NATIONAL FUEL GAS COMPANY (NYSE:NFG) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain OfficersItem 5.02
Performance Shares with Relative Total Return on Capital Performance Goal
On December 15, 2016, the Compensation Committee of the Board of Directors of National Fuel Gas Company (the “Company”) made the following grants of performance shares with a performance goal related to relative total return on capital (“ROC Performance Shares”) to the named executive officers of the Company: R. J. Tanski, 28,854; D. P. Bauer, 4,232; and J. R. Pustulka, 11,361. The grants were made under the Company’s 2010 Equity Compensation Plan (the “2010 Plan”). A brief description of the principal terms and conditions of the ROC Performance Shares is provided below.
The number of ROC Performance Shares awarded to a named executive officer is referred to as the officer’s “ROC Target Opportunity.” The performance cycle for the ROC Performance Shares is October 1, 2016 through September 30, 2019. Each ROC Performance Share will make the officer eligible to receive, no later than March 15, 2020 but in any event as soon as practicable after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Committee), provided that the ROC Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved. No dividend equivalents will be provided in respect of the ROC Performance Shares.
The performance goal for the October 1, 2016 to September 30, 2019 performance cycle is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (the “Report Group”). The Report Group consists of the following companies:
Atmos Energy Corporation
Cabot Oil & Gas Corporation
Energen Corporation
EQT Corporation
MDU Resources Group Inc.
National Fuel Gas Company
New Jersey Resources Corporation
Range Resources Corporation
SM Energy Company
Southwest Gas Corporation
Southwestern Energy Co.
Spire, Inc.
UGI Corporation
WGL Holdings Inc.
Whiting Petroleum Corporation
Total return on capital for a given company means the average of the company’s returns on capital for each twelve month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the company in the Bloomberg database at the time of analysis (or, if the Bloomberg database ceases to be available, such alternative publication or service as the Compensation Committee shall designate).
The number of ROC Performance Shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group, and not upon the absolute level of return achieved by the Company. The Compensation Committee established five percentile rankings that will determine the number of ROC Performance Shares to vest and be paid: (i) less than 45th, (ii) 45th, (iii) 60th, (iv) 75th, and (v) 100th. These percentile rankings will result in vesting and payment of a percentage of the ROC Target Opportunity, as follows: (i) 0%, (ii) 50%, (iii) 50%, (iv) 150%, and (v) 200%, respectively. For example, if the Company’s performance were to place it at the 60th percentile of the Report Group, then 50% of the ROC Target Opportunity would vest and be paid. For performance between two established performance levels, the percentage of ROC Performance Shares to vest and be paid will be determined by mathematical interpolation. Notwithstanding the above, if the Company’s total return on capital is negative, then the percentage of the ROC Target Opportunity to be paid will be capped at 50%. ROC Performance Shares that do not vest will be automatically forfeited when the Compensation Committee makes its determination as to the extent to which the performance goal has been achieved, but no later than March 15, 2020.
Performance Shares with Relative Total Shareholder Return Performance Goal
On December 15, 2016, the Compensation Committee of the Company made the following grants of performance shares with a performance goal related to relative total shareholder return (“TSR Performance Shares”) to the named executive officers of the Company: R. J. Tanski, 28,854; D. P. Bauer, 4,232; and J. R. Pustulka, 11,361. The grants were made under the 2010 Plan. A brief description of the principal terms and conditions of the TSR Performance Shares is provided below.
The number of TSR Performance Shares awarded to a named executive officer is referred to as the officer’s “TSR Target Opportunity.” The performance cycle for the TSR Performance Shares is October 1, 2016 through September 30, 2019. Each TSR Performance Share will make the officer eligible to receive, no later than March 15, 2020 but in any event as soon as practicable after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Committee), provided that the TSR Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved. No dividend equivalents will be provided in respect of the TSR Performance Shares.
The performance goal for the October 1, 2016 to September 30, 2019 performance cycle is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group. Three-year total shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database at the time of analysis (or, if the Bloomberg database ceases to be available, such alternative publication or service as the Compensation Committee shall designate).
The number of TSR Performance Shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group, and not upon the absolute level of return achieved by the Company. The Compensation Committee established five percentile rankings that will determine the number of TSR Performance Shares to vest and be paid: (i) 30th or below, (ii) 40th, (iii) 50th, (iv) 70th, and (v) 90th or above. These percentile rankings will result in vesting and payment of a percentage of the TSR Target Opportunity, as follows: (i) 0%, (ii) 50%, (iii) 50%, (iv) 150%, and (v) 200%, respectively. For example, if the Company’s performance were to place it at the 50th percentile of the Report Group, then 50% of the TSR Target Opportunity would vest and be paid. For performance between two established performance levels, the percentage of TSR Performance Shares to vest and be paid will be determined by mathematical interpolation. Notwithstanding the above, if the Company’s three-year total shareholder return is negative, then the percentage of the TSR Target Opportunity to be paid will be capped at 50%. TSR Performance Shares that do not vest will be automatically forfeited when the Compensation Committee makes its determination as to the extent to which the performance goal has been achieved, but no later than March 15, 2020.
Restricted Stock Units
On December 15, 2016, the Compensation Committee of the Company made a grant of 4,233 restricted stock units (“RSUs”) to D. P. Bauer, a named executive officer of the Company. The grant was made under the 2010 Plan. A brief description of the principal terms and conditions of the RSUs is provided below.
An RSU is a right to receive one share of common stock of the Company (or the equivalent value in cash or in a combination of shares and cash, as determined by the Committee) at the end of a specified period of time (the “restricted period”). Except as otherwise specified in the 2010 Plan or determined by the Compensation Committee, the restricted period will lapse, and the RSUs will vest, in three annual installments, commencing on December 15, 2017. If an officer retires prior to a vesting date, the portion of the officer’s RSU grant associated with that vesting date and with all subsequent vesting dates will be automatically forfeited. No dividend equivalents will be provided in respect of the RSUs.
Annual At Risk Compensation Incentive Plan
On December 15, 2016, the Compensation Committee adopted specific written performance goals for fiscal year 2017 under the 2012 Annual At Risk Compensation Incentive Plan (“AARCIP”) for named executive officers R. J. Tanski, D. P. Bauer and J. R. Pustulka. These executives will earn cash compensation in fiscal 2017 under the AARCIP depending upon their performance relative to their goals. Compensation amounts to these arrangements can range up to 200% of fiscal-year salary for Mr. Tanski, up to 140% of fiscal-year salary for Mr.
Bauer, and up to 180% of fiscal-year salary for Mr. Pustulka. Target compensation is 105% of fiscal-year salary for Mr. Tanski, 70% of fiscal-year salary for Mr. Bauer, and 90% of fiscal-year salary for Mr. Pustulka. The Compensation Committee may approve other compensation or awards at its discretion.
The goals for Mr. Tanski relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Company’s pipeline and storage subsidiaries and utility subsidiary (weighted as 25% of the formula), oil and natural gas production volume (weighted as 15% of the formula), safety (weighted as 10% of the formula), transportation, storage and gathering revenue of the Company’s pipeline and storage subsidiaries (weighted as 10% of the formula), mainline installation costs (weighted as 5% of the formula), service installation costs (weighted as 5% of the formula), and finding and development costs (weighted as 5% of the formula).
The goals for Mr. Bauer relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Company’s pipeline and storage subsidiaries and utility subsidiary (weighted as 25% of the formula), safety (weighted as 10% of the formula),finding and development costs (weighted as 10% of the formula), the Company’s investor relations program (weighted as 10% of the formula), Sarbanes-Oxley internal control compliance (weighted as 10% of the formula), and transportation, storage and gathering revenue of the Company’s pipeline and storage subsidiaries (weighted as 10% of the formula).
The goals for Mr. Pustulka relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Company’s pipeline and storage subsidiaries and utility subsidiary (weighted as 25% of the formula), safety (weighted as 15% of the formula), mainline installation costs (weighted as 10% of the formula), service installation costs (weighted as 10% of the formula), operations audit program of the Company’s exploration and production subsidiary (weighted as 10% of the formula), and EBITDA of the Company’s exploration and production subsidiary (weighted as 5% of the formula).
For purposes of the goals, EBITDA is defined in general as operating income plus depreciation, depletion and amortization, and any period-end impairment charges. For each named executive officer, the performance level achieved on each earnings goal will be averaged with the performance level achieved on the prior year’s corresponding earnings goal.
With respect to the goal related to oil and natural gas production volume, to the extent that there are oil and natural gas producing property acquisitions or dispositions during the fiscal year that were not included in the Company’s forecast, actual production volume figures will be adjusted to account for such transactions.
About NATIONAL FUEL GAS COMPANY (NYSE:NFG)
National Fuel Gas Company is a holding company. The Company is an energy company engaged principally in the production, gathering, transportation, distribution and marketing of natural gas. The Company operates in five business segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing. The Company operates an integrated business, with assets centered in western New York and Pennsylvania, and the production and transportation of natural gas from the Marcellus Shale basin. The Company also develops and produces oil reserves, primarily in California. The Company’s Exploration and Production segment operations are carried out by Seneca Resources Corporation (Seneca), a Pennsylvania corporation. The Company’s National Fuel Gas Supply Corporation (Supply Corporation), a Pennsylvania corporation, and Empire Pipeline, Inc. (Empire), a New York corporation, carry out the Company’s Pipeline and Storage segment operations. NATIONAL FUEL GAS COMPANY (NYSE:NFG) Recent Trading Information
NATIONAL FUEL GAS COMPANY (NYSE:NFG) closed its last trading session down -0.41 at 57.59 with 530,641 shares trading hands.
