-employee director will receive
$2,000 for each Board of Directors meeting attended in excess of six in-person meetings per year. The directors did not receive
additional meeting fees in 2014 because they did not attend in excess of six in-person meetings.
In 2014, non-employee directors were also entitled to an annual
award of restricted stock units under the 2004 Incentive Plan, the restrictions on which lapse the date the non-employee director
leaves the Board of Directors, with a targeted award value at grant date of $200,000. In 2014, these directors each received 5,073
restricted stock units.
Beginning in 2013, Board members had the option of participating
in the Director Non-Qualified Deferred Compensation Plan, which provides each non-employee director an opportunity to elect each
year to take any, or all, of the director’s annual retainer and additional fees for serving
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 24 |
as lead director or as a committee chairman in restricted stock
units, valued at the closing price of the common stock on the date specified in the plan, for the quarterly retainer payment. The
terms of the restricted stock units are the same as those issued annually.
All directors were reimbursed for travel
expenses incurred for attending Board and committee meetings. Spouses of the directors were invited to attend the Board of Director
strategy meeting during 2014 and travel expenses incurred by the spouses were reimbursed by the Company. For more information
on director compensation, see “Director Compensation Table” below.
The table below summarizes the total compensation paid to each
of the non-employee directors of the Company for the fiscal year ended December 31, 2014.
Name | |
Fees Earned or Paid in Cash* ($) | |
Stock Awards ($)(1) |
|
Option Awards ($) | |
Non-Equity Incentive Plan Compensation ($) | |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | |
All Other Compensation ($)(2) | |
Total ($) |
Rhys J. Best | |
$ | 90,000 | | |
$ | 200,028 | |
|
- | |
- | |
- | |
| $ 6,333 | | |
$ | 296,361 | |
James R. Gibbs | |
$ | 85,000 | | |
$ | 200,028 | |
|
- | |
- | |
- | |
| $ 5,468 | | |
$ | 290,496 | |
Robert L. Keiser | |
$ | 85,000 | | |
$ | 200,028 | |
|
- | |
- | |
- | |
| $ 9,738 | | |
$ | 294,766 | |
Robert Kelley | |
$ | 90,000 | | |
$ | 200,028 | |
|
- | |
- | |
- | |
| $ 12,733 | | |
$ | 302,761 | |
P. Dexter Peacock(3) | |
$ | 95,000 | | |
$ | 200,028 | |
|
- | |
- | |
- | |
| $ 13,098 | | |
$ | 308,126 | |
W. Matt Ralls | |
$ | 75,000 | | |
$ | 200,028 | |
|
- | |
- | |
- | |
| $ 3,513 | | |
$ | 278,541 | |
* | Restricted stock units were issued pursuant to the Company’s Non-Employee
Director Deferred Compensation Plan in lieu of quarterly cash retainer and leadership fees totaling $85,000 each for Messrs. Gibbs
and Keiser, $23,750 for Mr. Peacock, and $56,250 for Mr. Ralls. |
| |
(1) | The amounts in this column reflect the grant date fair value with respect to restricted
stock units in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 718 for the fiscal year ended December 31, 2014. Assumptions used in the calculation of these amounts are included in Note
13 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2014 (the “Form 10-K”). In February 2014, each non-employee director received a grant of 5,073
restricted stock units, with a grant date fair value of $200,028 based on the average of the high and low trading price of the
Common Stock on the February 20, 2014 grant date. The restricted stock units vest on the grant date, but are not payable by the
Company in shares of Common Stock until the date the non-employee director ceases to be a director of the Company. The aggregate
number of restricted stock units outstanding at December 31, 2014, including those issued in the election of the director and
in lieu of quarterly cash retainer and fees, were as follows: |
Name | |
Stock Awards |
Rhys J. Best | |
| 80,429 | |
James R. Gibbs | |
| 56,812 | |
Robert L. Keiser | |
| 123,996 | |
Robert Kelley | |
| 154,017 | |
P. Dexter Peacock | |
| 156,705 | |
W. Matt Ralls | |
| 32,255 | |
(2) | The amounts in this column include for each director some or all of the following: |
| | |
| • | Quarterly dividends paid on the restricted stock units. |
| | |
| • | Spouse travel to the September 2014 Board of Directors strategy meeting and related
expenses. |
| | |
(3) | Mr. Peacock will retire from service as a director as of the date of annual meeting pursuant to Cabot’s director retirement policy. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 25 |
Director Retirement
It is the policy of the Board of Directors that directors of
the Company retire at the annual meeting following a director’s 73rd birthday. It is also the policy of the Board
of Directors that a retiring CEO of the Company retires from service on the Board, unless a determination is otherwise made by
the Board of Directors.
Information on Standing Committees of the Board of Directors
Information on each of the Board’s standing committees
is discussed below. The charters of each of the Board Committees can be found on the Company’s website at www.cabotog.com
by choosing “About Cabot,” and then choosing “Governance.”
Committees | |
Independent? | |
2014
Meetings | |
Dinges | |
Best | |
Gibbs | |
Kelley | |
Keiser | |
Peacock | |
Ralls |
CGN | |
Yes | |
4 | |
| |
| |
C | |
| |
| |
| |
|
Audit | |
Yes | |
4 | |
| |
| |
| |
C | |
| |
| |
|
Compensation | |
Yes | |
4 | |
| |
C | |
| |
| |
| |
| |
|
Safety | |
Yes | |
4 | |
| |
| |
| |
| |
C | |
| |
|
Executive | |
No | |
0 | |
| |
| |
| |
| |
| |
C | |
|
C – Chairman of committee
– Member of
committee
Corporate Governance and
Nominations Committee. The function of the Corporate Governance and Nominations (“CGN”) Committee is to
assist the Board in fulfilling its responsibility to the stockholders by:
• | Identifying qualified individuals to become Board members and assisting the Board
in determining the composition of the Board and its committees; |
| |
• | Assessing Board and committee effectiveness; |
| |
• | Developing and implementing the Company’s corporate governance guidelines; and |
| |
• | Taking a leadership role in shaping the corporate governance of the Company. |
In accordance with its charter, the CGN Committee has adopted
minimum criteria for Board membership, which are discussed in more detail at “Director Nominations and Qualifications”
above.
Audit
Committee. The function of the Audit Committee is to assist the Board in overseeing:
• | The integrity of the financial statements of the Company; |
| |
• | The compliance by the Company with legal and regulatory requirements; |
| |
• | The independence, qualifications, performance and compensation of the Company’s
independent auditors; and |
| |
• | The performance of the Company’s internal audit function. |
It is the policy of the Audit Committee to pre-approve all audit,
review or attest engagements and permissible non-audit services, including the fees and terms thereof, to be performed by the independent
auditors, subject to, and in compliance with, the de minimis exception for non-audit services described in Section 10A(i)(l)(B)
of the Securities Exchange Act of 1934 and the applicable rules and regulations of the Securities and Exchange Commission (the
“SEC”). The Audit Committee has delegated to each member of the Audit Committee authority to pre-approve permissible
services to be performed by the independent auditors. Decisions of a member to pre-approve permissible services must be reported
to the full Audit Committee at its next scheduled meeting.
Each member of the Audit Committee satisfies the financial literacy
and independence requirements of the NYSE listing standards. The Board has determined that Mr. Kelley meets the requirements of
an “audit committee financial expert” as defined by the SEC.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 26 |
Compensation
Committee. The function of the Compensation Committee is to:
• | Review and approve corporate goals and objectives relevant to the CEO’s compensation,
evaluate the CEO’s performance in light of those goals and objectives, and determine, subject to ratification by the Board,
the CEO’s compensation level based on this evaluation; |
| |
• | Provide counsel and oversight of the evaluation and compensation of management of
the Company, including base salaries, incentive compensation and equity-based compensation; |
| |
• | Discharge any duties imposed on the Compensation Committee by the Company’s
incentive compensation and equity-based compensation plans, including making grants; |
| |
• | Evaluate the independence of, and retain or replace any compensation consultant engaged
to assist in evaluating the compensation of the Company’s directors, CEO and other officers and to approve such consultant’s
fees and other terms of retention; and |
| |
• | Review the annual compensation of the directors. |
Safety and Environmental
Affairs Committee. The function of the Safety and Environmental Affairs (“S&EA”) Committee is to assist
the Board in providing oversight and support of the Company’s safety and environmental policies, programs and initiatives.
Among other things, the S&EA Committee reviews our compliance with environmental, health and safety laws and regulations,
pending legislative and regulatory initiatives, training initiatives and, as needed, consults with outside and internal advisors
regarding the management of the Company’s safety and environmental policies, programs and initiatives.
Executive
Committee. The function of the Executive Committee is to exercise all power and authority of the Board of Directors
in the event action is needed between regularly scheduled Board Meetings and a meeting of the full Board is deemed unnecessary,
except as limited by the Company’s by-laws or applicable law. The Executive Committee did not meet during 2014.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 27 |
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
This Compensation Discussion and Analysis
(“CD&A”) provides stockholders with an understanding of our compensation philosophy, objectives, policies and
practices in place during 2014, as well as the factors considered by our Compensation Committee of the Board of Directors in making
compensation decisions for 2014. This CD&A focuses on the compensation of our Chief Executive Officer, our Chief Financial
Officer and our three other most highly compensated officers for 2014 (the “NEOs”), namely:
Dan
O. Dinges |
Chairman, President & Chief Executive Officer |
Scott
C. Schroeder |
Executive Vice President & Chief Financial Officer |
Jeffrey
W. Hutton |
Senior Vice President, Marketing |
Phillip
L. Stalnaker |
Vice President & Regional Manager, North Region |
G.
Kevin Cunningham |
Vice President & General Counsel |
Our compensation plans and practices are
designed to align the financial interests of the above NEOs with the financial interests of our shareholders. To that end, we
provide our NEOs with a competitive base salary, an annual cash bonus opportunity based on the achievement of specific goals aligned
with shareholder value creation and long-term incentives tied to long-term total shareholder return and annual cash flow attainment.
For the NEOs, in 2014 the level of at-risk pay ranged from 72% to 89% of the total annual compensation opportunity, with the CEO
having the highest level of at-risk pay.
2014 Performance Highlights
In 2014, we faced a difficult commodity pricing and capacity
environment in our industry that impacted our overall performance. We experienced a sharp decline in commodity prices during the
second half of 2014 resulting from an oversupply of both crude oil and natural gas. Adding to this dynamic was suppressed demand
for natural gas due to a lack of new pipeline takeaway capacity. As a result of this market imbalance, stock prices across the
industry fell dramatically in the last half of 2014, and, for the first time in 6 years, Cabot’s stock price finished the
year lower than where it began. The Company’s fiscal discipline and strong financial position, as well the quality of our
asset base, places Cabot in a good position to weather these challenges and take advantage of the opportunities that lie ahead.
In spite of the downturn in the industry during the last half
of 2014, our business strategy of delivering value by growing reserves and production in a cost-effective manner continued to deliver
outstanding operational results in 2014. Specifically:
• | Total year-end proved reserves grew to 7.4 Tcfe in 2014, a 36% increase over 2013; |
| |
• | Absolute production was 531.8 Bcfe, 28.6% higher than the level recorded in 2013;
and |
| |
• | The Company’s “all sources” finding cost was $0.71 per Mcfe for
2014 and $0.68 per Mcfe over the last three year period. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 28 |
These recent achievements are consistent
with the positive trend in these operating metrics experienced over the last several years, as highlighted below.
This substantial growth in reserves and production
over the last three years has been accompanied by a 41% decline in our finding costs per unit and a 37% decline in our total operating
costs per unit. These achievements translated into top tier performance for this period, not only in these categories, but also
in total shareholder return, as indicated below.
* |
Cimarex Energy Company, Concho Resources Inc., EQT Corporation, EXCO Resources Inc.,
Newfield Exploration Company, Noble Energy Inc., Pioneer Natural Resources Company, QEP Resources Inc.,
Quicksilver Resources Corporation, Range Resources Corporation, Southwestern Energy Company, SM Energy Company, Ultra Petroleum Corp., WPX Energy, Inc. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 29 |
2014 Compensation Highlights
Compensation outcomes in 2014 rewarded important
near-term operating successes while aligning executives with the same stock price performance results experienced by our long-term
stockholders:
• |
Due to our second-place ranking among our peer group, performance shares granted to our executives in 2012
with vesting contingent upon our relative three-year total shareholder return (“TSR”), vested at 200% of target. The
underlying shares appreciated in value consistent with the Company’s stock price, in absolute terms and relative to our peers,
over that three-year period. |
|
|
• |
Two of the four operating and financial performance metrics for the 2014 annual cash incentive awards significantly exceeded targets and two metrics fell short of targets, resulting in the awards being paid out in the range of 150% to 160% of target for the NEOs, prior to the application of individual performance adjustments. |
|
|
• |
Our performance target for our hybrid performance shares of achieving at least $100 million of operating cash flow in 2014 was met, resulting in the annual vesting of hybrid performance shares granted to executives over the last three years. |
|
|
• |
Outstanding long-term incentive awards made in February 2014 had declined in value by 25% by the end of the year, consistent with the Company’s stock price performance in 2014. |
|
|
• |
At our most recent annual meeting in May 2014, over 98% of the votes cast supported our NEO compensation practices. Consistent with this strong support, the Compensation Committee of our Board of Directors (“Committee”) determined to continue our 2013 compensation practices unchanged in 2014. |
CEO Compensation and Performance-Based
Pay
We have maintained consistent and disciplined
performance-based compensation programs for all of our executives. For many years, the Committee has awarded compensation opportunities
to our CEO and other executives that require meaningful absolute and relative stock price and financial performance to deliver
targeted realized compensation levels. The allocation of 2014 compensation among salary, short-term incentives and long-term incentives
for our CEO and the other NEOs, on an average basis, reflects this guiding principle, as show below:
|
In 2014, the Committee awarded 60% of each
executive’s long-term incentive opportunity in the form of performance shares payable solely on the basis of our total shareholder
return relative to our industry peer group over a three year performance period (“TSR performance shares”). Our frequent
top-quartile TSR performance over the past three years has generated above-target payments for executives from the TSR performance
shares and added significant value to our shareholders, on an absolute and relative basis. The CEO’s awards and the relative
performance achieved for the most recently completed performance period, plus the current ranking for the two remaining unvested
awards, are as follows:
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 30 |
CEO TSR PERFORMANCE SHARE AWARDS
| |
Target Value Awarded | |
Peer Rank Achieved | |
Percentage of Target Achieved | |
Earned Award Value |
Performance Period Achieved(1) | |
| |
| |
| |
|
2012-2014 | |
$ 1,976,697 | |
2nd of 15 | |
200% | |
$ 6,623,161 |
(1) |
This
performance period ended December 31, 2014. Target value awarded is based on the number of performance shares awarded multiplied
by the closing stock price on date of grant. The earned award value is based on the average of the high and low trading prices
of the Company’s common stock on December 31, 2014, which was $29.72. |
| |
Target Value Awarded | |
Target Value at 12/31/2014 |
Performance Periods In Progress(2) | |
| |
|
2013-2015 | |
$ 3,000,043 | |
$ 3,337,639 |
2014-2016 | |
$ 3,599,998 | |
$ 2,703,423 |
(2) |
These
performance periods are in progress. Target value awarded is based on the number of performance shares awarded multiplied
by the closing stock price on date of grant. The target value at 12/31/2014 is based on the Company’s closing stock
price on that day, which was $29.61. The actual value received by the CEO may be higher or lower than this value, depending
on Cabot’s peer rank achieved during the performance period, which affects the number of shares received, and the value
of the underlying common stock on the last day of the performance period. Cabot’s peer rank for the 2013-2015 award
and the 2014-2015 award as of December 31, 2014 was in the top quartile and second quartile of its peer group, respectively.
Those peer ranks equate with payouts of 170% and 140%, respectively, of the target number of shares. For more information
about the TSR performance shares, see “Executive Compensation – TSR Performance Shares” below. |
In 2014, we awarded 40% of each executive’s
long-term incentive value through hybrid performance shares that require threshold achievement based on a financial metric (see
“Hybrid Performance Shares” below). The hybrid performance shares vest on a three year graduated schedule, with 25%
of the award vesting on each of the first two anniversaries of the date of grant and 50% vesting on the third anniversary. To date,
all of the CEO’s hybrid performance share awards have satisfied the required performance criteria at their scheduled vesting
date.
Philosophy and Objectives of Our Compensation Programs
The Committee oversees an executive compensation program designed
to attract, retain, and engage highly qualified executives. The primary objectives of our compensation programs are:
• |
To align executive compensation with our business strategy; |
|
|
• |
To encourage management to create sustained value for the shareholders while managing inherent business risks; |
|
|
• |
To attract, retain, and engage talented executives; and |
|
|
• |
To support a long-term performance-based culture throughout the Company. |
|
|
We achieve these objectives by: |
|
• |
Assigning the vast majority of NEO compensation to at-risk, performance-based incentive opportunities; |
|
|
• |
Tying incentive plan metrics and goals to shareholder value principles; and |
|
|
• |
Having balanced, open and objective reviews of goals and performance. |
The Committee believes that each of these
objectives carries an equal amount of importance in our compensation program.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 31 |
Elements of Our Compensation Program
We use various components of executive compensation,
with an emphasis on variable compensation and long-term incentives. The components of executive compensation are presented in the
table below and discussed in more detail later in this section of the proxy statement.
Compensation Component |
|
Purpose |
|
Competitive Positioning |
Base Salary |
|
Compensation for position, experience, expertise and competencies. |
|
Base salaries are targeted to approximate the compensation peer group median, taking into account the competitive environment, as well as the experience and accomplishments of each executive. |
Annual cash incentive bonus |
|
Reward the achievement of annual business objectives, including:
• Financial goals (unit costs, finding costs)
• Operational goals (specific objectives tied to production
growth and reserve growth)
• Individual objectives aligned with corporate strategy
• Committee evaluation of qualitative performance
|
|
Annual bonus opportunities are established as a percentage of
base salary and are targeted to match industry bonus percentage levels for comparable executive positions.
Realizing target bonus opportunities requires achieving key annual
financial and operating goals aligned with long-term shareholder value creation.
|
Long-term Incentives |
|
Prominent part of total compensation to maintain alignment with
shareholder value creation:
• TSR performance shares (earned and vested based on Total
Shareholder Return versus peers)
• Hybrid performance shares (time vested and tied to operating
cash flow results)
• Stock ownership guidelines
|
|
Long-term incentives are intended to promote long-term value creation
for shareholders and to retain executives through extended vesting periods.
To place relatively greater emphasis on the importance of shareholder
return performance, the value of equity awards is generally targeted above the median of the peer group, although other individual
and Company circumstances influence the award amounts.
|
Executive Benefits and Perquisites |
|
Comprehensive programs to build financial security, manage personal financial risk and limit Company costs. |
|
Value of benefits and perquisites is generally targeted to be competitive with market levels and comprises a minor component of total compensation. |
Total Compensation |
|
Designed to attract, retain, align and engage highly qualified executives, while creating a strong connection to financial and operational performance and long-term shareholder value. |
|
Total compensation is highly correlated with Company and individual performance and is evaluated for its competitiveness when compared to the peer group. |
In making compensation decisions, the Committee
includes comparisons of each element of total compensation against a peer group of publicly-traded exploration and production companies.
In that total, a greater weight is placed on long-term equity awards versus salary and annual cash incentive bonus to foster an
environment where stock price appreciation over the long-term is a major executive focus. This focus in turn aligns the interests
of the executives with those of the shareholders. The competitive market is determined by reference to the compensation practices
of an industry peer group as set forth below.
Industry Peer Group
We use one peer group for both compensation
competitive analysis and to measure the relative performance of our TSR performance shares. The Committee chose these companies
because they represent our direct competitors of similar size and scope in the exploration and production sector of the energy
industry, and include several companies that compete in our core areas of operation for both business opportunities and executive
talent. The peer group changes from time to time due to organic changes in the Company or its peers, business combinations, asset
sales and other types
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 32 |
of transactions that cause peer companies
to no longer exist or to no longer be comparable. The Committee approves all revisions to the peer group. Based on 2014 year-end
closing market prices, the market capitalization of companies in our industry peer group ranged from approximately $35.6 million
to $21.3 billion. Our market capitalization at 2014 year-end was approximately $12.2 billion. The peer group for the two outstanding
TSR performance cycles, which began in 2013 and 2014, is as follows:
• Cimarex Energy Company |
• QEP Resources Inc. |
• Concho Resources Inc. |
• Quicksilver Resources Corporation |
• EQT Corporation |
• Range Resources Corporation |
• EXCO Resources Inc. |
• Southwestern Energy Company |
• Newfield Exploration Company |
• SM Energy Company |
• Noble Energy Inc. |
• Ultra Petroleum Corp. |
• Pioneer Natural Resources Company |
• WPX Energy, Inc. |
In February 2015, the Committee updated the peer group to maintain
comparability for the 2015 – 2017 performance cycle. The updated peer group includes companies with current valuations and
operations more comparable to Cabot:
• Antero Resources Corporation |
• Marathon Oil Corporation |
• Chesapeake Energy Company |
• Murphy Oil Corporation |
• Cimarex Energy Company |
• Newfield Exploration Company |
• Concho Resources Inc. |
• Noble Energy Inc. |
• Continental Resources Inc. |
• Pioneer Natural Resources Company |
• Devon Energy Corporation |
• QEP Resources Inc. |
• Encana Corporation |
• Range Resources Corporation |
• EQT Corporation |
• Southwestern Energy Company |
2014 Committee Activity
During 2014 the Committee held three regular
meetings, one in each of February, July and October. The Committee held a special meeting in early January 2015 for the purpose
of certifying the results for the TSR performance share awards with a performance period of 2012-2014 that vested on December 31,
2014.
At the time the 2014 grants were made and
periodically throughout the year, the Committee referenced the Fall 2013 competitive market study of the peer group by Meridian
Compensation Partners, LLC (Meridian), the Committee’s independent compensation consultant. Based on the study and the CEO’s
recommendations with respect to the other Company officers, the Committee determined 2014 salaries, bonus payouts for 2013 performance,
certified the 2013 results for payouts of one-third of each of the hybrid performance shares granted from 2011 to 2013, and the
annual grant of long-term incentive awards for our officers. A detailed discussion of each item of compensation can be found below
under “Elements of Compensation.”
Also at the February 2014 meeting and prior
to making any compensation decisions, the Committee reviewed a detailed analysis of wealth accumulation for each NEO for the period
from 2003 to 2013. The Committee does not use tally sheets, but over the course of the year reviews each element of compensation
for the NEOs, including elements of total direct compensation and payments upon severance or change of control, as well as other
benefits and perquisites. Lastly, at the February 2014 meeting, the Committee and the Board of Directors approved the 2014 measurement
criteria for the 2014 cash bonus plan.
During 2014, the Committee reviewed an analysis
prepared by Meridian of 2013 executive compensation reported by our peer group. From the available 2013 survey information, the
Committee evaluated its compensation decisions relative to our peer group. The Committee also reviewed an analysis prepared and
presented by Meridian of current compensation issues and trends, including a 2014 competitive market study of executive compensation
among the peer companies. This analysis is utilized in the Committee’s review of all components of compensation in the following
February meeting.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 33 |
Elements of Compensation
Elements of In-Service Compensation
There are three major elements of the executive in-service compensation
program: (1) base salary, (2) annual cash incentive bonus and (3) long-term incentive equity awards. Company perquisites are a
minor element of the executive compensation program. This design generally mirrors the pay practices of the exploration and production
industry generally and our selected industry peer group. Our compensation is intentionally weighted toward long-term equity-based
compensation. Each element is described below.
Mr. Dinges, our Chairman, President and Chief Executive Officer,
has a significantly broader scope of responsibilities than the other named executive officers. The difference in compensation for
Mr. Dinges described below primarily reflects these differing responsibilities and, except as described below, does not result
from the application of different policies or decisions with respect to Mr. Dinges.
Base Salary
The Committee believes base salary is a critical element of executive
compensation because it provides executives with a base level of monthly income. The base salary of each executive, including the
NEOs, is reviewed annually by the Committee. The CEO’s salary is established by the Committee (and ratified by the Board
of Directors) and the other executives’ salaries are established jointly by the CEO and the Committee. Base salary is targeted
for all executive positions near the median level of the peer group. Individual salaries take into account our established salary
policies and our current salary budget; the individual’s levels of responsibility, contribution and value to the Company;
individual performance; prior relevant experience; breadth of knowledge and internal and external equity issues. Base salary increases
from 2013 to 2014 for the NEOs ranged from approximately 4% to 9%.
Name |
|
2013 Base Salary |
|
2014 Base Salary |
Mr. Dinges |
|
$ 825,000 |
|
$ 900,000 |
Mr. Schroeder |
|
$ 450,000 |
|
$ 475,000 |
Mr. Hutton |
|
$ 340,000 |
|
$ 355,000 |
Mr. Stalnaker |
|
$ 300,000 |
|
$ 320,000 |
Mr. Cunningham |
|
$ 335,000 |
|
$ 348,000 |
In 2014, the Committee reviewed two competitive market studies
for compensation of the peer group, prepared by our independent consultant. The Committee noted that Mr. Dinges’ 2014 base
salary of $900,000 and Mr. Schroeder’s 2014 base salary of $475,000 were both between the 50th and 75th percentile
of the industry peer group for the 2014 competitive data. The base salaries of the other NEOs ranged between the 25th and
75th percentile of the peer group, with individual base salaries varying from the median of the peer group by position
due to individual experience in each role and differences in peer organization management structures relative to ours. The Committee
views these salary levels as consistent with its compensation philosophy, given the ongoing changes in peer compensation levels
and the intention of delivering a relatively higher percentage of NEO compensation through long-term incentives. The Committee
took no additional action to revise base salaries during the year.
In February 2015, in recognition of the depressed market for hydrocarbons
and its current and anticipated effect on the industry, as well the positioning of our NEO’s salaries relative to available
2014 peer benchmarking data, the Compensation Committee decided not to increase salaries for 2015 for four out of five of our NEOs.
Mr. Stalnaker received a 9% salary increase for 2015, due to his 2014 performance, increased operational responsibilities and relative
placement in the peer group for 2014.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 34 |
Annual Cash Incentive Bonus
The annual cash incentive bonus opportunity is based upon our
pay-for-performance philosophy. The opportunity provides the NEOs, as well as other executives and key employees, with an incentive
in the form of an annual cash bonus to achieve overall business goals. The bonus opportunity is stated as a percentage of base
salary and is set using the Committee’s philosophy to target bonus levels (as a percentage of base salary) consistent with
the competitive market for executives in similar positions. Annual bonus opportunities are based on specific goals that are of
primary importance to the Company during the coming year and motivate executives to achieve those goals.
During 2014, the bonus opportunity for the NEOs was as follows:
Executive | |
Target Bonus
(as a % of Salary) | |
Target Bonus
Value (100%) |
Mr. Dinges | |
| 125 | % | |
$ | 1,125,000 | |
Mr. Schroeder | |
| 100 | % | |
$ | 475,000 | |
Mr. Hutton | |
| 70 | % | |
$ | 248,500 | |
Mr. Stalnaker | |
| 70 | % | |
$ | 224,000 | |
Mr. Cunningham | |
| 70 | % | |
$ | 243,600 | |
The bonus measurement criteria for 2014 were unchanged from 2013.
The measurement criteria were designed to emphasize value-generating metrics, to link related metrics together to take into account
the interrelated impacts of such metrics on value creation, and to increase the overall payout potential for a breakout year, while
reducing overall discretion. Also, the measurement criteria place a cap on the payment for performance for each metric at 275%
of target payout, which allows for some additional benefit for above-range performance, but removes the potential of one metric
creating a disproportionate payout. The overall plan has a target maximum award of 250% of target in the aggregate, but individual
awards can vary, at the discretion of the Committee. The metrics, their weightings and the required levels of achievement for specified
bonus awards are listed in the table below.
| |
2014 Bonus Performance Goals (% of Target) |
| |
Weighting | |
0% | |
100% | |
200% |
|
Reserve Growth | |
| 25 | % | |
| 15 | % | |
| 21 | % | |
| 27% | |
Finding Costs (per Mcfe) | |
| 15 | % | |
$ | 0.99 | |
$ | 0.82 | |
| $ 0.65 | |
Production Growth | |
| 25 | % | |
| 25 | % | |
| 34 | % | |
| 43% | |
Unit Costs (per Mcfe) | |
| 15 | % | |
$ | 2.85 | |
$ | 2.55 | |
| $ 2.25 | |
Strategic Evaluation (Discretionary) | |
| 20 | % | |
| | | |
| | | |
| | |
| |
| 100 | % | |
| | | |
| | | |
| | |
At the start of each year the bonus criteria targets are established
based on the operating budget approved by the Board of Directors. The payout ranges are created at this same time. Upon completion
of each fiscal year, the CEO makes recommendations to the Committee for annual bonuses to be paid to each executive officer (other
than the CEO) using the formula established for the program in that year. The Committee references both the CEO’s recommendations
and the formulaic output in determining the bonuses to be paid to the NEOs other than the CEO. With respect to the strategic evaluation
component, the Compensation Committee evaluates key influences on Company performance not otherwise considered through the metrics.
These may include the management of capital spending, environmental and safety performance, net income performance, organizational
leadership and other factors the Committee deems to have been important in the prior year’s performance. The Committee follows
no formulaic structure relating to these factors. In general, the Committee expects to award the target 20% of the strategic evaluation
component in years when the Company meets internal and external performance expectations with respect to these factors, although
the strategic component can
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 35 |
range from 0% to 55% in the weighting of the bonus awards calculation.
Acquisitions and divestitures are not part of establishing the target metrics because the Company does not budget these activities.
When acquisition or divestiture activity occurs, the Committee assesses its impact and exercises its discretion to adjust for the
impact.
Additional parameters for the 2014 annual cash incentive bonus
include a payout multiplier of 1.5 times for each of two grouped metrics if the grouped metrics both achieve target, subject to
the 275% maximum payout per metric. The grouped metrics are (1) Reserve Growth and Finding Costs, and (2) Production Growth and
Unit Costs. The Committee established the incentive on the grouped metrics to encourage a balanced approach to achieving operational
goals and to discourage over-achievement of one metric in a manner that adversely affects the grouped metric. For example, undisciplined
spending on a development program could help achieve the reserve growth metric at levels above target levels, but cause finding
costs to increase to unacceptable levels. By grouping the reserve growth and finding costs metrics together, and using a payout
multiplier of 1.5 for achieving target in both metrics, the Committee is rewarding efficiency in operations.
In 2014, actual performance under these metrics exceeded targets
and budget metrics as follows:
|
|
Actual Results |
|
Bonus Plan Target (100%) |
|
Bonus Plan 200% |
Reserve Growth |
|
35.7% |
|
|
21% |
|
|
27% |
|
Finding Costs (per Mcfe) |
|
$ 0.71 |
|
|
$ 0.82 |
|
|
$ 0.65 |
|
Production Growth |
|
28.6% |
|
|
34% |
|
|
43% |
|
Unit Costs (per Mcfe) |
|
$ 2.56 |
|
|
$ 2.55 |
|
|
$ 2.25 |
|
Our proved reserves were 7.4 Tcfe, representing
reserve growth of 35.7% in 2014. These reserves were added at a very efficient $0.71 per Mcfe. Production growth of 28.6% helped
drive down unit costs to the lowest level in ten years. In reaching a conclusion on the strategic evaluation component, the Committee
considered. In reaching a conclusion on the strategic evaluation component of the bonus metrics, the Committee considered the Company’s
level of performance in 2014—recording record levels of production, reserves and cash flow—in light of the challenging
macro environment for the oil and gas industry. In so doing, the Committee evaluated the strategies utilized by the executive team
to maximize the Company’s financial and operational results for the year and also to place it in a position for long-term
success. The Committee found that the strategies that were employed enhance the opportunities for long-term value generation for
our stockholders, even in the face of the challenging macro environment facing the industry. This performance, combined with the
record achievements for 2014, resulted in the Committee setting an above target score on the strategic evaluation component of
the award. The result of 2014 performance against all the bonus metrics, including the strategic evaluation component, was that
the total allocation for corporate performance was approved at 160% of target, prior to adjustment for regional or individual performance.
Upon completion of each fiscal year, the
Committee determines the CEO’s annual cash incentive bonus based on Company performance, the results of the bonus plan formula
described above and the Board’s annual CEO performance evaluation. The independent directors of the Board discuss and ratify
the CEO’s annual cash incentive bonus payment, considering the factors stated above and any factors relating to performance
that were particularly significant in the year in question.
For 2014, the Committee noted in particular:
• | the Company’s trailing three-year TSR, which ranked second in its peer group
for that period; |
| |
• | the initiative shown by the management team in positioning the Company for long-term
success by increasing our acreage position in the Eagle Ford operating area at an attractive cost of entry; |
| |
• | management’s initiative to issue long-term senior notes at a historically low
cost of capital of 3.65%, the proceeds from which were used to fund the expansion of our Eagle Ford position and to pay down our
revolving credit facility, providing significant liquidity in a challenged market environment; |
| |
• | the operational oversight by the management team, leading to record results and reduction
of unit cost levels, which create an opportunity |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 36 |
| for continued success in a low commodity price environment, such
as that experienced in late 2014 and early 2015; and |
| |
• | continued strategic efforts to maximize shareholder value. |
Based on this evaluation, the Committee approved the CEO’s
bonus payment for 2014 at 160% of target. The bonus payments for the other NEOs ranged from 150% to 160% of target, prior to the
application of individual performance adjustments. See “Executive Compensation–Summary Compensation Table” below
for actual bonuses paid to the NEOs.
Long-Term Incentives
In 2014, the Committee continued its established practice of awarding
two types of performance shares—TSR performance shares and hybrid performance shares—to provide long-term incentives
to our NEOs. The award allocation to NEOs in 2014 is designed to provide 60% of the targeted grant-date value from TSR performance
shares and 40% from hybrid performance shares. This allocation is more heavily weighted toward performance-based awards than the
average of our peer group, based on peers’ 2013 compensation data, as shown below.
|
The total size of the long-term incentive awards is based on a
number of factors, including peer group and related industry competitive practice, which is used as a point of reference to gauge
appropriate total compensation levels for a company of our size, business complexity and growth profile. The Committee does not
typically consider prior period long-term incentive awards, such as the amount of equity previously granted and outstanding, or
the number of shares owned, when determining annual long-term incentive awards.
All long-term incentives awarded to our NEOs in 2014 were granted
under the 2004 Incentive Plan, which was approved by our stockholders at the 2004 Annual Meeting of Stockholders and the performance
goals of which were approved by our stockholders at the 2009 Annual Meeting of Stockholders. The 2004 Incentive Plan expired according
to its terms at the 2014 Annual Meeting of Stockholders. The 2014 Incentive Plan, which included performance goals, was approved
by our stockholders at the same meeting.
TSR Performance Shares. The Committee
believes performance shares based on the Company’s total shareholder return relative to that of its peers provides a strong
link between the performance of the executive group and their pay, whereas other types of equity awards, such as stock options,
may not. The Committee also believes that a relative comparison of performance against peers over a three-year period, as opposed
to a single year, provides a better evaluation of how management performed under changing economic conditions. For these reasons,
the Committee believes that our TSR performance share awards are a good measure of performance versus the peer group and appropriately
link stock performance and compensation. To allow for payouts in excess of target without excessive dilution or the need to reserve
shares in excess of target, all payouts in excess of 100% of target are paid in the cash value of the shares, based on the average
of the high and low trading prices of our common stock on the last day of the performance period. For additional information about
the TSR performance shares, see the table “Grants of Plan-Based Awards” below.
Hybrid Performance Shares. Due
to restricted stock share limitations under the 2004 Incentive Plan and Section 162(m) tax considerations, in 2014 the
Committee again awarded hybrid performance shares instead of restricted stock. The hybrid performance shares vest over a
three year period from the date of grant, with 25% vesting in each of the first two years and 50% vesting in the third year,
provided the Company has $100 million or more operating
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 37 |
cash flow in the fiscal year prior to the vesting date. Applying
a cash flow threshold on share vesting allows these awards to remain fully tax deductible to the Company upon vesting. Hybrid performance
shares also have less underlying volatility than do traditional performance shares, and therefore help manage attrition risk by
creating a more sustained forfeitable stake in the Company. For additional information about the hybrid performance shares, see
the table “Grants of Plan-Based Awards” below.
Stock Appreciation Rights
(SARs). No SARs were granted in 2013 or 2014, but SARs were an integral part of the long-term incentive program from 2006
to 2012, and SARs granted previously to the NEOs remain outstanding. All SARs granted to date vest ratably over a three year
period and have a seven-year term.
Personal Benefits and Perquisites
We provide the NEOs with perquisites and other personal benefits
that the Company and the Committee believe are reasonable and consistent with the overall compensation program to better enable
us to attract and retain superior employees for key positions. The Committee periodically reviews the level of perquisites and
other personal benefits provided to the NEOs. In an effort to promote physical and financial health of the NEOs, they are provided
with club membership dues, a Company-paid physical examination for the NEO and his or her spouse, a financial and tax planning
stipend of up to $3,000 annually, life insurance, and spouse travel to certain business meetings. The NEOs are reimbursed for these
expenses only if they are incurred. The aggregate cost to the Company of the perquisites and personal benefits described above
for the NEOs for 2014 are included under “All Other Compensation” in the Summary Compensation Table below.
Other Compensation
We offer all of our employees, including the NEOs, industry competitive
benefits including medical and dental reimbursement, short-term and long-term disability plans, basic life and accident insurance
and an employee assistance program. We offer a retirement program consisting of both qualified and non-qualified defined contribution
savings plans. See “Elements of Post-Termination Compensation” below for further descriptions of these programs.
Impact of Regulatory Requirements
Our performance shares, both traditional and hybrid, are intended
to constitute “qualified performance based compensation” as defined under Section 162(m) of the Internal Revenue Code.
The effect of that qualification is that compensation paid to covered employees pursuant to the performance shares and the SARs
should remain fully deductible. It is the Committee’s intent that the majority of long-term incentive awards and annual cash
incentive bonuses will qualify under Section 162(m) and with respect to 2014 compensation, we believe that to be the case. However,
a loss of deductibility may occur from year to year and is not considered a material factor in setting compensation.
In addition, in order to permit the Committee the flexibility
to use subjective and discretionary components in setting annual cash incentive awards without the Company’s loss of deduction
under Section 162(m), we use a “negative discretion” plan for executive officers to whom Section 162(m) might be applicable.
Under this plan, the Committee sets one or more financial or operating performance targets early in the year to create a bonus
pool intended to meet the requirements of Section 162(m) for such executive officers and reserves the right to reduce or otherwise
set the cash incentive amounts taking other factors into account. As a result, the Section 162(m) metrics are not the primary metrics
used in determining the relevant cash incentive awards to these executive officers.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 38 |
Clawback Provisions
We have not adopted express “clawback” provisions
with respect to compensation elements which would allow the Company to recoup paid compensation from designated officers in the
event of a financial restatement. The Committee has deferred taking action on clawbacks until such time as the regulations are
issued pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act in order to ensure our policy will
comply with the regulations. The Committee will continue to consider the appropriateness of clawback provisions in future compensation
decisions. Our 2014 Incentive Plan approved by the stockholders at the 2014 Annual Meeting of Stockholders makes any award pursuant
to that plan subject to any future clawback policy we adopt.
Elements of Post-Termination Compensation
Savings Investment Plan
The savings investment plan is a tax-qualified retirement savings
plan, or 401(k) plan, in which all employees, including the NEOs, may participate. It allows participants to contribute the lesser
of up to 50% of their annual salary, or the limit prescribed by the Internal Revenue Service, on a pre-tax basis. We match 100%
of the first six percent of a participant’s eligible pre-tax contribution. Participants are 100% vested in the Company’s
contributions after five years of service, vesting 20% per year.
During 2014, we continued the practice, established in 2011 after
the termination of the pension plan, of contributing 9% of salary and bonus of all eligible employees, including all eligible NEOs,
into the 401(k) plan (or into the non-qualified deferred compensation plan to the extent in excess of the qualified plan limits).
Participants are 100% vested in the Company’s contributions after five years of service, vesting 20% per year. The 9% contribution
is approved annually by the Board of Directors and in October 2014, the Board approved continuation of the contribution for 2015.
Deferred Compensation Plan
The non-qualified deferred compensation plan provides supplemental
retirement income benefits for our NEOs, other officers and other key employees, through voluntary deferrals of salary, bonus and
certain long-term incentives. It also allows for the Company to provide its full 6% match and 9% non-elective contribution when
contributions of the matching amount cannot be made to our 401(k) plan due to federal income tax limitations. The plan allows the
officers to defer the receipt and taxation of income until retirement from the Company. We make no additional contributions to,
nor do we pay in excess of market interest rates on, the deferred compensation plan. Amounts deferred by an officer under the deferred
compensation plan are held and invested by the Company in various mutual funds and other investment options selected by the officer
at the time of deferral. For additional information about the deferred compensation plan, including the investment options and
the manner of distributions, see “Non-Qualified Deferred Compensation” below.
Retiree Medical Coverage
NEOs are eligible for certain health benefits for retired employees,
including their spouses, eligible dependents and surviving spouses. The health care plans are contributory with participants’
contributions adjusted annually. Employees become eligible for this benefit if they meet certain age and service requirements at
retirement.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 39 |
Change in Control Agreements
We have entered into change in control agreements with the NEOs
and the other executive officers that provide for cash payments and certain other benefits in the event that the employee is actually
or constructively terminated within two years of a change in control event. This program has been in place since 1995, with some
modifications in 2001. At both of these time frames, many of the industry peer group and industry generally had in place some form
of change-in-control program. When approving the plan in 1995 with minor modifications in 2001, the Committee reviewed data regarding
similar plans within the peer group and the Company’s industry generally and applied its judgment to determine whether triggering
events and benefit levels under these agreements were necessary to meet the Committee’s objectives of encouraging such employees
to remain with the Company in the event of a change in control during circumstances suggesting a change in control might occur.
The Committee believes this program is important in recruiting and retaining strong leadership and to encourage retention in these
situations and that the “double-trigger” for cash payouts meets the stockholders’ expectations that employees
not be unjustly enriched upon a change in control.
The cash payments include three times the sum of base salary and
the highest bonus paid in the last three years or targeted to be paid in the year of termination. Benefits include continued eligibility
for medical, dental and life insurance for three years, provided the employee pays the premiums, three years service credit in
retirement plans, limited outplacement assistance and tax gross-up on excise taxes for agreements that were in place prior to 2010.
In 2010, the Committee adopted a policy to exclude excise tax gross-up provisions for change in control agreements adopted after
that date. The award agreements for the equity awards also contain accelerated vesting immediately upon a change in control, subject,
in the case of the traditional performance shares, to the achievement of the prescribed performance conditions as of the last day
of the month immediately preceding the month in which the change in control event occurs.
The Committee generally views the potential payments and benefits
under the change in control agreements as a separate compensation element because such payments and benefits are not expected to
be paid in a particular year and serve a different purpose for the executive other than elements of compensation. Accordingly,
those payments and benefits do not significantly affect decisions regarding other elements of compensation.
Stock Ownership Guidelines
The Corporate Governance and Nominations Committee and the Board
of Directors have adopted stock ownership guidelines for our officers and directors. Under those guidelines, the Chief Executive
Officer and the Chief Financial Officer are expected to hold 30% of the after-tax shares received upon the vesting or exercise
of an equity award until such time as they have accumulated six times their base salary. All other executive officers are expected
to hold 30% of the after-tax shares received upon the vesting or exercise of an equity award until such time as they have accumulated
three times their base salary. All of the NEOs have reached the required level of shareholdings under the stock ownership guidelines.
Non-employee directors must hold 100% of their restricted stock units until they cease to be a director.
Anti-hedging Policy
The Company has a policy prohibiting directors and officers from
speculative trading in Company securities, including hedging transactions, short selling, and trading in put options, call options,
swaps or collars. To our knowledge, all directors and executive officers are in compliance with the policy.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 40 |
Conclusion
We believe these executive compensation policies and programs
effectively serve the interests of the shareholders and the Company. The Committee has worked over the years to devise, manage
and provide an executive compensation program that meets its intended objectives and contributes to the Company’s overall
success.
Effect of Say on Pay Votes and Shareholder Outreach
In setting 2014 executive compensation, the Committee considered
the outcome of the say-on-pay vote at the two most recent annual meetings as strongly supportive of our pay practices and programs.
Those results were as follows:
• | 96.4% in favor at the 2013 annual meeting; and |
| |
• | 98.2% in favor at the 2014 annual meeting. |
As a result, the Committee concluded that the 2014 compensation
paid to our NEOs and our overall pay practices did not require substantial revision to address shareholder concerns. This conclusion
was further affirmed by input received from our top institutional shareholders in our regular outreach program during the period
after the 2014 annual meeting. This continued positive support from both the annual say-on-pay vote and communications with shareholders
was considered by the Committee in its decision not to make substantial changes to the program in setting 2015 executive compensation.
Compensation Consultant
The Committee employs the services of an executive compensation
consultant. In 2014, the Committee engaged Meridian as its independent consultant, and Meridian has also been retained by the Committee
for 2015. Meridian is responsible for preparing and presenting a comprehensive competitive market study of the compensation levels
and practices for a group of industry peers. The Committee-approved industry peer group is listed and described in more detail
above at “Industry Peer Group.” Meridian is also responsible for preparing and presenting an outside director compensation
study using the same industry peer group. The Committee relies on Meridian for input on pay philosophy, current market trends,
legal and regulatory considerations and prevalence of benefit and perquisite programs. A representative of Meridian attends all
regular meetings of the Committee and participates in most executive sessions.
In October 2014, the Committee reviewed the independence of Meridian,
and found it to be independent and without conflicts of interest in providing services to the Committee. In making such determination,
the Committee considered the six factors established by the NYSE effective July 2013. Fees paid by the Company to Meridian account
for less than 1% of Meridian’s total annual revenues. The Committee reviewed Meridian’s policies and procedures designed
to prevent conflicts of interest. To the knowledge of Meridian, there are no personal relationships among Meridian partners, consultants
or employees and members of the Committee or the Company’s management. To the knowledge of Meridian, none of the Meridian
partners, consultants or employees providing services the Committee owns Company stock. Meridian works exclusively for the Committee
and performs no services directly for management. Management does not retain the services of a compensation consultant.
Role of Executives in Establishing Compensation
The President and CEO, the Executive Vice President and CFO, and
the Corporate Secretary and Managing Counsel each play a role in our compensation process. With the benefit of Meridian’s
independent competitive market study, the CEO makes compensation recommendations to the Committee for our other officers, but not
for his own compensation. The CEO considers internal pay
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 41 |
equity issues, individual performance and Company performance
in making his recommendations to the Committee. The Executive Vice President and CFO makes recommendations to the CEO for the officers
who are his direct reports. The Human Resources Department provides the Committee survey data from a wider group of companies in
the energy sector than the industry peer group described above, which the Committee uses for evaluation of non-executive compensation
trends, and general administrative support implementing the Committee’s decisions. The executives listed above, together
with the Corporate Secretary and Managing Counsel, prepare materials and agenda for the Committee meetings and also prepare the
long-term equity plans as directed by the Committee for its review and consideration. Certain of the noted officers attend the
Committee meetings; however, the officers are generally excused from the meetings to enable the Committee to meet privately in
executive session, both with and without the compensation consultant also being present. The Committee has delegated to management
authority to administer the long-term incentive plans in accordance with the terms and conditions of the shareholder approved plans,
the specific award agreements and the specific individual awards approved by the Committee and, as needed, by the Board of Directors.
Executive Compensation Business Risk Review
The ownership stake in the Company provided by our equity-based
compensation, the extended vesting of these awards and our stock ownership guidelines are designed to align the interests of our
NEOs with our shareholders, maximize performance and promote executive retention. At the same time, the Committee believes, with
the concurrence of our independent consultant, that, as a result of our focus on long-term incentive compensation, our use of balanced
long-term incentives, the metric diversification and capped opportunities in our annual bonus plan and long-term incentives, and
our stock ownership guidelines, our executive compensation program does not encourage management to take unreasonable risks related
to the Company’s business.
Compensation Committee Report
The following report of the Compensation Committee of the Board
of Directors shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to
the SEC’s proxy rules, except for the required disclosure in this Proxy Statement, or subject to the liabilities of Section
18 of the Securities Exchange Act of 1934 (Exchange Act”), and the information shall not be deemed to be incorporated by
reference into any filing made by the company under the Securities Act of 1933 or the Exchange Act.
The Compensation Committee of the Board of Directors has reviewed
and discussed with management the above Compensation Discussion and Analysis. Based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated
by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 for filing with the
SEC.
The Compensation Committee
Rhys J. Best (Chairman)
James R. Gibbs
P. Dexter Peacock
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 42 |
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below summarizes the total compensation paid to or earned
by each of the CEO, the CFO and the next three most highly compensated executive officers (“NEOs”) for the fiscal year
ended December 31, 2014. Cash bonus amounts paid under the Company’s 2004 Incentive Plan, which are listed in the column
titled “Non-Equity Incentive Plan Compensation,” were determined by the Committee at its February 18, 2015 meeting
for 2014 performance and, to the extent not deferred by the executive, were paid out shortly thereafter. For additional information
about Non-Equity Incentive Plan Compensation, see “Annual cash incentive bonus” above.
Name and
Principal Position | |
Year | |
Salary
($) | |
Bonus
($)(1) | |
Stock
Awards ($)(2) | |
Option
Awards ($)(3) | |
Non-Equity Incentive Plan Compensation ($)(4) | |
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($) | |
All Other Compensation ($)(5) | |
Total ($) | |
Dan O. Dinges | |
2014 | |
$ | 885,592 | |
- | |
$ | 6,831,737 | |
| - | |
|
| $ 1,800,000 |
| |
- |
| |
|
| $ 297,484 |
| |
$ | 9,814,813 | |
Chairman, President and | |
2013 | |
$ | 800,962 | |
- | |
$ | 6,045,748 | |
| - | |
|
| $ 2,000,000 |
| |
- |
| |
|
| $ 266,154 |
| |
$ | 9,112,864 | |
Chief Executive Officer | |
2012 | |
$ | 678,205 | |
- | |
$ | 4,265,387 | |
$ | 931,758 | |
|
| $ 1,750,000 |
| |
- |
| |
|
| $ 238,540 |
| |
$ | 7,863,890 | |
Scott C. Schroeder | |
2014 | |
$ | 470,202 | |
- | |
$ | 2,561,903 | |
| - | |
|
| $ 760,000 |
| |
- |
| |
|
| $ 174,881 |
| |
$ | 3,966,986 | |
Executive Vice President | |
2013 | |
$ | 444,231 | |
- | |
$ | 2,599,587 | |
| - | |
|
| $ 1,112,500 |
| |
- |
| |
|
| $ 173,144 |
| |
$ | 4,329,462 | |
and Chief Financial Officer | |
2012 | |
$ | 405,256 | |
- | |
$ | 1,653,926 | |
$ | 361,283 | |
|
| $ 1,050,000 |
| |
- |
| |
|
| $ 152,647 |
| |
$ | 3,623,112 | |
Jeffrey W. Hutton | |
2014 | |
$ | 352,130 | |
- | |
$ | 882,431 | |
| - | |
|
| $ 397,000 |
| |
- |
| |
|
| $ 120,400 |
| |
$ | 1,751,961 | |
Senior Vice President, | |
2013 | |
$ | 336,154 | |
- | |
$ | 846,386 | |
| - | |
|
| $ 595,000 |
| |
- |
| |
|
| $ 114,134 |
| |
$ | 1,891,674 | |
Marketing | |
2012 | |
$ | 306,179 | |
- | |
$ | 548,399 | |
$ | 119,797 | |
|
| $ 580,000 |
| |
- |
| |
|
| $ 88,157 |
| |
$ | 1,642,532 | |
Phillip L. Stalnaker | |
2014 | |
$ | 316,164 | |
- | |
$ | 774,231 | |
| - | |
|
| $ 350,000 |
| |
- |
| |
|
| $ 106,131 |
| |
$ | 1,546,526 | |
Vice President and Regional | |
2013 | |
$ | 295,192 | |
- | |
$ | 785,958 | |
| - | |
|
| $ 575,000 |
| |
- |
| |
|
| $ 89,540 |
| |
$ | 1,745,690 | |
Manager, North Region | |
2012 | |
$ | 266,378 | |
- | |
$ | 391,758 | |
$ | 85,562 | |
|
| $ 430,000 |
| |
- |
| |
|
| $ 74,254 |
| |
$ | 1,247,952 | |
G. Kevin Cunningham | |
2014 | |
$ | 345,505 | |
- | |
$ | 740,110 | |
| - | |
|
| $ 150,000 |
| |
- |
| |
|
| $ 104,372 |
| |
$ | 1,339,987 | |
Vice President and | |
2013 | |
$ | 332,115 | |
- | |
$ | 785,958 | |
| - | |
|
| $ 527,630 |
| |
- |
| |
|
| $ 101,170 |
| |
$ | 1,746,873 | |
General Counsel | |
2012 | |
$ | 308,846 | |
- | |
$ | 548,399 | |
$ | 119,797 | |
|
| $ 475,000 |
| |
- |
| |
|
| $ 99,862 |
| |
$ | 1,551,904 | |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 43 |
(1) |
Cash
bonuses paid pursuant to the 2004 Incentive Plan for 2014 annual performance are listed under the column “Non-Equity Incentive
Plan Compensation.” |
|
|
(2) |
The amounts in this column reflect the grant date fair value with respect to both the TSR and the hybrid performance share awards for the relevant fiscal year in accordance with the FASB ASC Topic 718. The grant date fair value of the hybrid performance share awards was computed by using the average of the Company’s high and low stock trading price on the date of grant. The grant date fair values per share used to compute the amounts in this column for the hybrid performance shares are as follows: |
Grant Date | |
Grant Date Fair Value per Share | |
Award Types Included |
February 16, 2012 | |
| $ 17.59 | | |
Hybrid Performance Shares |
February 21, 2013 | |
| $ 26.62 | | |
Hybrid Performance Shares |
February 20, 2014 | |
| $ 39.43 | | |
Hybrid Performance Shares |
|
TSR performance shares granted on February 16, 2012, February 21, 2013 and February 20, 2014 were valued using a Monte Carlo model and the grant date fair values per share used for financial reporting purposes, including the liability component for cash payments over 100% of target, were $20.69, $35.89 and $48.54, respectively. Assumptions used in the Monte Carlo model for these grants, as well as additional information regarding accounting for performance share awards, are included in Notes 12 or 13 of the Notes to the Consolidated Financial Statements included in the Company’s Form 10-K for the years shown. |
|
|
(3) |
The amounts in this column reflect the grant date fair value with respect to Stock Appreciation Rights (“SARs”) for the relevant fiscal year, in accordance with ASC Topic 718, using a Black-Scholes model. Assumptions used in the calculation of these amounts are included in Notes 12 or 13 of the Notes to the Consolidated Financial Statements included in the Company’s Form 10-K for the years shown. SARs have not been repriced or otherwise materially modified. |
|
|
(4) |
The amounts in this column reflect cash incentive awards to the NEOs under the 2004 Incentive Plan, which is discussed in detail above under “Annual Cash Incentive Bonus.” |
|
|
(5) |
The amounts in this column include the Company’s matching contribution to the Savings Investment Plan (401(k) Plan), which is discussed above under “Elements of Post-Termination Compensation-Savings Investment Plan.” For 2014, such contribution totaled $15,600 for each NEO. The amounts also include the 9% Company retirement contribution to the 401(k) plan or to the deferred compensation plan, to the extent in excess of the 401(k) plan limits. Such contribution for 2014 totaled $259,703 for Mr. Dinges; $130,933 for Mr. Schroeder; $85,242 for Mr. Hutton; $78,582 for Mr. Cunningham and $80,153 for Mr. Stalnaker. The amounts also include for each NEO some or all of the following: |
|
• |
Premiums paid on executive term life insurance; |
|
• |
Club dues; |
|
• |
Executive physical examination for the NEOs and their spouses; |
|
• |
A financial and tax planning stipend of up to $3,000 per year; and |
|
• |
Spouse travel to certain business meetings. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 44 |
2014 Grants of Plan-Based Awards
The table below reports all grants of plan-based awards made during
2014. All grants of awards were made under the Company’s 2004 Incentive Plan.
|
|
|
|
|
` |
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
Awards: |
|
Exercise |
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Number of |
|
or Base |
|
Fair Value |
|
|
|
|
|
|
|
Estimated Future
Payouts |
|
Awards: |
|
Securities |
|
Price Of |
|
of Stock |
|
|
|
|
|
Estimated Possible
Payouts Under |
|
Under Equity Incentive
Plan |
|
Number |
|
Underlying |
|
Option |
|
and Option |
|
|
|
|
|
Non-Equity Incentive
Plan Awards |
|
Awards |
|
of Shares |
|
Options |
|
Awards |
|
Awards |
|
|
|
|
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
|
|
|
|
|
|
|
|
Name |
|
Grant
Date |
|
($) |
|
($) |
|
($) (1) |
|
(#) |
|
(#) (2) |
|
(#) (3) |
|
(#) |
|
(#) |
|
($/Sh) |
|
($) (4) |
|
Dan O. Dinges |
|
02/20/2014 |
|
|
|
$ 0 |
|
|
$ |
1,125,000 |
|
$ |
2,812,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
91,301 |
|
|
|
182,602 |
|
|
|
|
|
|
|
|
$ |
4,431,751 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,867 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,399,986 |
|
Scott C. |
|
02/20/2014 |
|
|
|
$ 0 |
|
|
$ |
475,000 |
|
$ |
1,187,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schroeder |
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
34,238 |
|
|
|
68,476 |
|
|
|
|
|
|
|
|
$ |
1,661,913 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,825 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
899,990 |
|
Jeffrey W. |
|
02/20/2014 |
|
|
|
$ 0 |
|
|
$ |
248,500 |
|
$ |
621,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hutton |
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
11,793 |
|
|
|
23,586 |
|
|
|
|
|
|
|
|
$ |
572,432 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,862 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
309,999 |
|
Phillip L. |
|
02/20/2014 |
|
|
|
$ 0 |
|
|
$ |
224,000 |
|
$ |
560,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stalnaker |
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
10,347 |
|
|
|
20,694 |
|
|
|
|
|
|
|
|
$ |
502,243 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,898 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
271,988 |
|
G. Kevin |
|
02/20/2014 |
|
|
|
$ 0 |
|
|
$ |
243,600 |
|
$ |
609,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cunningham |
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
9,891 |
|
|
|
19,782 |
|
|
|
|
|
|
|
|
$ |
480,109 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,594 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
260,001 |
|
(1) |
Amounts in this column represent a bonus payout of 250% of target. See discussion of the bonus factor applicable to the 2014 annual cash incentive bonus in the “Compensation Discussion and Analysis” above under “Annual Cash Incentive Bonus.” See also the actual bonus awards for 2014 in the “Non-Equity Incentive Plan Compensation” column of the “2014 Summary Compensation Table” above. |
|
|
(2) |
The first amount in this column for each NEO represents 100% of TSR performance shares, which will be paid out based on the relative total shareholder return on the Company’s stock over the three year period from January 1, 2014 to December 31, 2016, if the Company’s total shareholder return ranks 8th or higher out of its peer group of fifteen companies, including the Company. The second amount in this column for each NEO represents 100% of hybrid performance shares, which vest 25% on each of the first and second anniversaries of the date of grant and 50% on the third anniversary of the date of grant, provided the Company has $100 million or more operating cash flow in the fiscal year prior to the vesting date. |
|
|
(3) |
Amounts in this column represent 200% of the targeted TSR performance shares, although amounts earned in excess of 100% up to 200% are paid in cash, rather than shares, based on the average of the high and low trading prices of a share of Common Stock on the last day of the performance period. See discussion of the additional terms of the TSR performance shares below. |
|
|
(4) |
The amounts in this column reflect the grant date fair value of the TSR performance shares and the hybrid performance shares granted in 2014, as computed in accordance with ASC Topic 718. The TSR performance share awards were valued using a Monte Carlo model and the grant date fair value per share used for financial reporting purposes was $48.54. The hybrid performance share awards were valued using the average of the Company’s high and low stock trading price on the date of grant, which was $39.43. Additional assumptions used in the Monte Carlo model for TSR performance shares and other assumptions used in the calculation of these amounts, are included in Note 13 of the Notes to the Consolidated Financial Statements included in the Form 10-K for the period ended December 31, 2014. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 45 |
TSR performance shares
The TSR performance shares awarded in 2014 have a three-year performance
period, which commenced January 1, 2014 and ends December 31, 2016. Each TSR performance share represents the right to receive,
after the end of the performance period, from 0% to 200% of a share of Common Stock (with amounts over 100% paid in cash), based
on the Company’s performance. The performance criteria that determines the payout per performance share is the relative total
shareholder return on the Company’s Common Stock as compared to the total shareholder return on the common equity of each
company in a comparator group. For this purpose, total shareholder return is expressed as a percentage equal to common stock price
appreciation as averaged for the first and last month of the performance period, plus dividends (on a cumulative reinvested basis).
The comparator group consists of the companies listed above under “Industry Peer Group.” If any member of the comparator
group ceases to have publicly traded common stock or if as a result of other business transactions becomes incomparable, it may
be removed from the comparator group and a replacement company added by the Compensation Committee, or the Committee may decide
to reduce the peer group to the remaining companies.
After the end of the performance period, the Company will issue
shares of Common Stock and pay cash in respect of each TSR performance share based on the relative ranking of the Company versus
the comparator group for total shareholder return during the performance period using the following scale:
Company
Relative Placement |
Percent
Performance Shares |
Value
Consideration |
1-2 (highest) |
200% |
100% stock / 100% cash |
3 |
180% |
100% stock / 80% cash |
4 |
165% |
100% stock / 65% cash |
5 |
150% |
100% stock / 50% cash |
6 |
135% |
100% stock / 35% cash |
7 |
120% |
100% stock / 20% cash |
8 |
100% |
Stock |
9 |
85% |
Stock |
10 |
70% |
Stock |
11 |
55% |
Stock |
12 |
40% |
Stock |
13 |
25% |
Stock |
14 |
10% |
Stock |
15 |
0% |
|
As noted above, in the event of a relative ranking of 1 through
7, corresponding to a percentage payout above 100%, a share of TSR performance stock will entitle the participant to receive one
full share of Common Stock with respect to the first 100% of the payout and the balance of the payout in cash, in an amount based
on the fair market value of a share of Common Stock at the end of the performance period. The Committee certifies the Company’s
relative placement and the resulting level of achievement of the performance share awards prior to the issuance of Common Stock
and cash, if any.
If a participant is not an employee on the last day of the performance
period due to death, disability or retirement, Common Stock will be issued on the original performance period schedule and the
level of payout will be determined as with all other participants, except that (i) if the participant retires and thereafter accepts
an offer of employment from a competitor at any time prior to the receipt of Common Stock, the participant will forfeit the right
to receive such Common Stock and (ii) in the case of a retirement, the participant must be an employee on September 30th of
the year the award is granted in order to continue vesting in the award. If a participant is not an employee on the date the Compensation
Committee certifies the Company’s achievement level with respect to the TSR performance shares due to any other voluntary
or involuntary termination, no Common Stock or cash will be issued in respect of the participant’s TSR performance share
award unless otherwise determined by the Compensation Committee. Prior
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 46 |
to the issuance of shares of Common
Stock in respect of a TSR performance share award, the participant will have no right to vote or receive dividends on the
shares. The TSR performance share award may not be assigned or transferred except by will or the laws of descent and
distribution. In the event of a Change In Control (as defined) all unvested TSR performance shares shall vest to the extent
of actual performance as of the Change In Control. Actual performance as of the Change In Control is based on the greater of
(i) total shareholder return through the end of the month prior to the Change In Control or (ii) total shareholder return
through the end of the month prior to the Change In Control calculated using the value realized by shareholders in the Change
In Control event. In the event the Company ceases to have publicly traded Common Stock as a result of a business combination
or other extraordinary transaction, the performance period will be terminated effective upon the date of such cessation.
Hybrid performance shares
The hybrid performance shares awarded in 2014 vest 25% on each
of the first two anniversaries of the date of grant and 50% on the third anniversary of the date of grant, provided the Company
has $100 million or more operating cash flow in the fiscal year prior to the vesting date. If the performance metric is not met
in any given year, then the respective tranche of hybrid performance shares will be forfeited. Unvested hybrid performance shares
will be forfeited if, during the three-year vesting period, the executive voluntarily leaves the Company. In the event of an involuntary
termination by the Company, the Compensation Committee will determine whether the unvested hybrid performance shares will be forfeited.
In the event of an employment termination due to death, disability or retirement, all unvested hybrid performance shares will vest
in accordance with the original vesting schedule except that (i) if the participant retires and thereafter accepts an offer of
employment from a competitor at any time prior to the receipt of hybrid performance shares, the participant will lose the right
to receive such hybrid performance shares and (ii) in the case of a retirement, the participant must be an employee on September
30th of the year the award is granted in order to continue vesting in the award. Prior to vesting, the participant has
no right to vote or receive dividends on such shares. The hybrid performance shares may not be assigned or transferred except by
will or the laws of descent and distribution. In the event of a Change In Control (as defined), the unvested hybrid performance
shares will vest.
In the event of any merger, reorganization, recapitalization,
separation, liquidation, stock dividend, share combination or other change in the corporate structure of the Company affecting
the performance shares, the number of performance shares will be equitably adjusted by the Compensation Committee to prevent dilution
or enlargement of rights.
For additional information about the treatment of certain of Mr.
Dinges’ awards in the event of an employment termination, see “Potential Payments Upon Termination or Change In Control”
below.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 47 |
Outstanding Equity Awards at Fiscal Year-End 2014
The table below reports for each NEO outstanding equity awards
at December 31, 2014.
| |
Option
Awards | |
Stock
Awards |
Name | |
Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable (1) | |
Number
of Securities
Underlying Unexercised
Options (#)
Unexercisable (2) | |
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options
(#) | |
Option
Exercise
Price
($) | |
Option
Expiration
Date | |
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#) | |
Market Value of
Shares or Units of Stock That
Have Not Vested ($) | |
Equity Incentive
Plan Awards:
Number of Unearned Shares,
Units or Other Rights
That Have Not Vested
(#) (3) | |
Equity
Incentive Plan Awards:
Market or Payout Value of Unearned
Shares, Units or Other
Rights That Have Not Vested
($) (4) |
Dan
O. | |
| 180,548 | | |
| 0 | | |
| - | | |
| $ 10.19 | | |
2/17/2018 | |
| |
|
|
| |
| | | |
| | |
Dinges | |
| 76,170 | | |
| 38,086 | | |
| - | | |
| $ 17.59 | | |
2/16/2019 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 204,021 | | |
| $ 6,041,062 | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 154,365 | | |
| $ 4,570,748 | |
Scott
C. | |
| 64,916 | | |
| 0 | | |
| - | | |
| $ 10.19 | | |
2/17/2018 | |
| |
|
|
| |
| | | |
| | |
Schroeder | |
| 29,534 | | |
| 14,768 | | |
| - | | |
| $ 17.59 | | |
2/16/2019 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 82,698 | | |
| $ 2,448,688 | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 61,467 | | |
| $ 1,820,038 | |
Jeffrey
W. | |
| 24,952 | | |
| 0 | | |
| - | | |
| $ 10.19 | | |
2/17/2018 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| |
|
|
| |
| | | |
| | |
Hutton | |
| 9,792 | | |
| 4,898 | | |
| - | | |
| $ 17.59 | | |
2/16/2019 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 27,573 | | |
| $ 816,437 | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 20,528 | | |
| $ 607,834 | |
Phillip
L. | |
| 16,228 | | |
| 0 | | |
| - | | |
| $ 10.19 | | |
2/17/2018 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| |
|
|
| |
| | | |
| | |
Stalnaker | |
| 6,994 | | |
| 3,498 | | |
| - | | |
| $ 17.59 | | |
2/16/2019 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 25,007 | | |
| $ 740,457 | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 17,630 | | |
| $ 522,024 | |
G.
Kevin | |
| 20,288 | | |
| 0 | | |
| - | | |
| $ 10.19 | | |
2/17/2018 | |
| |
|
|
| |
| | | |
| | |
Cunningham | |
| 9,792 | | |
| 4,898 | | |
| - | | |
| $ 17.59 | | |
2/16/2019 | |
| |
|
|
| |
| | | |
| | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 24,551 | | |
| $ 726,955 | |
| |
| | | |
| | | |
| - | | |
| | | |
| |
| |
|
|
| |
| 18,690 | | |
| $ 553,411 | |
(1) | Amounts in this column represent the exercisable portion of SARs granted in various
years, all of which vest ratably on the first, second and third anniversaries of the date of grant and have a seven-year term.
Unvested SARs will be forfeited and vested SARs must be exercised within 90 days if the executive voluntarily leaves the Company.
In the event of an involuntary termination by the Company, the Compensation Committee may extend the exercise period for vested
SARs from 90 days to 36 months. In the event of an employment termination due to death, disability or retirement, all SARs will
vest except that (i) if the participant retires and thereafter accepts an offer of employment from a competitor at any time prior
to the exercise of the SARs, the participant will lose the right to exercise any remaining SARs and the remaining SARs shall be
forfeited and (ii) in the case of a retirement, the participant must be an employee on September 30th of the year the award is
granted in order to continue vesting in the award. The SAR award may not be assigned or transferred except by will or the laws
of descent and distribution. In the event of a Change In Control, all unvested SARs shall vest and remain exercisable throughout
the term of the SAR, provided the Company’s stock is still trading on a national stock exchange. |
(2) | Amounts in this column represent the unexercisable portion of SARs granted in various
years, all of which vest ratably on the first, second and third year anniversaries of the date of grant and have a seven year
term. |
(3) | The first amount in this column for each NEO is TSR performance share
awards. The terms and conditions of the TSR performance share awards are described in the narrative following the “2014
Grants of Plan-Based Awards” table above. The TSR performance shares vest, if at all, for each executive as follows
(assuming 100% payout): |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 48 |
Date | |
Dan O. Dinges | |
Scott C. Schroeder | |
Jeffrey W. Hutton | |
Phillip L. Stalnaker | |
G. Kevin Cunningham |
12/31/2015 | |
| 112,720 | | |
| 48,460 | | |
| 15,780 | | |
| 14,660 | | |
| 14,660 | |
12/31/2016 | |
| 91,301 | | |
| 34,238 | | |
| 11,793 | | |
| 10,347 | | |
| 9,891 | |
The second amount in this column for each NEO is hybrid performance
shares. The terms and conditions of the hybrid performance share awards are described in the narrative following the “2014
Grants of Plan-Based Awards” table above. The hybrid performance shares vest, if at all, for each executive as follows:
Date | |
Dan O. Dinges | |
Scott C. Schroeder | |
Jeffrey W. Hutton | |
Phillip L. Stalnaker | |
G. Kevin Cunningham |
2/16/2015 | |
| 37,142 | | |
| 14,402 | | |
| 4,776 | | |
| 3,412 | | |
| 4,776 | |
2/21/2015 | |
| 18,786 | | |
| 8,080 | | |
| 2,630 | | |
| 2,440 | | |
| 2,440 | |
2/21/2016 | |
| 37,570 | | |
| 16,160 | | |
| 5,260 | | |
| 4,880 | | |
| 4,880 | |
2/20/2015 | |
| 15,216 | | |
| 5,706 | | |
| 1,965 | | |
| 1,724 | | |
| 1,648 | |
2/20/2016 | |
| 15,217 | | |
| 5,706 | | |
| 1,966 | | |
| 1,725 | | |
| 1,649 | |
2/20/2017 | |
| 30,434 | | |
| 11,413 | | |
| 3,931 | | |
| 3,449 | | |
| 3,297 | |
(4) | Market value is based on the $29.61 per share closing price of the Company’s
common stock on December 31, 2014. |
2014 Option Exercises and Stock Vested
The table below reports stock options that were exercised and
performance shares that vested during 2014.
| |
Option Awards | |
Stock Awards |
Name | |
Number of Shares
Acquired on Exercise
(#) | |
Value Realized
on Exercise
($) | |
Number of Shares
Acquired on Vesting
(#) | |
Value Realized
on Vesting
($) |
Dan O. Dinges | |
| 0 | | |
| $0 | | |
| 225,616 | (1) | |
$ | 7,910,012 | (1)(3) |
| |
| | | |
| | | |
| - | | |
$ | 3,311,581 | (2) |
Scott C. Schroeder | |
| 0 | | |
| $0 | | |
| 86,636 | (1) | |
$ | 3,033,008 | (1)(3) |
| |
| | | |
| | | |
| - | | |
$ | 1,284,082 | (2) |
Jeffrey W. Hutton | |
| 0 | | |
| $0 | | |
| 29,784 | (1) | |
$ | 1,048,262 | (1)(3) |
| |
| | | |
| | | |
| - | | |
$ | 425,769 | (2) |
Phillip L. Stalnaker | |
| 0 | | |
| $0 | | |
| 21,326 | (1) | |
$ | 750,829 | (1)(3) |
| |
| | | |
| | | |
| - | | |
$ | 304,154 | (2) |
G. Kevin Cunningham | |
| 0 | | |
| $0 | | |
| 28,090 | (1) | |
$ | 980,045 | (1)(3) |
| |
| | | |
| | | |
| - | | |
$ | 425,769 | (2) |
(1) | Represents the number of shares and value realized for TSR performance shares,
the performance period for which was January 1, 2012 through December 31, 2014 and which paid out at 200% of target upon the Compensation
Committee’s certification of the results on January 6, 2015, and hybrid performance shares that vested in February 2014,
upon the Compensation Committee’s certification of the performance metric of achieving at least $100 million of operating
cash flow in 2013. |
(2) | Represents the cash portion of the TSR performance share award for performance
in excess of 100% of target. |
(3) | These amounts represent the closing price of the Company’s common stock on
the vesting dates times the number of shares acquired and do not indicate that there was a sale of these shares by the NEO. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 49 |
2014 Non-Qualified Deferred Compensation
The table below reports NEO contributions, Company contributions,
earnings, and aggregate balances in the Company’s Deferred Compensation Plan for 2014.
Name | |
Executive
Contributions in Last FY ($) (1) | |
Registrant Contributions
in Last
FY ($) (2) | |
Aggregate
Earnings in Last FY ($) (3) | |
Aggregate
Withdrawals/
Distributions ($) (4) | |
Aggregate Balance at Last FYE ($) (5) |
Dan O. Dinges | |
$ | 0 | | |
| $ 240,803 | | |
$ | (2,184,688 | ) | |
| $ 0 | | |
$ | 12,269,939 | |
Scott C. Schroeder | |
$ | 0 | | |
| $ 123,543 | | |
$ | (1,971,515 | ) | |
| $ 0 | | |
$ | 7,762,447 | |
Jeffrey W. Hutton | |
$ | 0 | | |
| $ 66,342 | | |
$ | 87 | | |
| $ 0 | | |
$ | 881,089 | |
Phillip L. Stalnaker | |
$ | 44,558 | | |
| $ 61,253 | | |
$ | 22,883 | | |
| $ 0 | | |
$ | 365,093 | |
G. Kevin Cunningham | |
$ | 0 | | |
| $ 59,682 | | |
$ | 19 | | |
| $ 0 | | |
$ | 206,795 | |
(1) | Amounts reported in this column are included in the Summary Compensation Table
as salary and non-equity incentive plan compensation, as applicable. |
(2) | Amounts reported
in this column are included in the Summary Compensation Table as all other compensation. |
(3) | Amounts
reported in this column are not included in the Summary Compensation Table. |
(4) | Distribution pursuant to election by the NEO. |
(5) | Of the aggregate deferred compensation balances in this column, the following amounts
are the total deferred amounts previously reported as compensation to the NEOs in prior years’ summary compensation tables,
or would have been reported but for the executive not being an NEO in prior years, as salary, stock awards and non-equity incentive
plan compensation, as applicable: |
Dan
O. Dinges | |
$ | 4,833,437 | |
Scott C. Schroeder | |
$ | 2,592,540 | |
Jeffrey W. Hutton | |
$ | 553,350 | |
Phillip L. Stalnaker | |
$ | 101,257 | |
G.
Kevin Cunningham | |
$ | 0 | |
Up to 100% of salary and annual cash incentive bonus are permitted
to be deferred into the Deferred Compensation Plan, subject to payment of Social Security, Medicare, incomes taxes (on compensation
not deferred) and employee benefit plan withholding requirements. Prior to June 1, 2008, TSR performance shares were permitted
to be deferred into the Deferred Compensation Plan. The Company also makes contributions to make up for certain matching and profit-sharing
contributions which, due to IRS limitations, cannot be contributed to the Company’s tax-qualified savings investment plan
(401(k) plan). Earnings on the deferred balances are determined by the executive’s investment selections at the time of deferral.
The Company holds deferred amounts and earnings thereon as corporate assets, which are invested as elected by the executive. For
2014, the investment options and their respective rates of return follow:
Fund
Name | |
Rate
of Return | |
Fund Name | |
Rate
of Return |
Fidelity Retirement
Money Market | |
| 0.01 | % | |
FID Freedom K 2005 | |
| 4.57 | % |
Fidelity Spartan U.S. Bond
Index | |
| 5.93 | % | |
FID Freedom K 2010 | |
| 4.93 | % |
Oakmark Equity & Income | |
| 6.93 | % | |
FID Freedom K 2015 | |
| 5.25 | % |
John Hancock Disciplined
Value R6 | |
| 11.04 | % | |
FID Freedom K 2020 | |
| 5.40 | % |
Oakmark Fund I | |
| 11.51 | % | |
FID Freedom K 2025 | |
| 5.75 | % |
Davis NY Venture | |
| 6.79 | % | |
FID Freedom K 2030 | |
| 5.86 | % |
Spartan 500 Index | |
| 13.62 | % | |
FID Freedom K 2035 | |
| 5.88 | % |
Fidelity Capital Appreciation
K | |
| 10.98 | % | |
FID Freedom K 2040 | |
| 5.88 | % |
Lord Abbett Mid Cap Stock | |
| 11.97 | % | |
FID Freedom K 2045 | |
| 5.90 | % |
Glenmede Small Cap Equity
IS | |
| 3.28 | % | |
FID Freedom K 2050 | |
| 5.96 | % |
Fidelity International
Discovery K | |
| -5.47 | % | |
FID Freedom K 2055 | |
| 5.99 | % |
Cabot
Oil & Gas Common Stock | |
| -23.43 | % | |
FID Freedom K Income | |
| 3.96 | % |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 50 |
Distributions from the Deferred Compensation Plan are based on
the executive’s election at the time of deferral. Distribution elections may be modified, provided that the modification
is made at least one year prior to the original time elected and the new election is moved out at least five years past the original
time-based distribution election. Distribution elections can only be delayed not accelerated.
Potential Payments Upon Termination or Change In Control
Change In Control Benefits
The Company has entered into change in control agreements with
each NEO and certain other officers of the Company. The Committee believes that these agreements encourage these executives to
remain employed and to carry out their duties with the Company in the event of a change in control of the Company and during circumstances
suggesting a change in control might occur. The Committee believes this program is important to maintaining strong leadership in
those situations.
In the agreements, a “change in control” is generally
defined to include:
• | any person or group becoming the beneficial owner of 35% or more of either the Company’s common stock or the combined voting power of the Company’s outstanding voting securities, with certain exceptions; |
| |
• | specified changes in a majority of the members of the Board of Directors; |
| |
• | a reorganization, merger or consolidation or sale or other disposition of substantially all of the Company’s assets being consummated, unless, following the transaction: |
| |
| - | the persons who were the beneficial owners of the Company prior to the transaction
continue to own at least 50% of the common stock or other securities entitled to vote in the election of directors of the resulting
entity in substantially the same proportions as prior to the transaction, |
| | |
| - | no individual or entity (other than an entity resulting from the transaction) beneficially
owns 35% or more of the common equity or voting power of the entity resulting from the transaction, except to the extent that
such ownership existed prior to the transaction, and |
| | |
| - | at least a majority of the members of the Board of Directors of the entity resulting
from the transaction were members of the Company’s Board at the time the transaction was approved or entered into; and |
| | |
• | a liquidation or dissolution of the Company. |
The agreements provide that, in the event of a change in control
or upon an occurrence deemed to be in anticipation of a change in control, the executives will receive certain benefits, provided
that their employment is terminated within two years of such event. The executive will receive these benefits unless termination
is:
• | for cause; |
| |
• | voluntary on the part of the executive (but not a constructive termination without
cause); or |
| |
• | due to death or disability. |
Benefits under the change in control agreements generally include:
• | a lump-sum cash payment equal to three times the sum of: |
| |
| - | the executive’s base salary in effect immediately prior to the change in control
or the executive’s termination, whichever is greater, and |
| | |
| - | the greater of (1) the executive’s target bonus for the year during which the
change in control occurred or, if greater, the year during which the executive’s termination occurred, or (2) the executive’s
actual bonus paid in any of the three fiscal years immediately preceding the change in control or, if termination of employment
occurs prior to a change in control, termination of employment; |
| | |
• | three years of continued medical, dental and life insurance coverage at the premium rate applicable to active executives; and |
| |
• | outplacement assistance in an amount up to 15% of the executive’s base salary. |
Beginning in 2010, the Company ceased entering into agreements
containing tax gross-up payments on payments to executives by the Company upon a change in control. The agreements in place prior
to that time with all of the NEOs except Mr. Cunningham, who became an officer in September 2010, provide that in the event that
excise taxes apply to payments to the executives by the Company upon a change
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 51 |
in control, the Company will make an additional tax gross-up payment
to the executive in an amount necessary to leave the executive “whole,” as if no excise tax had applied. No payments
have been made to any of the NEOs under these agreements.
The award agreements for all of the NEOs’ long-term equity
awards also include provisions for the immediate vesting of all unvested awards upon the change in control event, as follows:
• | payment with respect to traditional performance shares based on performance
through the change in control event as more fully described above under “Grants of Plan-Based Awards;” |
| |
• | immediate vesting and exercisability of all of the executive’s stock options
and SAR awards, with exercisability extended for the full term of the award; |
| |
• | immediate vesting and lapse of restrictions on any outstanding restricted stock
grants; and |
| |
• | immediate vesting of any outstanding hybrid performance shares. |
For a more detailed discussion of the terms of these awards, see
above under “Grants of Plan-Based Awards.”
CEO Employment Agreement
In addition to a change in control agreement, we have entered
into an employment agreement with Mr. Dinges. Under the terms of Mr. Dinges’ employment agreement, in the event of a change
in control, Mr. Dinges will receive the more generous of the benefits and payments, as determined on a benefit-by-benefit basis,
under either his change in control agreement or his employment agreement, but not both. The employment agreement provides that
if Mr. Dinges terminates his employment for good reason (as defined) or if the Company terminates his employment other than for
cause (as defined), Mr. Dinges will receive:
• | a lump-sum cash payment equal to two times his annual base salary plus two times
his annual target bonus; |
| |
• | a 24-month continuation of medical and life insurance programs at the premium
rate applicable to active executives; |
| |
• | full vesting of all of his restricted stock awards; |
| |
• | full vesting of all of his stock option awards and SAR awards, with exercisability
extending for 36 months following termination (or the expiration of the original term, if earlier); and |
| |
• | full vesting of all of his performance shares, subject to the payout provisions
in the underlying award agreements. |
Potential Payments to NEOs
The tables below reflect the compensation payable to each NEO
upon voluntary termination, retirement, involuntary not-for-cause termination, for cause termination, termination following a change
in control and in the event of disability or death of the executive. The actual amounts to be paid out can only be determined at
the time of such executive’s separation from the Company.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 52 |
DAN O. DINGES, CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Executive
Benefit and
Payments Upon Separation | |
Voluntary
Termination
for Good
Reason | |
Voluntary
Termination | |
Retirement
(1) | |
Involuntary
Not For
Cause
Termination | |
For
Cause
Termination | |
Change
In
Control
(2) | |
Disability | |
Death |
Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Multiple
of Salary (0x, 2x or 3x) | |
$ | 1,800,000 | | |
| - | | |
| - | | |
$ | 1,800,000 | | |
| - | | |
$ | 2,700,000 | | |
| - | | |
| - | |
Multiple
of Bonus (0x, 2x or 3x) | |
$ | 4,000,000 | | |
| - | | |
| - | | |
$ | 4,000,000 | | |
| - | | |
$ | 6,000,000 | | |
| - | | |
| - | |
Long-Term
Incentive Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Performance
Share Vesting(3) | |
$ | 10,611,810 | | |
| - | | |
$ | 10,611,810 | | |
$ | 10,611,810 | | |
| - | | |
$ | 10,611,810 | | |
$ | 10,611,810 | | |
$ | 10,611,810 | |
Stock
Appreciation Rights Vesting(4) | |
$ | 457,794 | | |
| - | | |
$ | 457,794 | | |
$ | 457,794 | | |
| - | | |
$ | 457,794 | | |
$ | 457,794 | | |
$ | 457,794 | |
Benefits
& Perquisites | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Payout
of Deferred | |
$ | 12,269,939 | | |
$ | 12,269,939 | | |
$ | 12,269,939 | | |
$ | 12,269,939 | | |
$ | 12,269,939 | | |
$ | 12,269,939 | | |
$ | 12,269,939 | | |
$ | 12,269,939 | |
Compensation(5) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Health,
Life, and Welfare | |
$ | 30,651 | | |
| - | | |
| - | | |
$ | 30,651 | | |
| - | | |
$ | 45,976 | | |
| - | | |
| - | |
Benefits
Continuation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Excise
Tax & Gross-Up | |
$ | - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Outplacement
Services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 135,000 | | |
| - | | |
| - | |
Earned
Vacation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Total | |
$ | 29,170,194 | | |
$ | 12,269,939 | | |
$ | 23,339,543 | | |
$ | 29,170,194 | | |
$ | 12,269,939 | | |
$ | 32,220,519 | | |
$ | 23,339,543 | | |
$ | 23,339,543 | |
(1) | Mr. Dinges was retirement eligible on December 31, 2014. |
(2) | Amounts in this column representing accelerated vestings of long-term incentive
compensation will occur immediately upon the change in control event, pursuant to the terms of the awards. |
(3) | The amounts set forth in this row represent a payout at achievement of 100% of
pre-established performance objectives. Under normal conditions, the actual payout of the TSR performance awards will occur at
the end of the relevant performance period, and may be higher or lower than 100% (up to a maximum of 200%) depending on the Company’s
actual Total Shareholder Return ranking for the performance period. However, in the event of a change in control, the performance
period will be shortened and payout will occur immediately following the change in control based on the greater of (i) Total Shareholder
Return through the end of the month prior to the change in control, or (ii) Total Shareholder Return through the end of the month
prior to the change in control using the value realized by shareholders in the change in control event. For hybrid performance
shares, receipt of the full payout will occur at the original vesting dates set forth in the award agreements only if the relevant
operating income targets are achieved, except in the case of a change in control, in which case full payout will be made immediately
upon the change in control. These values were computed using the closing price of the Company’s common stock on December
31, 2014 of $29.61. |
(4) | The value of the SARs was computed using the difference between the closing price
of the Company’s common stock on December 31, 2014 of $29.61 and the grant price of the SARs, which was the average of the
high and low prices of the Company’s common stock on the dates of grant of the SARs. |
(5) | Amounts in this row represent earned compensation voluntarily deferred by the NEO
under the terms of the deferred compensation plan. For more information, see “2014 Nonqualified Deferred Compensation”
above. For termination of employment due to retirement, payment of the deferred compensation is based upon the NEO’s election
at the time of deferral. For all other terminations of employment, payment of the deferred compensation is in a lump sum six months
from the date of termination. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 53 |
SCOTT C. SCHROEDER, EXECUTIVE VICE PRESIDENT AND CFO
Executive
Benefit and Payments
Upon Separation | |
Voluntary
Termination | |
Retirement
(1) | |
Involuntary
Not For Cause
Termination | |
For
Cause
Termination | |
Change
In
Control
(2) | |
Disability | |
Death |
Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Multiple
of Salary (0x or 3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,425,000 | | |
| - | | |
| - | |
Multiple
of Bonus (0x or 3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 3,337,500 | | |
| - | | |
| - | |
Long-Term
Incentive Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Performance
Share Vesting(3) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 4,268,726 | | |
$ | 4,268,726 | | |
$ | 4,268,726 | |
Stock
Appreciation Rights Vesting(4) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 177,511 | | |
$ | 177,511 | | |
$ | 177,511 | |
Benefits
& Perquisites | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Payout
of Deferred Compensation(5) | |
$ | 7,762,447 | | |
$ | 7,762,447 | | |
$ | 7,762,447 | | |
$ | 7,762,447 | | |
$ | 7,762,447 | | |
$ | 7,762,447 | | |
$ | 7,762,447 | |
Health,
Life, and Welfare Benefits Continuation | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 77,975 | | |
| - | | |
| - | |
Excise
Tax & Gross-Up | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | - | | |
| - | | |
| - | |
Outplacement
Services | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 71,250 | | |
| - | | |
| - | |
Earned
Vacation | |
$ | 36,767 | | |
$ | 36,767 | | |
$ | 36,767 | | |
$ | 36,767 | | |
$ | 36,767 | | |
$ | 36,767 | | |
$ | 36,767 | |
Total | |
$ | 7,799,214 | | |
$ | 7,799,214 | | |
$ | 7,799,214 | | |
$ | 7,799,214 | | |
$ | 22,576,004 | | |
$ | 12,245,451 | | |
$ | 12,245,451 | |
(1) | Mr. Schroeder was not retirement eligible on December 31, 2014. |
(2) | Amounts in this column representing accelerated vestings of long-term incentive
compensation will occur immediately upon the change in control event, pursuant to the terms of the awards. |
(3) | The amounts set forth in this row represent a payout at achievement of 100% of
pre-established performance objectives. Under normal conditions, the actual payout of the TSR performance awards will occur at
the end of the relevant performance period, and may be higher or lower than 100% (up to a maximum of 200%) depending on the Company’s
actual Total Shareholder Return ranking for the performance period. However, in the event of a change in control, the performance
period will be shortened and payout will occur immediately following the change in control based on the greater of (i) Total Shareholder
Return through the end of the month prior to the change in control, or (ii) Total Shareholder Return through the end of the month
prior to the change in control using the value realized by shareholders in the change in control event. For hybrid performance
shares, receipt of the full payout will occur at the original vesting dates set forth in the award agreements only if the relevant
operating income targets are achieved, except in the case of a change in control, in which case full payout will be made immediately
upon the change in control. These values were computed using the closing price of the Company’s common stock on December
31, 2014 of $29.61. |
(4) | The value of the SARs was computed using the difference between the closing price
of the Company’s common stock on December 31, 2014 of $29.61 and the grant price of the SARs, which was the average of the
high and low prices of the Company’s common stock on the dates of grant of the SARs. |
(5) | Amounts in this row represent earned compensation voluntarily deferred by the NEO
under the terms of the deferred compensation plan. For more information, see “2014 Nonqualified Deferred Compensation”
above. For termination of employment due to retirement, payment of the deferred compensation is based upon the NEO’s election
at the time of deferral. For all other terminations of employment, payment of the deferred compensation is in a lump sum six months
from the date of termination. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 54 |
JEFFREY W. HUTTON, SENIOR VICE PRESIDENT, MARKETING
Executive Benefit and Payments Upon Separation | |
Voluntary Termination | |
Retirement (1) | |
Involuntary Not For Cause Termination | |
For Cause Termination | |
Change In Control (2) | |
Disability | |
Death |
Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Multiple
of Salary (0x or 3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,065,000 | | |
| - | | |
| - | |
Multiple of Bonus
(0x or 3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,785,000 | | |
| - | | |
| - | |
Long-Term
Incentive Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Performance Share Vesting(3) | |
| - | | |
$ | 1,424,271 | | |
| - | | |
| - | | |
$ | 1,424,271 | | |
$ | 1,424,271 | | |
$ | 1,424,271 | |
Stock Appreciation
Rights Vesting(4) | |
| - | | |
$ | 58,874 | | |
| - | | |
| - | | |
$ | 58,874 | | |
$ | 58,874 | | |
$ | 58,874 | |
Benefits &
Perquisites | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Payout of Deferred Compensation(5) | |
$ | 881,089 | | |
$ | 881,089 | | |
$ | 881,089 | | |
$ | 881,089 | | |
$ | 881,089 | | |
$ | 881,089 | | |
$ | 881,089 | |
Health, Life, and
Welfare Benefits Continuation | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 36,382 | | |
| - | | |
| - | |
Excise Tax &
Gross-Up | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Outplacement Services | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 53,250 | | |
| - | | |
| - | |
Earned Vacation | |
$ | 32,428 | | |
$ | 32,428 | | |
$ | 32,428 | | |
$ | 32,428 | | |
$ | 32,428 | | |
$ | 32,428 | | |
$ | 32,428 | |
Total | |
$ | 913,517 | | |
$ | 2,396,662 | | |
$ | 913,517 | | |
$ | 913,517 | | |
$ | 5,336,294 | | |
$ | 2,396,662 | | |
$ | 2,396,662 | |
(1) | Mr. Hutton was retirement eligible on December 31, 2014. |
(2) | Amounts in this column representing accelerated vestings of long-term incentive
compensation will occur immediately upon the change in control event, pursuant to the terms of the awards. |
(3) | The amounts set forth in this row represent a payout at achievement of 100% of
pre-established performance objectives. Under normal conditions, the actual payout of the TSR performance awards will occur at
the end of the relevant performance period, and may be higher or lower than 100% (up to a maximum of 200%) depending on the Company’s
actual Total Shareholder Return ranking for the performance period. However, in the event of a change in control, the performance
period will be shortened and payout will occur immediately following the change in control based on the greater of (i) Total Shareholder
Return through the end of the month prior to the change in control, or (ii) Total Shareholder Return through the end of the month
prior to the change in control using the value realized by shareholders in the change in control event. For hybrid performance
shares, receipt of the full payout will occur at the original vesting dates set forth in the award agreements only if the relevant
operating income targets are achieved, except in the case of a change in control, in which case full payout will be made immediately
upon the change in control. These values were computed using the closing price of the Company’s common stock on December
31, 2014 of $29.61. |
(4) | The value of the SARs was computed using the difference between the closing price
of the Company’s common stock on December 31, 2014 of $29.61 and the grant price of the SARs, which was the average of the
high and low prices of the Company’s common stock on the dates of grant of the SARs. |
(5) | Amounts in this row represent earned compensation voluntarily deferred by the NEO
under the terms of the deferred compensation plan. For more information, see “2014 Nonqualified Deferred Compensation”
above. For termination of employment due to retirement, payment of the deferred compensation is based upon the NEO’s election
at the time of deferral. For all other terminations of employment, payment of the deferred compensation is in a lump sum six months
from the date of termination. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 55 |
PHILLIP L. STALNAKER, VICE PRESIDENT AND REGIONAL MANAGER,
NORTH REGION
Executive Benefit and Payments
Upon Separation | |
Voluntary
Termination | |
Retirement
(1) | |
Involuntary
Not For Cause
Termination | |
For Cause
Termination | |
Change In
Control
(2) | |
Disability | |
Death |
Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Multiple of Salary
(0x or 3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 960,000 | | |
| - | | |
| - | |
Multiple of Bonus (0x or
3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,725,000 | | |
| - | | |
| - | |
Long-Term Incentive
Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Performance Share Vesting(3) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,262,481 | | |
$ | 1,262,481 | | |
$ | 1,262,481 | |
Stock Appreciation
Rights Vesting(4) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 42,046 | | |
$ | 42,046 | | |
$ | 42,046 | |
Benefits & Perquisites | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Payout of Deferred Compensation(5) | |
$ | 365,093 | | |
$ | 365,093 | | |
| $ 365,093 | | |
$ | 365,093 | | |
$ | 365,093 | | |
$ | 365,093 | | |
$ | 365,093 | |
Health, Life, and Welfare
Benefits Continuation | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 76,811 | | |
| - | | |
| - | |
Excise Tax & Gross-Up | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,762,705 | | |
| - | | |
| - | |
Outplacement Services | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 48,000 | | |
| - | | |
| - | |
Earned Vacation | |
$ | 9,077 | | |
$ | 9,077 | | |
| $ 9,077 | | |
$ | 9,077 | | |
$ | 9,077 | | |
$ | 9,077 | | |
$ | 9,077 | |
Total | |
$ | 374,170 | | |
$ | 374,170 | | |
| $ 374,170 | | |
$ | 374,170 | | |
$ | 6,690,372 | | |
$ | 1,678,697 | | |
$ | 1,678,697 | |
(1) | Mr. Stalnaker was not retirement eligible on December 31, 2014. |
(2) | Amounts in this column representing accelerated vestings of long-term incentive
compensation will occur immediately upon the change in control event, pursuant to the terms of the awards. |
(3) | The amounts set forth in this row represent a payout at achievement of 100% of
pre-established performance objectives. Under normal conditions, the actual payout of the TSR performance awards will occur at
the end of the relevant performance period, and may be higher or lower than 100% (up to a maximum of 200%) depending on the Company’s
actual Total Shareholder Return ranking for the performance period. However, in the event of a change in control, the performance
period will be shortened and payout will occur immediately following the change in control based on the greater of (i) Total Shareholder
Return through the end of the month prior to the change in control, or (ii) Total Shareholder Return through the end of the month
prior to the change in control using the value realized by shareholders in the change in control event. For hybrid performance
shares, receipt of the full payout will occur at the original vesting dates set forth in the award agreements only if the relevant
operating income targets are achieved, except in the case of a change in control, in which case full payout will be made immediately
upon the change in control. These values were computed using the closing price of the Company’s common stock on December
31, 2014 of $29.61. |
(4) | The value of the SARs was computed using the difference between the closing price
of the Company’s common stock on December 31, 2014 of $29.61 and the grant price of the SARs, which was the average of the
high and low prices of the Company’s common stock on the dates of grant of the SARs. |
(5) | Amounts in this row represent earned compensation voluntarily deferred by the NEO
under the terms of the deferred compensation plan. For more information, see “2014 Nonqualified Deferred Compensation”
above. For termination of employment due to retirement, payment of the deferred compensation is based upon the NEO’s election
at the time of deferral. For all other terminations of employment, payment of the deferred compensation is in a lump sum six months
from the date of termination. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 56 |
G. KEVIN CUNNINGHAM, VICE PRESIDENT AND GENERAL COUNSEL
Executive Benefit and Payments
Upon Separation | |
Voluntary
Termination | |
Retirement
(1) | |
Involuntary
Not For Cause
Termination | |
For Cause
Termination | |
Change In
Control
(2) | |
Disability | |
Death |
Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Multiple of Salary
(0x or 3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,044,000 | | |
| - | | |
| - | |
Multiple of Bonus (0x or
3x) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,582,890 | | |
| - | | |
| - | |
Long-Term
Incentive Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Performance Share Vesting(3) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,280,366 | | |
$ | 1,280,366 | | |
$ | 1,280,366 | |
Stock Appreciation Rights
Vesting(4) | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 58,874 | | |
$ | 58,874 | | |
$ | 58,874 | |
Restricted Stock Vesting | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Benefits & Perquisites | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Payout of Deferred Compensation(5) | |
$ | 206,795 | | |
$ | 206,795 | | |
| $ 206,795 | | |
$ | 206,795 | | |
$ | 206,795 | | |
$ | 206,795 | | |
$ | 206,795 | |
Health, Life, and Welfare
Benefits Continuation | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 38,529 | | |
| - | | |
| - | |
Excise Tax & Gross-Up(6) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Outplacement Services | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 52,200 | | |
| - | | |
| - | |
Earned Vacation | |
$ | 335 | | |
$ | 335 | | |
| $ 335 | | |
$ | 335 | | |
$ | 335 | | |
$ | 335 | | |
$ | 335 | |
Total | |
$ | 207,130 | | |
$ | 207,130 | | |
| $ 207,130 | | |
$ | 207,130 | | |
$ | 4,264,312 | | |
$ | 1,546,370 | | |
$ | 1,546,370 | |
(1) | Mr. Cunningham was not retirement eligible on December 31, 2014. |
(2) | Amounts in this column representing accelerated vestings of long-term incentive
compensation will occur immediately upon the change in control event, pursuant to the terms of the awards. |
(3) | The amounts set forth in this row represent a payout at achievement of 100% of
pre-established performance objectives. Under normal conditions, the actual payout of the TSR performance awards will occur at
the end of the relevant performance period, and may be higher or lower than 100% (up to a maximum of 200%) depending on the Company’s
actual Total Shareholder Return ranking for the performance period. However, in the event of a change in control, the performance
period will be shortened and payout will occur immediately following the change in control based on the greater of (i) Total Shareholder
Return through the end of the month prior to the change in control, or (ii) Total Shareholder Return through the end of the month
prior to the change in control using the value realized by shareholders in the change in control event. For hybrid performance
shares, receipt of the full payout will occur at the original vesting dates set forth in the award agreements only if the relevant
operating income targets are achieved, except in the case of a change in control, in which case full payout will be made immediately
upon the change in control. These values were computed using the closing price of the Company’s common stock on December
31, 2014 of $29.61. |
(4) | The value of the SARs was computed using the difference between the closing price
of the Company’s common stock on December 31, 2014 of $29.61 and the grant price of the SARs, which was the average of the
high and low prices of the Company’s common stock on the dates of grant of the SARs. |
(5) | Amounts in this row represent earned compensation voluntarily deferred by the NEO
under the terms of the deferred compensation plan. For more information, see “2014 Nonqualified Deferred Compensation”
above. For termination of employment due to retirement, payment of the deferred compensation is based upon the NEO’s election
at the time of deferral. For all other terminations of employment, payment of the deferred compensation is in a lump sum six months
from the date of termination. |
(6) | Mr. Cunningham became an officer in 2010, after we eliminated excise tax gross-ups
for new officers, so this benefit does not apply to him. |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 57 |
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three independent, non-employee
directors. The Board of Directors has made a determination that the members of the Audit Committee satisfy the requirements of
the NYSE listing standards as to independence, financial literacy and experience. The Board determined that one of the members
of the Audit Committee, Mr. Kelley, is an “audit committee financial expert” as defined by rules of the SEC. The responsibilities
of the Audit Committee are set forth in the Audit Committee Charter, as amended from time to time by the Board of Directors, which
is included on the Company’s website at www.cabotog.com. The function of the Audit Committee is to review and report
to the Board of Directors with respect to various auditing and accounting matters, including overseeing the integrity of the financial
statements of the Company, the compliance by the Company with legal and regulatory requirements, the selection, independence, qualifications,
performance and compensation of the Company’s independent registered public accounting firm and the performance of the Company’s
internal audit function. The Audit Committee also reviews its charter annually. This is a report on the Audit Committee’s
activities relating to 2014.
Review of Audited Financial Statements with Management
The Audit Committee reviewed and discussed the audited financial
statements and management’s discussion and analysis of the Company’s financial condition and results of operations with the management of the
Company.
Review of Financial Statements and Other Matters with Independent
Registered Public Accounting Firm
The Audit Committee discussed with the independent registered
public accounting firm the matters required to be discussed as described in Statement on Auditing Standards (“SAS”)
No. 16 - Communication with Audit Committees. The Audit Committee has received and reviewed the written disclosures and the letter
from PricewaterhouseCoopers LLP (“PWC”), the Company’s independent registered public accounting firm, required
by applicable Public Company Accounting Oversight Board requirements regarding the firm’s communications with the Audit Committee
concerning independence and has discussed with PWC the independent registered public accounting firm’s independence. These
discussions included a review of all audit and non-audit services (including tax services) provided by PWC to the Company.
Recommendation that Financial Statements be Included in
the Annual Report
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2014 and filed with the SEC.
Audit Committee
Robert Kelley (Chairman)
Rhys J. Best
Robert L. Keiser
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 58 |
FEES BILLED BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR SERVICES IN 2014 AND 2013
Fee Type* |
| 2014 | |
|
|
2013 |
|
Audit Fees |
| $ |
1,635,100 | |
|
$ |
1,525,000 |
|
Audit
Related Fees(1) |
| $ |
0 | |
|
|
80,185 |
|
Tax Fees(2) |
| $ |
579,457 | |
|
$ |
600,002 |
|
All
Other Fees(3) |
| $ |
1,919 | |
|
$ |
1,919 |
|
* | No pre-approved requirements were waived under the de minimis exception. |
(1) | Consists of audit-related fees associated with the divestiture of certain oil and
gas properties during 2013. The Company was reimbursed for these fees by the purchaser of the properties. |
(2) | Consists of federal, state and sales tax planning, tax compliance and tax advice. |
(3) | Consists of an accounting research software license. |
PROPOSAL 2 | APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The Audit Committee has approved and recommended the appointment
of PricewaterhouseCoopers LLP as the independent registered public accounting firm to examine the Company’s financial statements
for 2014. The persons named in the accompanying proxy will vote in accordance with the choice specified thereon, or, if no choice
is properly indicated, in favor of the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting
firm for the Company. A representative of PricewaterhouseCoopers LLP is not expected to be in attendance at the Annual Meeting.
See “Audit Committee Report” above for further information.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR RATIFICATION OF THE APPOINTMENT OF THE FIRM OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE COMPANY FOR ITS 2015 FISCAL YEAR.
PROPOSAL 3 | TO
APPROVE, BY NON-BINDING ADVISORY VOTE, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
The shareholders of the Company are entitled to vote at the Annual
Meeting to approve the compensation of the Company’s NEOs, as disclosed in this Proxy Statement. The shareholder vote on
executive compensation is an advisory vote only, and it is not binding on the Company or the Board of Directors. Although the vote
is non-binding, the Compensation Committee and the Board value the opinions of the shareholders and will consider the outcome of
the vote when making future compensation decisions.
As described more fully in the Compensation Discussion and Analysis
section of this Proxy Statement, the Company’s executive compensation program is designed to:
• | Align executive compensation design and outcomes with business strategy; |
| |
• | Encourage management to create sustained value for the shareholders while managing
inherent business risks; |
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 59 |
• | Attract, retain, and engage talented executives; and |
| |
• | Support a performance-based culture throughout the Company. |
The executive compensation program seeks to align executive compensation
with shareholder value on an annual and long-term basis through a combination of base pay, annual cash incentive bonus and long-term
equity award incentives. The annual cash incentive bonus is based on Company-wide performance for year-over-year oil and natural
gas reserve and production growth, along with absolute levels for finding costs and unit production costs. For 2014, the aggregate
bonus award pool for the annual cash incentive bonus was 160% of the target bonus.
In addition, in 2014 long-term incentive awards were comprised
of (i) TSR performance shares, which are based on total shareholder return relative to an industry peer group over a three-year
performance period, and (ii) hybrid performance shares, which are based on annual operating cash flow and vest over a three year
period.
At-risk compensation for the Chief Executive Officer in
2014 was targeted at 90% and for the other NEOs was targeted at an average of 81%. The Company also has several governance
programs in place to align executive compensation with shareholder interests. These programs include: an annual advisory vote
on executive compensation, stock ownership guidelines, an anti-hedging policy, limited perquisites and the use of wealth
accumulation spreadsheets. For information on the Company’s 2014 operational and financial accomplishments, see
“Compensation Discussion and Analysis” above.
The advisory vote regarding the compensation of the NEOs described
in this Proposal 3 will be approved if a majority of the shares present in person or by proxy at the meeting and entitled to vote
on the proposal vote in favor of the proposal. Abstentions will have the same effect as votes against the proposal, but broker
non-votes will not affect the outcome of the voting on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE APPROVAL OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL 4 | | REPORT ON POLITICAL CONTRIBUTIONS |
The Comptroller of the City of New
York, Scott M. Stringer, as custodian and a trustee of the New York City Employees’ Retirement System, the New York
City Fire Department Pension Fund and the New York City Teachers’ Retirement System, has notified us that it intends to
present the following proposal at the Annual Meeting. The proponent has furnished evidence of ownership of at least $2,000 in
market value of the Company’s common stock for at least one year prior to the date the proposal was submitted. The
Company is not responsible for the contents of this proposal or the supporting statement and recommends that you vote AGAINST
the following shareholder proposal for the reasons set forth in the Company’s opposition statement following the
proposal.
RESOLVED: that the
shareholders of Cabot Oil & Gas (“Cabot” or the “Company”) hereby request that the Company provide
a report, updated semiannually, disclosing the Company’s:
1. | Policies and procedures for
making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in
any political campaign on behalf of (or in opposition to) any candidate
for public office, or (b) influence the general public, or any
segment thereof, with respect to an election or referendum. |
| |
2. | Monetary and non-monetary
contributions and expenditures (direct and indirect) used in the
manner described in section 1 above, including: |
|
a. | The identity of the recipient
as well as the amount paid to each; and |
|
| |
|
b. | The title(s) of the person(s)
in the Company responsible for decision-making. |
The report shall be presented to the board of directors or relevant
board committee and posted on the Company’s website within 12 months from the date of the annual meeting.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 60 |
STOCKHOLDER SUPPORTING STATEMENT
Almost half of Cabot’s voting shareholders supported this
resolution last year.
As long-term shareholders of Cabot, we support transparency and
accountability in corporate spending on political activities. These include any activities considered intervention in any political
campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations;
independent expenditures; or electioneering communications on behalf of federal, state or local candidates.
We acknowledge that Cabot now discloses some information on its
political spending on its website, including the annual aggregate amount spent on political engagement and the names of trade associations
to which it belongs. We believe this is deficient since it does not disclose how much and to whom the Company gave. For example,
we do not know to which candidates, parties, and committees the Company gave and how much, or if it gave to any of the “social
welfare” organizations that engage in political activities.
Publicly available records show that Cabot spent at least $327,850
to intervene in elections since the 2004 election cycle. (CQ: http://moneyline.cq.com and National Institute on Money in State
Politics: http://followthemoney.org)
Gaps in transparency and accountability may expose the company to reputational and business
risks that could threaten long-term shareholder value. This may be especially true for Cabot, which the Political Economy Research
Institute included in its Toxic 100 Water Polluters list of 2013.
Relying on publicly available data does not provide a complete
picture of the Company’s political spending. The proposal asks Cabot to disclose all of its political spending, including
payments to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in
line with a growing number of its peers, including Noble Energy, Exelon Corp., and ConocoPhillips that support political disclosure
and accountability and present this information on their websites.
The Company’s Board and its shareholders need comprehensive
disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance
reform.
CABOT’S STATEMENT IN OPPOSITION TO PROPOSAL 4
Our Board of Directors has carefully considered this proposal
and believes that approval of the proposed resolution is not in the best interest of Cabot or our shareholders. This is the
second consecutive year we have received this proposal from the Comptroller of the City of New York. At our 2014 annual meeting,
the proposal received the support of only 31% of the shares represented in person or by proxy at the meeting. Our Board believes
that this vote result indicates that our shareholders support the Company’s current policies and practices with respect to
political contributions.
We publicly disclose our political spending on our website.
As disclosed on our website in accordance with our Policy
on Political Contributions and Activities, our total corporate political contributions for 2014 were $50,000 and the total
amount of our dues paid to business and trade associations to which we belong that were used for non-deductible lobbying
expenses in 2014, as reported to us by the associations, were less than $250,000. Based on the 2014 shareholder vote,
Cabot’s existing transparency with respect to its political activities and the de minimis nature of our political
contributions, the Board believes that the requested report is both unnecessary and not a productive use of Cabot’s and
the shareholders’ resources.
We follow our Board-approved policy on political contributions.
We operate in an industry that is heavily regulated and as such,
deeply affected by the political and legislative process. We strongly believe that Cabot’s long-term value to our shareholders
is enhanced by a business environment that protects and supports free enterprise economic policies and, in particular, the oil
and gas industry. To address this business need and to provide oversight for the participation in the political process, the Board
has approved a Policy on Political Contributions
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 61 |
and Activities, which is contained in our Code of Business Conduct
found on our website at www.cabotog.com/about-cabot/governance. We strictly adhere to this Policy and to all U.S. and state laws
and regulations that govern political engagement for U.S. public companies.
Cabot is prohibited by its policy and by law from directly participating
in federal elections or campaigns. Cabot has also never engaged in “independent expenditures,” which are aimed at the
general public and advocate the election or defeat of a specific candidate and were allowed by the decision of the U.S. Supreme
Court in the Citizens United case in 2010. We participate in the political process primarily indirectly, through sponsorship of
the non-partisan Cabot Oil & Gas Political Action Committee (“COGPAC”), which is financed completely through voluntary
employee contributions.
From time to time, however, where allowed by state law, Cabot
supports organizations that are active in the political process on a state level, state candidates or ballot initiatives, and these
contributions are reported by the recipients to the appropriate state agencies and publicly available. We also disclose the total
amount of these corporate political contributions on an annual basis on our website. For 2014, the total amount was $50,000. The
Board believes this disclosure provides the transparency that shareholders need to make informed investment decisions in Cabot
and that naming individual recipients is unnecessary and not in the best interest of Cabot or its shareholders as a whole.
We disclose all trade association memberships and lobbying
expenses on our website and such expenditures are de minimis.
Consistent with our policy, we are members of business and industry
trade groups that engage in collaborative activities and information sharing regarding issues that affect our industry. Some of
these associations also engage in lobbying activities that seek to promote legislative solutions that are, in our judgment, sound
and responsible and that advance Cabot’s and our industry’s business goals and interests. A list of our business and
trade association memberships can be found on our website at www.cabotog.com/social-responsibility/environment-safety. The primary
reason for Cabot’s membership in trade associations is to further business goals and initiatives and not to fund political
activities. Some of the trade associations in which we participate, however, have notified us that a small portion (generally
5% or less) of our dues paid in 2014 may have been used for non-deductible lobbying expenses. The total non-deductible portion
of our dues paid to all business and trade associations in which we participate, as reported to us by those associations, is disclosed
on our website each year. In 2014, such amount was less than $250,000. These expenditures are ancillary to the primary business
purpose of our membership in those associations, and we believe that reasonable investors could only consider such amounts immaterial.
Accordingly, our Board believes it is not necessary to report the amount of our dues, or the non-deductible portions, paid to
such associations by name, as requested by the proponent.
Our Board of Directors oversees all political spending.
Finally, we believe that the proponents’ stated concern
regarding Cabot’s exposure to reputational and business risks from participation in the political process is unfounded. Our
Board receives a report at least annually, detailing all political contributions by the COGPAC, as well as all direct political
contributions by Cabot, and listing recipients by name and amount. Additionally, the Chairman of the Board and CEO approves the
Company’s participation in, and levels of contributions to, all business and trade associations. In this way, our Board oversees
our political contributions process and compliance with our policies and seeks to ensure that our participation in the political
process is consistent with the best interests of the Company and our shareholders.
For the reasons stated above, the Board believes that the shareholders
as a whole would not benefit from the additional report outlined in the proposal and urges that you vote against it.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST APPROVAL OF THE SHAREHOLDER PROPOSAL.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 62 |
The Comptroller of the City of New
York, Scott M. Stringer, as custodian and trustee of the New York City Employees’ Retirement System, the New York City
Police Pension Fund and custodian of the New York City Board of Education Retirement System, has notified us that it intends
to present the following proposal at the Annual Meeting. The proponent has furnished evidence of ownership of at least $2,000
in market value of the Company’s common stock for at least one year prior to the date the proposal was submitted. The
Company is not responsible for the contents of this proposal or the supporting statement and recommends that you vote AGAINST
the following shareholder proposal for the reasons set forth in the Company’s opposition statement following the
proposal.
RESOLVED: Shareholders
of Cabot Oil & Gas Corporation (the “Company”) ask the board of directors (the “Board”) to adopt,
and present for shareholder approval, a “proxy access” bylaw. Such a bylaw shall require the Company to include in
proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as
defined herein) of any person nominated for election to the board by a shareholder or group (the “Nominator”) that
meets the criteria established below. The Company shall allow shareholders to vote on such nominee on the Company’s proxy
card.
The number of shareholder-nominated candidates appearing in proxy
materials shall not exceed one quarter of the directors then serving. This bylaw, which shall supplement existing rights under
Company bylaws, should provide that a Nominator must:
a) | have beneficially owned 3% or more of the Company’s outstanding common stock
continuously for at least three years before submitting the nomination: |
| |
b) | give the Company, within the time period identified in its bylaws, written notice
of the information required by the bylaws and any Securities and Exchange Commission rules about (i) the nominee, including consent
of being named in the proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the
required shares (the “Disclosure”); and |
| |
c) | certify that (i) it will assume liability stemming from any legal or regulatory violation
arising out of the Nominator’s communications with the Company shareholders, including the Disclosure and Statement; (ii)
it will comply with all applicable laws and regulations if it uses soliciting material other than the Company’s proxy materials;
and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change
or influence control at the Company. |
The Nominator may submit with the Disclosure a statement not exceeding
500 words in support of the nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes
over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations,
and the priority to be given to multiple nominations exceeding the one-quarter limit.
STOCKHOLDER SUPPORTING STATEMENT
We believe proxy access is a fundamental shareholder right that
will make directors more accountable and contribute to increased shareholder value. The CFA Institute’s 2014 assessment of
pertinent academic studies and the use of proxy access in other markets similarly concluded that proxy access:
• | Would “benefit both the markets and corporate boardrooms, with little cost or
disruption.” |
| |
• | Has the potential to raise overall US market capitalization by up to $140.3 billion
of adopted market-wide. (http://www.cfapubs.org/doi/ pdf/10.2469/ccb.v2014.n9.1) |
The proposed bylaw terms enjoy strong
investor support – votes for similar shareholder proposals averaged 55% from 2012 through September 2014 – and
similar bylaws have been adopted by companies of various sizes across industries, including Chesapeake Energy,
Hewlett-Packard, Western Union and Verizon.
We urge shareholders to vote FOR this proposal.
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 63 |
CABOT’S STATEMENT IN OPPOSITION TO PROPOSAL 5
The Board of Directors has carefully considered this proposal
and recommends a vote AGAINST this proposal. As discussed below, Cabot has already implemented proxy access for its stockholders;
accordingly, the Board believes that no further action is needed, and that the form of proxy access sought by the proponent is
not in the best interest of Cabot or its stockholders.
We have an established record of best governance practices,
exceptional performance and strong support from our stockholders.
Our commitment to corporate governance best practices is well
established and discussed throughout this proxy statement. See, for example, “Proxy Summary—Governance Highlights”
above on page 9. Our stockholders have expressed continued confidence in our Board through support for each of our current director
nominees in excess of 95% at each annual meeting in the last five years at which they were also nominated. This support for our
Board is also expressed through the advisory vote in favor of our executive compensation programs in excess of 95% since 2011,
the first year such vote was taken. Our exceptional financial and operational performance, as discussed above under “Compensation
Discussion and Analysis—2014 Financial and Operational Highlights,” puts us at the top of our peer group over those
periods. Additionally, our total shareholder returns (TSR) for the last three and five year periods have been at the top of our
current peer group, outperforming all but one of our peers in each of those periods. We believe that the strength of our Board
and our corporate governance practices have contributed to the strong returns Cabot’s stockholders have enjoyed over the
last three and five year periods.
Our Board of Directors is responsive to stockholders.
We routinely engage with many of our stockholders to
discuss their views on corporate governance, executive compensation and other matters of interest to our stockholders, and
have demonstrated our willingness to respond to these concerns. As a result of this ongoing engagement, in recent years we
have implemented majority voting in uncontested director elections and declassified the structure of our Board. In accordance
with this practice, we sought input about proxy access from many of our significant stockholders. Based on these discussions,
we found that our stockholders generally support proxy access rights for long-term stockholders as a means to increase
director accountability and give stockholders a more meaningful voice in director elections. Our stockholders do not,
however, have uniform views on the ownership levels and holding periods that should be required for a stockholder or group of
stockholders to be eligible to include their nominees in our proxy materials, or the number of such nominees that may be
included. For example, many of our stockholders expressed a willingness to support higher ownership thresholds where a
company had already implemented many key corporate governance best practices and financial performance was strong.
Our Board of Directors has adopted proxy access for the benefit
of all stockholders.
Due to the interest of our stockholders in proxy access, our Board
considered various potential formulations of proxy access, including the provisions advocated by the proponent, taking into account
feedback from many of our stockholders, the level of ownership and nature of our larger holders and the size, tenure and structure
of our Board. Based upon the Board’s assessment of the relative advantages and disadvantages to the stockholders and the
Company of the various proxy access formulations, in March 2015, the Board of Directors amended the bylaws of the Company to implement
proxy access in the form it believes is most appropriate for Cabot and its stockholders. Under the amended bylaws adopted by the
Board, any stockholder or group of up to 10 stockholders that beneficially owns at least 5% of our outstanding Common Stock continuously
for three years is permitted to nominate candidates for election to the Board and to require the Company to list such nominees
along with the Board’s nominees in the Company’s proxy statement. The qualifying stockholder or group of stockholders
may nominate up to 20% of the Board, rounding down to the nearest whole number of Board seats, under the proxy access provisions
of the bylaws.
The proponent’s version of proxy access is unnecessary
and could be detrimental to stockholders as a whole.
In selecting the appropriate proxy access formulation, our Board
sought to balance the desire to provide meaningful rights to stockholders who we believe are generally representative of our other
long-term stockholders against the potential harm to Board effectiveness that may be caused by the nomination
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 64 |
of directors who may pursue narrow special interests,
including interests unrelated to long-term stockholder value. We believe that a 5% ownership level, as opposed to the 3%
ownership level urged by the proponent, is more effective at balancing these competing goals, particularly when up to 10
stockholders may aggregate their stockholdings to reach the 5% ownership threshold. Allowing a lower ownership threshold or
an unlimited number of holders to act as a group undermines the principle that we believe is shared by most of our
stockholders: that the right to nominate a director using the Company’s proxy statement should be available only for
those who have a sufficient financial stake in the Company to cause their interests to be aligned with the interests of the
stockholders as a whole. For these reasons, our Board believes that the Company’s current proxy access right is in the
best interests of the stockholders and that the proponent’s approach is not appropriate for Cabot.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST APPROVAL OF THE STOCKHOLDER PROPOSAL.
CONFLICT OF INTEREST AND RELATED PERSON POLICIES
Under our Code of Business Conduct, directors, officers and employees
are required to avoid situations that present a potential conflict between their personal interests and the interests of the Company.
The Code requires that, at all times, directors, officers and employees make a prompt disclosure in writing to the Company’s
Corporate Secretary of any fact or circumstance that may involve an actual or potential conflict of interest, as well as any information
necessary to determine the existence or likely development of conflicts of interest. This specifically includes any material transaction
or relationship that could reasonably be expected to give rise to a conflict of interest. This requirement includes situations
that create even the appearance of a conflict of interest.
For executive officers of the Company other than the CEO, the
Corporate Secretary reviews the written disclosure described above with the CEO, and a determination is made whether to approve
the transaction resulting in the conflict of interest or potential conflict of interest. The CEO and the Corporate Secretary may
refer the matter to our Board of Directors as circumstances require. If the transaction involves the CEO or a member of the Board
of Directors, the matter is referred to the full Board of Directors for review and approval. In each case the standard applied
in approving the transaction is the best interests of the Company without regard to the interests of the individual officer or
director involved in the transaction. These procedures for reviewing and approving conflict of interest transactions are based
on the Company’s past practice and are not contained in any written policy.
Mineral and Royalty Interest Plan
In 2006, we implemented a Mineral, Royalty and Overriding
Royalty Interest Plan (“Plan”), under which we may offer to a number of our employees, including our executive
officers, the opportunity to purchase a portion of the mineral, participating and non-participating royalty and overriding
royalty interests acquired by the Company from time to time for cash at a price determined using the same cost basis as we
acquired such interests. In accordance with the Plan, the Company makes all determinations with respect to the acquisition,
exploration, development, maintenance and operation of any property subject to an interest under the Plan using the same
criteria (or criteria less favorable to the property subject to an interest) as it would use were such property not subject
to such an interest (that is, the Company will not favor properties subject to interests under the Plan over properties not
subject to such interests when allocating Company resources in the acquisition, exploration, development, maintenance and
operation of its properties).
In 2006, we offered to 73 participants, including ten officers,
whose participation was approved by the Compensation Committee, the opportunity to purchase an aggregate of $2.3 million of the
mineral,
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 65 |
royalty and overriding royalty interests acquired by the Company
in the McCampbell Field, located in Aransas Pass, Texas. Interests were offered to the key professional employees in the region
in which the interest was located and to management level employees in the other regions and the corporate office. Participants
were offered an interest commensurate with their level of responsibility and their income. Each participant was offered an interest
in the same property. Each of the officers participating in the Plan, including each NEO other than Mr. Cunningham who was not
employed at the time, purchased interests in the field. No individual officer purchased in excess of $115,000 of the interests
offered.
In 2010, we offered to 85 participants, including ten
officers, whose participation was approved by the Compensation Committee, the opportunity to purchase an aggregate of $1.4
million of the mineral, royalty and overriding royalty interests acquired by the Company from Guardian Oil & Gas, Inc.
and located in Shelby, San Augustine and Nacogdoches Counties, Texas. Similar to the McCampbell Field, interests were offered
to key professional employees in the region in which the interest was located and to management level employees in the other
region and the corporate office. Participants were offered an interest commensurate with their level of responsibility and
their income. Each participant was offered an interest in the same property. Each of the officers participating in the Plan,
including each NEO, purchased interests in the field. No individual officer purchased in excess of $102,000 of the interest
offered.
In 2012, we offered to 66 participants, including 11 officers,
whose participation was approved by the Compensation Committee, the opportunity to purchase an aggregate of approximately $608,000
of the mineral, royalty and overriding royalty interests acquired by the Company from the period of October 2011 to July 2012,
located in Frio, Atascosa and McMullen counties, Texas, in the Buckhorn operating area. All of the properties are operated by the
Company. Similar to the previous offerings, interests were offered to key professional employees in the region in which the interest
was located and to management level employees in the other region and the corporate office. Participants were offered an interest
commensurate with their level of responsibility and their income. Each participant was offered an interest in the same property.
Each of the officers participating in the Plan, including each NEO, purchased interests in the field. No individual officer purchased
in excess of $44,000 of the interest offered.
No interests were offered under the Plan to participants in 2014.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2014, no member of the Compensation Committee was an officer
or employee of the Company or any of its subsidiaries, or formerly an officer of the Company or any of its subsidiaries. During
2014, the Company had no compensation committee interlocks.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal or stockholder nomination of
director candidates intended for inclusion in the proxy statement for the 2015 Annual Meeting of Stockholders of the Company,
and otherwise eligible, should be sent to Ms. Deidre L. Shearer, Corporate Secretary and Managing Counsel, Cabot Oil &
Gas Corporation, 840 Gessner Road, Suite 1400, Houston, Texas 77024 and must be received by November 13, 2015 or, in the case
of such a stockholder nomination, in the time period specified below.
The by-laws of the Company require timely advance written notice
of stockholder nominations of director candidates (other than proxy access nominations, which are discussed below) and of any other
business to be presented by a stockholder at an annual meeting of stockholders. To be timely, the
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 66 |
by-laws require advance written notice be delivered to the Company’s
Secretary at the principal executive offices of the Company not later than the close of business on the 90th day, nor
earlier than the close of business on the 120th day, prior to the anniversary of the preceding year’s annual meeting
(with certain exceptions if the date of the annual meeting is different by more than specified amounts from the anniversary date).
The deadline for submission for the 2016 Annual Meeting of Stockholders is currently January 24, 2016. To be valid, a notice must
set forth certain information specified in the by-laws.
The by-laws of the Company also permit any stockholder or
group of not more than 10 stockholders that have continuously held at least 5% of our outstanding Common Stock for at least
three years to nominate up candidates for up to 20% of the available Board seats and have such candidates included in the
proxy statement for the 2016 Annual Meeting of Stockholders of the Company. To be timely, the by-laws require advance written
notice be delivered to the Company’s Secretary at the principal executive offices of the Company not later than the
close of business on the 120th day, nor earlier than the close of business on the 150th day, prior to
the anniversary of the date on which the Company first mailed proxy materials for the preceding year’s annual meeting.
The deadline for submission for the 2016 Annual Meeting of Stockholders is currently November 13, 2015. To be valid, a notice
must set forth certain information specified in the by-laws and the stockholder or group of stockholders providing such a
notice must comply with the eligibility and other requirements specified in the by-laws.
SOLICITATION OF PROXIES
The cost of soliciting proxies in the enclosed form will be borne
by the Company. In addition to solicitation by mail, officers, employees or agents of the Company may solicit proxies personally.
The Company may request banks and brokers or other similar agents or fiduciaries to transmit the proxy material to the beneficial
owners for their voting instructions and will reimburse them for their expenses in so doing. Okapi Partners LLC has been retained
to assist the Company in the solicitation of proxies at a fee estimated not to exceed $7,000, plus expenses.
MISCELLANEOUS
The Company’s management does not know of any matters to
be presented at the Annual Meeting other than those set forth in the Notice of Annual Meeting of Stockholders. However, if any
other matters properly come before the Annual Meeting, the persons named in the enclosed proxy intend to vote the shares to which
the proxy relates on such matters in accordance with their best judgment unless otherwise specified in the proxy.
By Order of the Board of Directors,
Deidre L. Shearer
Corporate Secretary and Managing Counsel
March 12, 2015
Cabot Oil & Gas Corporation |
- 2015 Proxy Statement 67 |
Three Memorial City Plaza
840 Gessner Road, Suite 1400
Houston, Texas 77024
(281) 589-4600
www.cabotog.com
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ATTN:
DEIDRE L.
SHEARER
840
GESSNER RD., SUITE
1400
HOUSTON,
TX 77024 |
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VOTE
BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
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ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. |
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VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
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VOTE
BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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DETACH AND RETURN THIS PORTION ONLY |
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The Board of Directors
recommends you vote FOR the following: |
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1. |
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Election of Directors |
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For |
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Abstain |
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1a. |
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Rhys J. Best |
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1b |
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Dan O. Dinges |
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For |
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1c |
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James R. Gibbs |
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3 |
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To approve, by non-binding advisory vote, the compensation of our named executive officers. |
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1d |
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Robert L. Keiser |
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1e. |
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Robert Kelley |
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The Board of Directors recommends you vote AGAINST proposals 4 and 5. |
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1f. |
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W. Matt Ralls |
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The Board of Directors recommends you vote FOR proposals 2 and 3. |
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To consider a shareholder proposal to provide a report on the Company’s political contributions. |
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To consider a shareholder proposal to adopt a “proxy access” bylaw. |
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2 |
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To ratify the
appointment of the firm PricewaterhouseCoopers LLP as the independent registered public accounting firm for the company
for its 2015 fiscal year. |
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NOTE: To transact
such other business as may properly come before the meeting or any adjournments or postponements thereof. |
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For address change/comments,
mark here. (see reverse for instructions) |
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Yes |
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No |
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Please indicate if you plan
to attend this meeting. |
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership,
please sign in full corporate or partnership name, by authorized officer. |
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Signature
[PLEASE SIGN WITHIN BOX] |
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Signature
(Joint Owners) |
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Important
Notice Regarding the Availability of Proxy Materials for the Annual
Meeting: The Annual Report, Form 10-K, Notice & Proxy Statement is/are
available at www.proxyvote.com.
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CABOT
OIL & GAS CORPORATION Annual Meeting of Stockholders April 23,
2015 8:00 AM This proxy is solicited by the Board of
Directors |
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The
stockholder(s) hereby appoint(s) Scott C. Schroeder and Deidre L. Shearer,
or either of them, as proxies, each with the power to appoint his or her
substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side of this ballot, all of the shares of Common
Stock of CABOT OIL & GAS CORPORATION that the stockholder(s) is/are
entitled to vote at the Annual Meeting of stockholder(s) to be held at
08:00 AM, CDT on 4/23/2015, at 840 Gessner Road, Suite 1400 Houston, TX
77024, and any adjournment or postponement thereof.
This
proxy, when properly executed, will be voted in the manner directed
herein. If no such direction is made, this proxy will be voted in
accordance with the Board of Directors’ recommendations.
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Address
change/comments: |
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(If
you noted any Address Changes
and/or Comments above, please mark corresponding box on
the reverse side.) |
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Continued and to be signed on reverse side |
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