Document



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

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material under §240.14a-12

CENTENNIAL RESOURCE DEVELOPMENT, INC.
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Centennial Resource Development, Inc.
1001 17th Street, Suite 1800
Denver, Colorado 80202
(720) 499-1400
March 19, 2020

Dear Stockholder:
You are cordially invited to attend the 2020 annual meeting of stockholders (the “Annual Meeting”) of Centennial Resource Development, Inc., a Delaware corporation (the “Company,” “we,” “us” or “our”), which will be held at 10:00 a.m., Central Time, on Wednesday, April 29, 2020. The Annual Meeting will be a virtual meeting of stockholders conducted online by live audio webcast. You will be able to attend the virtual meeting, vote your shares electronically and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/CDEV2020. To participate in the virtual meeting, you will need the control number included on your Notice Regarding the Internet Availability of Proxy Materials or on your proxy card. 
At the Annual Meeting, stockholders will be asked to (i) elect three nominees to serve on our board of directors as Class I directors, (ii) approve, by a non-binding advisory vote, our named executive officer compensation, (iii) approve and adopt an amendment and restatement of the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “Amended and Restated LTIP”), which, among other items, increases the number of shares of Class A common stock authorized for issuance under the existing 2016 Long Term Incentive Plan by 8,250,000 shares, (iv) ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 and (v) act upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. These proposals are more fully described in our proxy statement.
On or about March 19, 2020, we will mail to our stockholders either a full set of paper proxy materials or a Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting (the “Notice”) containing instructions on how to access our proxy statement and our annual report for the fiscal year ended December 31, 2019 and authorize your proxy electronically via the Internet or by telephone. If you receive a Notice, it will also contain instructions on how to receive a paper copy of the proxy materials.
It is important that your shares be represented at the Annual Meeting and voted in accordance with your wishes. Whether or not you plan to attend the meeting, we urge you to authorize your proxy as promptly as possible, either electronically via the Internet, by telephone or, if you receive paper proxy materials, by completing and returning the enclosed proxy card, so that your shares will be voted at the Annual Meeting. This will not limit your right to attend the Annual Meeting or vote electronically during the Annual Meeting.
Thank you for your ongoing support.


Sincerely,
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Mark G. Papa
Chief Executive Officer and Chairman of the Board





Centennial Resource Development, Inc.
1001 17th Street, Suite 1800
Denver, Colorado 80202
(720) 499-1400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 29, 2020

To our Stockholders:
The annual meeting of stockholders (the “Annual Meeting”) of Centennial Resource Development, Inc., a Delaware corporation (the “Company,” “we,” us” or “our”), will be held at 10:00 a.m., Central Time on Wednesday, April 29, 2020. The Annual Meeting will be a virtual meeting of stockholders conducted online by live audio webcast. You will be able to attend the virtual meeting, vote your shares electronically and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/CDEV2020. To participate in the virtual meeting, you will need the control number included on your Notice Regarding the Internet Availability of Proxy Materials or on your proxy card.
The Annual Meeting is being held for the following purposes:
1.
To elect three directors to our board of directors, each to serve as a Class I director for a term of three years expiring at our annual meeting of stockholders to be held in 2023 and until his or her successor is duly elected and qualified. The following persons have been nominated as Class I directors:
Maire A. Baldwin;
Steven J. Shapiro; and
Robert M. Tichio.
2.
To approve, by a non-binding advisory vote, our named executive officer compensation;
3.
To approve and adopt an amendment and restatement of the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “Amended and Restated LTIP”), which, among other items, increases the number of shares of Class A common stock authorized for issuance under the existing 2016 Long Term Incentive Plan by 8,250,000 shares;
4.
To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; and
5.
To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 11, 2020, the record date for the Annual Meeting, will be entitled to notice of and to vote at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, we urge you to authorize your proxy electronically via the Internet, by telephone or, if you received paper proxy materials, by completing and returning the enclosed proxy card. Voting instructions are provided in the Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting or, if you received paper proxy materials, printed on your proxy card and included in the accompanying proxy statement. Any person giving a proxy has the power to revoke it at any time prior to the Annual Meeting, and stockholders who attend the Annual Meeting may withdraw their proxies and vote electronically during the Annual Meeting.                

By Order of the Board of Directors,
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Mark G. Papa
Chief Executive Officer and Chairman of the Board

Denver, Colorado
March 19, 2020





CENTENNIAL RESOURCE DEVELOPMENT, INC.
1001 17th Street, Suite 1800
Denver, Colorado 80202
 
PROXY STATEMENT
FOR
2020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 2020    
 
This proxy statement is being furnished by and on behalf of the board of directors of Centennial Resource Development, Inc., a Delaware corporation (the “Company,” “we,” “us” or “our”), in connection with the solicitation of proxies to be voted at the Company’s 2020 annual meeting of stockholders (the “Annual Meeting”). The date, time and place of the Annual Meeting are as follows:
Date:    April 29, 2020
Time:    10:00 a.m. (Central Time)
Place:     Online at www.virtualshareholdermeeting.com/CDEV2020
At the Annual Meeting, the Company’s stockholders will be asked to:
Elect three directors to our board of directors, each to serve as a Class I director for a term of three years expiring at our annual meeting of stockholders to be held in 2023 and until his or her successor is duly elected and qualified. The following persons have been nominated as Class I directors:

Maire A. Baldwin;
Steven J. Shapiro; and
Robert M. Tichio.

Approve, by a non-binding advisory vote, the Company’s named executive officer compensation;

Approve and adopt an amendment and restatement of the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “Amended and Restated LTIP”), which, among other items, increases the number of shares of Class A common stock authorized for issuance under the existing 2016 Long Term Incentive Plan by 8,250,000 shares;

Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; and

Transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Our principal executive offices are located at 1001 17th Street, Suite 1800, Denver, Colorado 80202, and our telephone number is (720) 499-1400.
We are furnishing the proxy materials for the Annual Meeting by mailing to our stockholders either a full set of paper proxy materials or a Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting (the “Notice”). The paper proxy materials and the Notice will first be mailed to stockholders on or about March 19, 2020.





TABLE OF CONTENTS
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





GENERAL INFORMATION ABOUT THE MEETING
In this section of the proxy statement, we answer some common questions regarding the Annual Meeting and the voting of shares of our Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”) and Class C Common Stock, par value $0.0001 per share (the “Class C Common Stock” and, together with the Class A Common Stock, the “Common Stock”), at the Annual Meeting.
Where and when will the Annual Meeting be held?
The Annual Meeting will be held at 10:00 a.m., Central Time on Wednesday, April 29, 2020. The Annual Meeting will be a virtual meeting of stockholders conducted online by live audio webcast. There will not be any physical, in-person meeting. You will be able to attend the virtual meeting by visiting www.virtualshareholdermeeting.com/CDEV2020. To participate in the virtual meeting, you will need the control number included on your Notice Regarding the Internet Availability of Proxy Materials or on your proxy card.

Why did I receive a Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting in the mail instead of a paper copy of the proxy materials?
The United States Securities and Exchange Commission (the “SEC”) has approved rules (the “e-proxy rules”) allowing companies to furnish proxy materials, including this proxy statement and our annual report for the fiscal year ended December 31, 2019, to our stockholders by providing access to such documents on the Internet instead of mailing paper copies. We believe these e-proxy rules provide a convenient and quick way in which our stockholders can access the proxy materials and vote their shares of Common Stock, while allowing us to conserve natural resources and reduce the costs of printing and distributing the proxy materials. Accordingly, certain of our stockholders will receive a Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting (the “Notice”) and will not receive paper copies of the proxy materials unless they request them. Instead, the Notice will provide such stockholders with notice of the Annual Meeting and will also provide instructions regarding how such stockholders can access and review all of the proxy materials on the Internet. The Notice also provides instructions as to how you may submit your proxy electronically via the Internet or by telephone. If you received the Notice and you would instead prefer to receive a paper or electronic copy of the proxy materials, you should follow the instructions for requesting such materials that are provided in the Notice. Any request to receive proxy materials by mail or email will remain in effect until you revoke it.
Why did you send me the proxy materials or the Notice?
We sent you the proxy materials or the Notice because we are holding our Annual Meeting and our board of directors (the “Board”) is asking for your proxy to vote your shares of Common Stock at the Annual Meeting. We have summarized information in this proxy statement that you should consider in deciding how to vote at the Annual Meeting.
Can I vote my shares of Common Stock by filling out and returning the Notice?
No. The Notice identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and returning it. The Notice provides instructions on how to authorize your proxy electronically via the Internet, by telephone or by requesting and returning a paper proxy card, or you may vote your shares of Common Stock by submitting an electronic ballot at the meeting.
Who can vote?
You can vote your shares of Common Stock if our records show that you were the owner of the shares as of the close of business on March 11, 2020, the record date for determining the stockholders who are entitled to vote at the Annual Meeting. As of March 11, 2020, there were a total of 276,020,471 shares of Class A Common Stock and 1,034,119 shares of Class C Common Stock outstanding and entitled to vote at the Annual Meeting. You get one vote for each share of Common Stock that you own.
How is a quorum determined?
We will hold the Annual Meeting of stockholders representing the required quorum of shares of Common Stock entitled to vote authorize their proxy online or telephonically, sign and return their proxy cards or attend the Annual Meeting. The presence via live webcast or by proxy of a majority of the shares of Common Stock entitled to vote at the Annual Meeting constitutes a quorum. If you authorize your proxy online or telephonically or sign and return your proxy card, your shares will be counted to determine whether we have a quorum even if you abstain or fail to indicate your vote on the proxy card.

1




What is the required vote for approval?
The election of each of our Class I director nominees requires the vote of a majority of the votes cast by the stockholders present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions and broker non-votes will not be counted as votes cast and, therefore, will not have an effect on the results of the election of directors. We have adopted a director resignation policy whereby an incumbent director who fails to receive a majority of the votes cast during an uncontested election may be required by the Board to resign. See “Corporate Governance—Majority Voting in Director Elections” for additional information regarding the majority voting standard for uncontested director elections and our director resignation policy.
The approval by a non-binding advisory vote of our named executive officer compensation, the approval and adoption of the Amended and Restated LTIP and the ratification of the appointment of KPMG LLP as our independent registered public accounting firm require the vote of a majority of the votes cast by the stockholders present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. If you abstain for purposes of these proposals, your abstention will not be counted as a vote cast and, therefore, will not have an effect on the results of such vote. For the approval and adoption of the Amended and Restated LTIP and the approval on an advisory basis of our named executive officer compensation, broker non-votes will have no effect on the outcome of the vote. However, the rules of the NASDAQ Capital Market (the “NASDAQ”) permit brokers to vote uninstructed shares at their discretion regarding the ratification of the appointment of KPMG LLP as our independent registered public accounting firm, so there will be no broker non-votes on the proposal.
How do I vote by proxy?
Follow the instructions on the Notice or the proxy card to authorize a proxy to vote your shares of Common Stock at the Annual Meeting electronically via the Internet or by telephone or, if you received paper proxy materials, by completing and returning the proxy card. The individuals named and designated as proxies will vote your shares of Common Stock as you instruct. You have the following choices in voting your shares of Common Stock:
You may vote on each proposal, in which case your shares will be voted in accordance with your choices.
In voting on the election of Class I directors, you may either vote “FOR” or “AGAINST” each director.
You may abstain from voting on the proposal (i) to elect our Class I director nominees, (ii) to approve on an advisory basis our named executive officer compensation, (iii) to approve the adoption of the Amended and Restated LTIP and (iv) to ratify the appointment of KPMG LLP as our independent registered public accounting firm, in which case no vote will be recorded with respect to the proposal.
You may return a signed proxy card without indicating your vote on any matter, in which case the designated proxies will vote to (i) elect each Class I director nominee, (ii) approve on an advisory basis our named executive officer compensation, (iii) approve the adoption of the Amended and Restated LTIP and (iv) ratify the appointment of KPMG LLP as our independent registered public accounting firm.
How can I authorize my proxy online or via telephone?
In order to authorize your proxy online or via telephone, go to www.proxyvote.com or call the toll-free number reflected on the Notice, and follow the instructions. If your shares of Common Stock are held in the name of your broker, a bank or other nominee in “street name,” that party will give you instructions for voting your shares. Please have your Notice in hand when accessing the site, as it contains a control number required for access. You can authorize your proxy electronically via the Internet or by telephone at any time prior to 11:59 p.m., Eastern Time, on April 28, 2020, the day before the Annual Meeting.
If you received paper proxy materials, you may also refer to the enclosed proxy card for instructions. If you choose not to authorize your proxy electronically, please complete and return the paper proxy card in the pre-addressed, postage-paid envelope provided.
What if other matters come up at the Annual Meeting?
As of the date of this proxy statement, the only matters we know of that will be voted on at the Annual Meeting are the proposals we have described herein: (i) the election of three Class I directors, (ii) the approval on an advisory basis of our named executive officer compensation, (iii) the approval of the adoption of the Amended and Restated LTIP; and (iv) the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. If other matters are properly presented at the Annual Meeting, the designated proxies will vote your shares of Common Stock at their discretion.

2




Can I change my previously authorized vote?
Yes, you can change your vote at any time before the vote on a proposal either by executing or authorizing, dating and delivering to us a new proxy electronically via the Internet, by telephone or by mail at any time prior to 11:59 p.m., Eastern Time, on April 28, 2020, the day before the Annual Meeting, by giving us a written notice revoking your proxy card or by attending the Annual Meeting and electronically voting your shares of Common Stock during the Annual Meeting. Your attendance at the Annual Meeting will not, by itself, revoke a proxy previously given by you. We will honor the latest dated proxy.
Proxy revocation notices or new proxy cards should be sent to Centennial Resource Development, Inc., 1001 17th Street, Suite 1800, Denver, Colorado, 80202, Attention: General Counsel.
Can I vote during the Annual Meeting rather than by authorizing a proxy?
You can virtually attend the Annual Meeting and electronically vote your shares of Common Stock during the Annual Meeting; however, we encourage you to authorize your proxy to ensure that your vote is counted. Authorizing your proxy electronically or telephonically, or submitting a proxy card, will not prevent you from later attending the Annual Meeting and electronically voting your shares during the Annual Meeting.
Will my shares of Common Stock be voted if I do not provide my proxy?
Depending on the proposal, your shares of Common Stock may be voted if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under the NASDAQ rules to cast votes on certain “routine” matters if they do not receive instructions from their customers. The proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm is considered a “routine” matter for which brokerage firms may vote shares without receiving voting instructions.
Brokerage firms do not have the authority under the NASDAQ rules to vote on non-routine matters, which include the election of directors, the approval on an advisory basis of our named executive officer compensation and the approval of the adoption of the Amended and Restated LTIP. If you do not provide the brokerage firm with voting instructions on these proposals, your shares will not be voted and will result in “broker non-votes.” Broker non-votes will be considered present for the purpose of determining whether we have a quorum; however, such broker non-votes will not have an effect on the election of directors, the approval on an advisory basis of our named executive officer compensation or the approval of the adoption of the Amended and Restated LTIP.
What do I do if my shares are held in “street name”?
If your shares of Common Stock are held in the name of your broker, a bank or other nominee in “street name,” that party will give you instructions for voting your shares. If your shares of Common Stock are held in “street name” and you would like to electronically vote your shares during the Annual Meeting, you must contact your broker, bank or other nominee to obtain a proxy form from the record holder of your shares.
Who will count the votes?
A representative of Broadridge Financial Solutions, Inc. will count the votes and will serve as the independent inspector of election.
Who pays for this proxy solicitation?
We do. The Company has engaged Morrow Sodali, to assist in the solicitation of proxies for the Annual Meeting. The Company has agreed to pay Morrow Sodali a fee of $6,500, plus disbursements. The Company will reimburse Morrow Sodali for reasonable out-of-pocket expenses and will indemnify Morrow Sodali and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Common Stock for their expenses in forwarding soliciting materials to beneficial owners of shares of Common Stock and in obtaining voting instructions from those owners. In addition to sending you these materials, some of our employees or agents may contact you by telephone, by mail or in person. None of our employees will receive any extra compensation for providing those services.

3




Who can help with my questions?
If you have additional questions about this proxy statement or the Annual Meeting or would like to receive additional copies, without charge, of this document or our annual report for the fiscal year ended December 31, 2019, please contact:

Centennial Resource Development, Inc.
1001 17th Street, Suite 1800
Denver, Colorado, 80202
Attention: General Counsel
If you have any questions or need assistance voting your shares you may also contact our proxy solicitor at:

Morrow Sodali LLC
470 West Avenue, 3rd Floor
Stamford, CT 06902

Banks and Brokerage Firms, please call (203) 658-9400

Stockholders, please call toll free (800) 662-5200

4




PROPOSAL 1
ELECTION OF DIRECTORS
Director Nomination Process
The Nominating and Corporate Governance Committee of our Board (the “N&CG Committee”) identifies, evaluates and recommends to our Board director candidates with the goal of identifying individuals with a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments. In evaluating director candidates, the N&CG Committee may also consider certain other criteria as set forth in our Corporate Governance Guidelines, including, among other things:
the candidate’s experience in corporate management, such as serving as an officer or former officer of a publicly held company;
the candidate’s experience as a board member of another publicly held company;
the candidate’s professional and academic experience relevant to our industry;
the strength of the candidate’s leadership skills;
the candidate’s experience in finance and accounting and/or executive compensation practices;
the overall diversity of the Board; and
whether the candidate has the time required for preparation, participation and attendance at Board meetings and committee meetings, if applicable.
The N&CG Committee and the Board monitor the mix of specific experience, qualification and skills of our directors in order to ensure that the Board, as a whole, has the necessary tools to perform its oversight function effectively.  Generally, the N&CG Committee identifies candidates through the personal, business and organizational contacts of the directors and management, but the N&CG Committee may also engage an executive search firm to assist in the process.
Our Corporate Governance Guidelines requires that each nominee for director sign and deliver to the Board an irrevocable letter of resignation that becomes effective if (a) the nominee does not receive a majority of the votes cast in an uncontested election, and (b) the Board decides to accept the resignation. The Board has received such conditional letters of resignation from each of the nominees named in Proposal 1.
Board Structure
There are currently nine directors on our Board, and the directors are divided into three equal classes. The terms of office of the three Class I directors will expire at the Annual Meeting. Each nominee is currently a director, including Steven J. Shapiro, who was appointed by the Board on October 17, 2019 (after the date of our 2019 annual meeting of stockholders). Other than Mr. Shapiro, all nominees were previously elected to the Board by our stockholders. The holder of our Series A Preferred Stock, par value $0.0001 per share, has the right to nominate and elect one additional director to our Board but has declined to do so since May 2019, when the director previously nominated and elected by such holder resigned.

5




The following table provides a snapshot of the current members of the Board and its committees.
 
 
 
 
 
 
 
 
 
 
Committee Memberships
Name
 
Director Class
 
Term Expires
 
Director Since
 
Independent
 
Audit
 
Comp.
 
N&CG
Maire A. Baldwin*
 
I
 
2020
 
2016
 
ü
 
ü
 
þ
 
ü
Steven J. Shapiro
 
I
 
2020
 
2019
 
ü
 
ü
 
ü
 
 
Robert M. Tichio
 
I
 
2020
 
2016
 
 
 
 
 
 
 
 
Karl E. Bandtel
 
II
 
2021
 
2016
 
ü
 
ü
 
 
 
þ
Matthew G. Hyde
 
II
 
2021
 
2018
 
ü
 
 
 
ü
 
ü
Jeffrey H. Tepper
 
II
 
2021
 
2016
 
ü
 
þ
 
ü
 
 
Pierre F. Lapeyre, Jr.
 
III
 
2022
 
2016
 
 
 
 
 
 
 
 
David M. Leuschen
 
III
 
2022
 
2016
 
 
 
 
 
 
 
 
Mark G. Papa**
 
III
 
2022
 
2015
 
 
 
 
 
 
 
 
 
*     = Lead Independent Director
**     = Chairman of the Board; Mr. Papa intends to retire effective May 31, 2020 as discussed below in “Corporate GovernanceLeadership Transition.”
ü    = Independent Director / Committee Member
þ    = Committee Chair
Summary of Director Qualifications
The members of the Board have a diversity of experience and a wide variety of backgrounds, skills, qualifications and viewpoints that strengthen their ability to carry out their oversight role on behalf of our stockholders. The following matrix highlights key qualifications, skills and attributes each director brings to the Board. The lack of a mark for a particular item does not mean the director does not possess that qualification or expertise. However, a mark indicates a specific area of focus or expertise that the director brings to our Board. More details on each director’s qualifications, skills and expertise are included in the director biographies on the following pages.
Name
 
Accounting / Financial Oversight
 
Business Development / M&A
 
ESG Oversight
 
Executive Leadership
 
E&P Industry
 
Finance / Capital Markets
 
Investor Relations
 
Marketing / Midstream
 
Public Company Board
 
Strategic Planning / Risk Management
Maire A. Baldwin
 
ü
 
 
 
 
 
ü
 
ü
 
ü
 
ü
 
 
 
 
 
 
Karl E. Bandtel
 
ü
 
 
 
 
 
 
 
ü
 
ü
 
 
 
 
 
 
 
 
Matthew G. Hyde
 
 
 
ü
 
 
 
ü
 
ü
 
 
 
 
 
 
 
 
 
ü
Pierre F. Lapeyre, Jr.
 
ü
 
ü
 
 
 
 
 
ü
 
ü
 
 
 
ü
 
ü
 
ü
David M. Leuschen
 
 
 
ü
 
ü
 
 
 
ü
 
ü
 
 
 
ü
 
ü
 
 
Mark G. Papa
 
ü
 
ü
 
ü
 
ü
 
ü
 
 
 
ü
 
ü
 
ü
 
ü
Steven J. Shapiro
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
Jeffrey H. Tepper
 
ü
 
ü
 
ü
 
 
 
 
 
ü
 
 
 
 
 
ü
 
ü
Robert M. Tichio
 
ü
 
ü
 
ü
 
 
 
ü
 
ü
 
 
 
 
 
ü
 
ü
Class I Election
The three nominees for election as Class I directors are listed below. If elected, the nominees for election as Class I directors will serve on our Board for a term of three years expiring at our annual meeting of stockholders in 2023 and until their respective successors are duly elected and qualified. Each of the nominees currently serves on our Board.

6




Class I Nominees
The Class I nominees are as follows:
Director
 
Age, Principal Occupation, Business Experience, Other Directorships Held and Director Qualifications
Maire A. Baldwin
(Class I)
 
Maire A. Baldwin, age 54, has served as a director since October 2016 and as the Lead Independent Director since 2018. Ms. Baldwin was employed as an Advisor to EOG Resources, Inc. (NYSE: EOG), an independent U.S. oil and gas company (“EOG”) from March 2015 until April 2016. Prior to that, she served as Vice President Investor Relations at EOG from 1996 to 2014. Ms. Baldwin has served as a director of the Houston Parks Board since 2011, a non-profit dedicated to developing parks and green space to the greater Houston area where she serves on several committees. She is co-founder of Pursuit, a non-profit dedicated to raising funds and awareness of adults with intellectual and developmental disabilities. Ms. Baldwin has a Master of Business Administration and a Bachelor of Arts in Economics from the University of Texas at Austin.
We believe Ms. Baldwin is qualified to serve on our Board due to her experience in the energy industry. From her executive experience with EOG, Ms. Baldwin has a deep understanding of the oil and gas industry generally and investor relations issues specifically, which we believe gives her an important insight into best practices relating to shareholder engagement and an understanding of the investment community’s expectations for public companies in our industry.
Steven J. Shapiro
(Class I)
 
Steven J. Shapiro, age 68, has served as a director since October 2019. If Mr. Shapiro is elected at the Annual Meeting, he will continue to serve in his current role as an independent director and, following the retirement of Mark G. Papa, will become the Chairman of the Board, effective June 1, 2020.  For more information on the previously announced leadership transition, see “Corporate Governance-Leadership Transition” below.

Mr. Shapiro is a Senior Advisor to Outfitter Energy Capital, a private equity group focused on the energy industry, a position he has held since December 2016. From 2006 through December 2016, Mr. Shapiro was a Senior Advisor to TPH Partners, the legacy private equity business of Tudor, Pickering, Holt & Co. From 2000 to 2006, Mr. Shapiro held various leadership positions at Burlington Resources Inc. (“Burlington Resources”), an oil and gas exploration and production company, including Executive Vice President of Finance and Corporate Development and Executive Vice President and Chief Financial Officer. During his tenure at Burlington Resources, Mr. Shapiro also served as a member of the Office of the Chairman, the executive group responsible for setting the strategic direction of the company, and a member of the Board of Directors, positions he assumed in 2004. From 1993 to 2000, Mr. Shapiro served as Senior Vice President, Chief Financial Officer and Director at Vastar Resources, Inc. (“Vastar”), an oil and gas exploration and production company. In connection with that role, he also served on the Board of Directors of Southern Company Energy Marketing L.P. (“Southern Company”), a joint venture entity between Vastar and Southern Company focused on marketing electricity, natural gas and other energy commodities. Previously, Mr. Shapiro spent 16 years with Atlantic Richfield Company (“ARCO”), a global oil and gas company, beginning as a planning analyst in 1977 and later holding a variety of positions in ARCO’s coal and minerals businesses, including Vice President of Finance for ARCO Coal, Assistant Treasurer and Vice President for Corporate Planning for ARCO and President for ARCO Coal Australia.

Mr. Shapiro is currently a Director of Elk Meadows Resources, LLC, a private oil and gas exploration and production company, a position he has held since 2013. Mr. Shapiro also previously served from 2004 to January 2019 as a Director of Barrick Gold Corporation, a gold mining company (Nasdaq: GOLD); from 2010 to 2017 as Chairman of GeoSynFuels, LLC, a private biofuels company; from 2006 to 2012 as a Director of El Paso Corporation, an oil and gas exploration and production company; and from 2010 to 2012 as a Director of Asia Resource Minerals PLC, a coal exploration and mining company. Mr. Shapiro holds an undergraduate degree in Industrial Economics from Union College and a Master of Business Administration from Harvard University.

We believe Mr. Shapiro is qualified to serve on our Board and become the Chairman of the Board on June 1, 2020 due to his extensive industry experience. From his executive experience with Burlington Resources, Mr. Shapiro has significant oil and gas operating experience and knowledge of the complex financial issues that public companies face. Mr. Shapiro has also served on the Board of Directors of other publicly traded companies, and we believe his knowledge and experience in this area will further strengthen our Board.


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Director
 
Age, Principal Occupation, Business Experience, Other Directorships Held and Director Qualifications
Robert M. Tichio
(Class I)

 
Robert M. Tichio, age 42, has served as a director since October 2016. Mr. Tichio is a Partner of Riverstone and joined Riverstone in 2006. Prior to joining Riverstone, Mr. Tichio was in the Principal Investment Area of Goldman Sachs, which manages the firm’s private corporate equity investments. Mr. Tichio began his career at J.P. Morgan in the Mergers & Acquisitions group where he concentrated on assignments that included public company combinations, asset sales, takeover defenses and leveraged buyouts. In addition to serving on the boards of a number of Riverstone portfolio companies and their affiliates, Mr. Tichio has been a director of EP Energy Corporation since September 2013, Talos Energy Inc. (NYSE: TALO) since April 2012 and Pipestone Energy Corp., a Canadian publicly traded company, since January 2019. Mr. Tichio previously served as a member of the board of directors of Gibson Energy (TSE: GEI) from 2008 to 2013; Midstates Petroleum Company, Inc. from 2012 to 2015; and, Northern Blizzard Inc. from 2011 to 2017. He holds a Master of Business Administration and a Bachelor of Arts from Dartmouth College.
We believe Mr. Tichio is qualified to serve on our Board due to his capital markets and mergers and acquisitions experience. Mr. Tichio also serves as a director on the boards of other energy companies, which we believe further enhances his understanding of the industry and perspective on best practices relating to corporate governance, management and capital markets transactions.
Vote Required; Recommendation
The election of each of our Class I director nominees requires the vote of a majority of the votes cast at the Annual Meeting, which means the number of votes cast “FOR” such nominee exceeds the number of votes cast “AGAINST” such nominee. Abstentions and broker non-votes will not be counted as votes cast and, therefore, will not have an effect on the outcome of the election of directors.
The Company has adopted a director resignation policy whereby an incumbent director who fails to receive a majority of the votes cast during an uncontested election may be required by the Board to resign. See “Corporate Governance—Majority Voting in Director Elections” for additional information regarding the majority voting standard for uncontested director elections and our director resignation policy.
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE CLASS I DIRECTOR NOMINEES NAMED ABOVE.
Continuing Directors
The six Class II and Class III directors whose terms will continue after the Annual Meeting and will expire at our 2021 (Class II) or 2022 (Class III) annual meeting of stockholders are listed below.
Director
 
Age, Principal Occupation, Business Experience, Other Directorships Held and Director Qualifications
Karl E. Bandtel
(Class II)
 
Karl E. Bandtel, age 53, has served as a director since October 2016. Mr. Bandtel was a Partner at Wellington Management Company, where he managed energy portfolios, from 1997 until June 30, 2016, when he retired. He holds a Master of Business Administration and a Bachelor of Business Administration from the University of Wisconsin-Madison.

We believe Mr. Bandtel is qualified to serve on our Board due to his extensive experience in evaluating and investing in energy companies, both public and private, and to his executive management skills developed as part of his career with Wellington Management Company.

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Director
 
Age, Principal Occupation, Business Experience, Other Directorships Held and Director Qualifications
Matthew G. Hyde
(Class II)
 
Matthew G. Hyde, age 64, has served as a director since January 2018. Previously, Mr. Hyde was Senior Vice President of Exploration at Concho Resources Inc. (NYSE: CXO) (“Concho”) from 2010 to 2016. After leaving Concho, Mr. Hyde was retired until joining our Board in January 2018. From 2008 to 2010, Mr. Hyde served as Concho’s Vice President of Exploration and Land. From 2001 to 2007, Mr. Hyde was an Asset Manager of Oxy Permian, a business unit of Occidental Petroleum Corporation (NYSE: OXY). Mr. Hyde served as President and General Manager of Occidental Petroleum Corporation’s international business unit in Oman from 1998 to 2001. Prior to that role, Mr. Hyde served in a variety of domestic and international exploration positions for Occidental Petroleum Corporation, including Regional Exploration Manager responsible for Latin American exploration activities. From 2008 to 2012, Mr. Hyde served in various leadership positions, including the Executive Committee and Chairman of the Board, for the New Mexico Oil & Gas Association (NMOGA), which promotes the safe and environmentally responsible development of oil and natural gas resources in New Mexico. Mr. Hyde has also served as a director of privately held Birch Permian Holdings, Inc. since April 2018. He is a graduate of the University of Vermont and the University of Massachusetts where he obtained Bachelor of Arts and Master of Science degrees, respectively, in Geology. Mr. Hyde also holds a Master of Business Administration from the University of California Los Angeles.
We believe Mr. Hyde is qualified to serve on our Board due to his extensive management and operational experience in the upstream oil and gas industry, including in the Permian and Delaware Basins.
Jeffrey H. Tepper
(Class II)
 
Jeffrey H. Tepper, age 54, has served as a director since February 2016. Mr. Tepper is Founder of JHT Advisors LLC, an M&A advisory and investment firm. From 1990 to 2013, Mr. Tepper served in a variety of senior management and operating roles at the investment bank Gleacher & Company, Inc. and its predecessors and affiliates (“Gleacher”). Mr. Tepper was Head of Investment Banking and a member of the Firm’s Management Committee. Mr. Tepper is also Gleacher’s former Chief Operating Officer overseeing operations, compliance, technology and financial reporting. In 2001, Mr. Tepper co-founded Gleacher’s asset management activities and served as President. Gleacher managed over $1 billion of institutional capital in the mezzanine capital and hedge fund areas. Mr. Tepper served on the Investment Committees of Gleacher Mezzanine and Gleacher Fund Advisors. Between 1987 and 1990, Mr. Tepper was employed by Morgan Stanley & Co. as a financial analyst in the mergers & acquisitions and merchant banking departments. Mr. Tepper is currently a director of Alta Mesa Resources, Inc. (NASDAQ: AMR), a position he has held since March 2017 when the company was called Silver Run Acquisition Corporation II. Mr. Tepper received a Master of Business Administration from Columbia Business School and a Bachelor of Science in Economics from The Wharton School of the University of Pennsylvania with concentrations in finance and accounting.
We believe Mr. Tepper is qualified to serve on our Board due to his significant investment and financial experience, particularly as it relates to mergers and acquisitions, corporate finance, leveraged finance and asset management.
Pierre F. Lapeyre, Jr.
(Class III)

 
Pierre F. Lapeyre, Jr., age 57, has served as a director since October 2016. Mr. Lapeyre is a Founder of Riverstone Holdings, LLC, a private equity firm specializing in energy investments (together with its affiliates, “Riverstone”) and has been a Partner/Senior Managing Director since 2000. Prior to founding Riverstone, Mr. Lapeyre was a Managing Director of Goldman Sachs in its Global Energy and Power Group. Mr. Lapeyre joined Goldman Sachs in 1986 and spent his 14-year investment banking career focused on energy and power, particularly the midstream, upstream and energy service sectors. Mr. Lapeyre has served as a non-executive board member of Riverstone Energy Limited (LSE: REL) (“REL”) since May 2013 and serves on the boards of directors or equivalent bodies of a number of public and private Riverstone portfolio companies and their affiliates. Mr. Lapeyre is currently a director of Alta Mesa Resources, Inc. (NASDAQ: AMR), a position he has held since February 2018. He has a Master of Business Administration from the University of North Carolina at Chapel Hill and a Bachelor of Science in Finance and Economics from the University of Kentucky.

We believe Mr. Lapeyre is qualified to serve on our Board due to his extensive financing, mergers and acquisitions and investing experience in the energy and power industries. Mr. Lapeyre has a deep understanding of the energy and power industries arising from his experience as a Founder and Managing Director at Riverstone and prior experience at Goldman Sachs. Furthermore, as a result of Mr. Lapeyre’s service on the boards of various energy and power companies, he is able to share best practices relating to transactions, risk oversight, shareholder engagement, corporate governance, corporate responsibility and management.

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Director
 
Age, Principal Occupation, Business Experience, Other Directorships Held and Director Qualifications
David M. Leuschen
(Class III)

 
David M. Leuschen, age 68, has served as a director since October 2016. Mr. Leuschen is a Founder of Riverstone and has been a Senior Managing Director since 2000. Prior to founding Riverstone, Mr. Leuschen was a Partner and Managing Director at Goldman Sachs and founder and head of the Goldman Sachs Global Energy and Power Group. Mr. Leuschen joined Goldman Sachs in 1977, became head of the Global Energy and Power Group in 1985, became a Partner of that firm in 1986 and remained with Goldman Sachs until leaving to found Riverstone in 2000. Mr. Leuschen also served as Chairman of the Goldman Sachs Energy Investment Committee, where he was responsible for screening potential investments by Goldman Sachs in the energy and power industries. Mr. Leuschen has served as a non-executive board member of REL since May 2013 and serves on the boards of directors or equivalent bodies of a number of private Riverstone portfolio companies and their affiliates. Mr. Leuschen is currently a director of Alta Mesa Resources, Inc. (NASDAQ: AMR), a position he has held since February 2018. Mr. Leuschen received a Master of Business Administration from Dartmouth’s Amos Tuck School of Business and a Bachelor of Arts from Dartmouth College.

As a founder of Riverstone, Mr. Leuschen has overseen investments in, and the operations of, various companies operating in the energy and power industries. In connection with that role and his prior experience at Goldman Sachs, Mr. Leuschen has a deep understanding of the energy and power industries and has extensive experience with capital markets and other financing transactions. Mr. Leuschen also serves as a director on the boards of various other energy and power companies, which we believe further enhances his understanding of the industry and perspective on best practices relating to corporate governance, corporate responsibility, management and capital markets transactions. For these reasons, among others, we believe Mr. Leuschen is qualified to serve as a director.
 
 
 
Mark G. Papa
(Class III)

 
Mark G. Papa, age 73, has served as our Chief Executive Officer and a director since November 2015. Effective May 31, 2020, Mr. Papa will be retiring from his roles as our Chief Executive Officer, Chairman of the Board and a member of the Board. For more information on the previously announced leadership transition, see “Corporate Governance—Leadership Transition” below.

Mr. Papa previously served as an advisor to Riverstone, a position he held from February 2015 through December 2019. Prior to joining Riverstone, Mr. Papa was retired from December 2013 through February 2015. Previously, Mr. Papa was Chairman and Chief Executive Officer of EOG, from August 1999 to December 2013. Mr. Papa served as a member of EOG’s board of directors from August 1999 until December 2014. Mr. Papa worked at EOG for 32 years in various management positions. Prior to joining EOG, Mr. Papa worked at Conoco Inc. for 13 years in various engineering and management positions. Mr. Papa has also served on, and acted as Chairman of, the board of directors of Schlumberger Limited (NYSE: SLB), an international oilfield services company, since October 2018 and August 2019, respectively. Since November 2006, Mr. Papa has served on the board of Casa de Esperanza, a non-profit organization serving children in crisis situations. Mr. Papa previously served on the board of directors of Oil States Industries (NYSE: OIS), an international oilfield services company, from February 2001 to August 2018. In February 2010 and 2013, the Harvard Business Review cited Mr. Papa as one of the 100 Best Performing CEOs in the World; both times Mr. Papa was the highest ranked Global Energy CEO. Additionally, Institutional Investor magazine repeatedly ranked him as the Top Independent E&P CEO. He received a Bachelor of Science in petroleum engineering from the University of Pittsburgh and a Master of Business Administration from the University of Houston.

We believe Mr. Papa’s significant experience in the energy industry and his deep understanding of the Company and its assets make him well qualified to serve as the Chairman of our Board. Through his current role as our Chief Executive Officer and Chairman, and his prior experience with EOG and other exploration and production companies, Mr. Papa has established himself in the industry as a proven leader with a strong understanding of macro conditions in the energy industry, exploration and production techniques, as well as the operational, strategic, financial, risk and compliance issues facing a publicly traded company in the upstream oil and gas industry.



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CORPORATE GOVERNANCE
Governance Highlights
We are committed to corporate governance practices that promote the long-term interests of our stockholders, strengthen our Board, foster management accountability, and help build public trust in our Company. The table below sets forth some of our most important governance highlights, which are described in more detail in this proxy statement
Board Structure and Practices
Size of Board of Directors
 
9
 
Annual Board and Committee Self-Evaluations
 
Yes
Number of Independent Directors
 
5
 
Diverse Board Skills and Experience
 
Yes
 
 
 
 
Lead Independent Director
 
Yes

Board and Committee Governance; Board’s Role in Risk Oversight
Corporate Governance Guidelines
 
Yes
 
Review of Related Person Transactions
 
Yes
Code of Business Conduct and Ethics
 
Yes
 
Compensation Risk Assessment
 
Yes
Board and Audit Committee Risk Oversight
 
Yes
 
Majority Voting in Director Elections
 
Yes

Compensation; Stock Ownership
Annual Equity Grants to Directors
 
Yes
 
Tax Gross-Ups
 
No
Non-Hedging and Non-Pledging Policies
 
Yes
 
Director and Senior Management Stock Ownership Guidelines
 
Yes
Clawback Policy
 
Yes
 
 
 
 
Our website (www.cdevinc.com) includes materials that are helpful in understanding our corporate governance practices, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Policy for Related Person Transactions, Policy for Accounting-Related Complaints and charters for the committees of our Board.
Leadership Transition
On February 24, 2020, we announced that Mark G. Papa, our Chief Executive Officer and the Chairman of the Board, intends to retire, effective May 31, 2020. Mr. Papa has served as our Chief Executive Officer and the Chairman of the Board since October 2016 and has worked in the oil and gas industry for 52 years. The Board, upon the recommendation of the N&CG Committee, approved a succession plan, pursuant to which, as of June 1, 2020:
Sean R. Smith, our Chief Operating Officer, will succeed Mr. Papa as our Chief Executive Officer;
Mr. Smith will be added to our Board as a Class III director;
Steven J. Shapiro, an independent director on the Board, will succeed Mr. Papa as the Chairman of the Board; and
Matthew R. Garrison, our Vice President of Geosciences, will succeed Mr. Smith as our Chief Operating Officer. 
Until June 1, 2020, Messrs. Papa, Smith, Shapiro and Garrison will continue to serve in their current roles.
Board Role in Risk Oversight
As an oil and gas exploration and production company, we encounter a variety of risks, including, among others, commodity price volatility and supply and demand risks, risks associated with rising costs of doing business, availability of capital and financing, risks associated with our development, acquisition and production activities, environmental and other regulatory risks, weather-related risks and political instability. While our senior management is responsible for the day-to-day management of the risks we face, the Board, directly and through its committees, oversees the Company’s management and, with their assistance, is actively involved in the oversight of risks that could affect the Company. Specifically, the Board is responsible for ensuring that the risk management processes designed and implemented by management are adequate to address the risks we face and function as intended. Accordingly, during the course of each year, the Board (i) reviews and approves management’s operating plans and considers any risks that could affect operating results, (ii) reviews the structure and operation of our various departments and functions and (iii) in connection with the review and approval of particular transactions and initiatives, reviews related risk analyses and mitigation plans.

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The Board has delegated certain risk oversight responsibility to committees of the Board as follows: (i) the Audit Committee of the Board (the “Audit Committee”) oversees the Company’s risk assessment and risk management guidelines, policies and processes, as well as risks relating to the financial statements and financial reporting processes of the Company, meeting periodically with management, our independent auditors and our independent petroleum reservoir engineering firm to discuss the Company’s major financial risk exposures and the steps management is taking to monitor and control such exposures, including the Company’s risk assessment and risk management policies; (ii) the Compensation Committee of the Board (the “Compensation Committee”) oversees risks related to compensation arrangements for the Company’s senior management and other employees; and (iii) the N&CG Committee oversees risks related to corporate governance, including succession planning. Our senior management regularly reports to the full Board and, as appropriate, the committees of the Board regarding enterprise risk that the Company must mitigate and/or manage.
Board Independence
NASDAQ listing rules require that a majority of the board of directors of a company listed on NASDAQ be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined that Maire A. Baldwin, Karl E. Bandtel, Matthew G. Hyde, Steven J. Shapiro and Jeffrey H. Tepper are independent within the meaning of the NASDAQ listing rules. Further, our Board has determined that Maire A. Baldwin, Karl E. Bandtel, Steven J. Shapiro and Jeffrey H. Tepper, the current members of the Audit Committee, are independent with the meaning of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Board Leadership Structure
Mark G. Papa currently serves as our Chief Executive Officer and the Chairman of the Board, and we have no policy with respect to the separation of the offices of Chairman and Chief Executive Officer. In connection with the retirement of Mr. Papa, the Board has decided to separate the Chairman and Chief Executive Officer roles. Beginning June 1, 2020, Mr. Smith will become our Chief Executive Officer, and Mr. Shapiro will become the Chairman of the Board. Our Board believes that separating these roles following Mr. Papa’s retirement will be the most effective leadership structure for the foreseeable future. The Board believes this leadership structure will permit the Chief Executive Officer to focus his attention on setting the Company’s strategic direction and managing our business while allowing the Chairman to function as an important liaison between management and the Board, enhancing the ability of the Board to provide oversight of the Company’s management and affairs.
Majority Vote in Director Elections
In early 2019, our Board proposed amendments to our governance documents to implement a majority voting standard in uncontested director elections, which were approved by our shareholders at the 2019 annual meeting of stockholders. As a result, election of the director nominees named in Proposal 1 requires that each director be elected by a majority of the votes cast, meaning that the number of shares voted “FOR” a nominee must exceed the number of shares voted “AGAINST” such nominee. We believe that this majority voting standard in uncontested director elections gives our stockholders a greater voice in determining the composition of our Board than the plurality voting standard used in prior director elections. For any director election where the number of director nominees exceeds the number of directors to be elected, a plurality voting standard continues to apply pursuant to our governance documents.
Our Corporate Governance Guidelines include a director resignation policy to address the issue of any “holdover” director who is not re-elected but remains a director because his or her successor has not been elected or appointed. This policy requires each incumbent director that is nominated by the Board for re-election to tender an irrevocable resignation letter to the Board prior to the mailing of the proxy statement for the meeting at which such nominee is to be re-elected as director. If such incumbent director is not re-elected by a majority vote in an uncontested election, the N&CG Committee will consider the tendered resignation and make a recommendation to the Board as to whether to accept or reject the resignation. The Board would then, after taking into account the recommendation of the N&CG Committee, accept or reject such tendered resignation generally within 90 days following certification of the election results. Thereafter, the Company would publicly disclose the decision of the Board and, if applicable, the Board’s reasons for rejecting a tendered resignation. If a director’s tendered resignation is rejected, such director would continue to serve until a successor is elected, or until such director’s earlier removal or death. If a director’s tendered resignation is accepted, then the Board could fill any resulting vacancy or decrease the number of directors.

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Lead Independent Director
Our Corporate Governance Guidelines provide that, if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a Lead Independent Director. In 2018, the independent directors elected Maire A. Baldwin to serve as the Board’s Lead Independent Director, and Ms. Baldwin was re-elected for that role by the independent directors in 2019. The Lead Independent Director’s responsibilities include, but are not limited to: (i) presiding over all meetings of our Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors; (ii) approving Board meeting schedules and agendas; and (iii) acting as the liaison between the independent directors and the Chief Executive Officer and Chairman of the Board.
In connection with the retirement of Mr. Papa, the Board has decided to separate the Chairman and Chief Executive Officer roles, effective as of June 1, 2020. Thereafter, Mr. Shapiro, an independent member of the Board, will serve as the Chairman of the Board, and a separate Lead Independent Director role will no longer apply.
Board Meetings
Our Board conducts its business through meetings of the Board, actions taken by written consent in lieu of meetings and by the actions of its committees. During the fiscal year ended December 31, 2019, the Board held four meetings. During the fiscal year ended December 31, 2019, no incumbent director attended fewer than 75% of the total number of meetings of the Board (including consents to action in lieu of a meeting) held during the period for which he or she has been a director.
Committees of the Board
The Board currently has three standing committees: the Audit Committee, the Compensation Committee and the N&CG Committee. Each of the committees reports to the Board as it deems appropriate and as the Board may request. The composition, duties and responsibilities of these committees are set forth below.
From time to time and as necessary to address specific issues, our Board may establish other committees.
Audit Committee
The principal functions of our Audit Committee are detailed in the Audit Committee charter, which is posted on the Investor Relations portion of our website at www.cdevinc.com, and include:
the appointment, compensation, retention, replacement and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
setting clear hiring policies for employees or former employees of the independent auditors;
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
meeting annually with our independent petroleum reservoir engineering firm and management to review the process by which our oil and gas reserves are estimated, reported and audited;
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction;
reviewing our annual audited financial statements and quarterly financial statements with management and the Company’s independent auditors prior to their final completion and filing with the SEC;
reviewing the program, policies and systems we have in place to monitor compliance with the Code of Business Conduct and Ethics and any ethics complaints we may receive; and
reviewing with management, the independent auditors and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Our Audit Committee consists of Jeffrey H. Tepper, Karl E. Bandtel, Maire A. Baldwin and Steven J. Shapiro, with Mr. Tepper serving as the Chair. We believe that Messrs. Tepper, Bandtel and Shapiro and Ms. Baldwin qualify as independent

13




directors according to the rules and regulations of the SEC with respect to audit committee membership. We also believe that Mr. Tepper qualifies as our “audit committee financial expert,” as such term is defined in Item 401(h) of Regulation S-K.
During the fiscal year ended December 31, 2019, the Audit Committee held four meetings.
Compensation Committee
The principal functions of our Compensation Committee are detailed in the Compensation Committee charter, which is posted on the Investor Relations portion of our website at www.cdevinc.com, and include:
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
reviewing and approving on an annual basis the compensation of all of our other officers;
reviewing and approving on an annual basis the compensation of all of our non-employee directors;
reviewing on an annual basis our executive compensation policies and plans;
implementing and administering our incentive compensation stock-based remuneration plans;
assisting management in complying with our proxy statement and annual report disclosure requirements;
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers;
producing a report on executive compensation to be included in our annual proxy statement; and
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
Our Compensation Committee consists of Maire A. Baldwin, Matthew G. Hyde, Steven J. Shapiro and Jeffrey H. Tepper, with Ms. Baldwin serving as the Chair. Our Board has affirmatively determined that Ms. Baldwin and Messrs. Hyde, Shapiro and Tepper meet the definition of “independent director” for purposes of serving on a compensation committee under the NASDAQ listing rules.
The Compensation Committee has the authority to retain or obtain the advice of compensation consultants, legal counsel and other advisors (independent or otherwise) to assist in carrying out its responsibilities. For information regarding the role of our Chief Executive Officer, other executive officers and compensation consultants in determining our executive and director compensation, please refer to the section entitled “Compensation Discussion and Analysis—Determination of Compensation.”
During the fiscal year ended December 31, 2019, the Compensation Committee held six meetings.
Nominating and Corporate Governance Committee
The principal functions of our N&CG Committee are detailed in the charter of the N&CG Committee, which is posted on the Investor Relations portion of our website at www.cdevinc.com, and include:
assisting the Board in identifying individuals qualified to become members of the Board, consistent with criteria approved by the Board;
recommending director nominees for election or for appointment to fill vacancies;
monitoring the independence of board of director members;
overseeing and approving plans for CEO succession; and
ensuring the availability of director education programs.
The N&CG Committee also develops and recommends to the Board corporate governance principles and practices and assists in implementing them, including conducting a regular review of our corporate governance principles and practices. The Board finds it appropriate that the N&CG Committee currently does not have a policy regarding consideration of director candidates recommended by stockholders. The N&CG Committee oversees the annual performance evaluation of the Board and the committees of the Board and makes a report to the Board on succession planning.
Our N&CG Committee consists of Karl E. Bandtel, Maire A. Baldwin and Matthew G. Hyde, with Mr. Bandtel serving as the Chair. Our Board has affirmatively determined that Messrs. Bandtel and Hyde and Ms. Baldwin meet the definition of “independent director” for purposes of serving on a nominations committee under the NASDAQ listing rules.
The N&CG Committee held seven meetings during the fiscal year ended December 31, 2019.

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Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2019, no officer or employee of the Company served as a member of our Compensation Committee. None of our executive officers serve, or have served during the fiscal year ended December 31, 2019, as a member of the board of directors or compensation committee of any entity that has or had one or more executive officers serving on our Board or Compensation Committee.
Code of Business Conduct and Ethics
We have adopted a written code of ethics (the “Code of Business Conduct and Ethics”) that applies to our directors, officers and employees and that, among other purposes, is intended to assist directors, officers and employees in recognizing, avoiding and resolving ethical issues. The Code of Business Conduct and Ethics covers various topics, including the standards of honest, ethical and fair conduct, conflicts of interest, gifts and entertainment, use of company assets, disclosure requirements, compliance, reporting and accountability, insider information and trading, issues relating to health, safety and the environment, confidentiality, anti-corruption laws and others. The Code of Business Conduct and Ethics is designed to comply with SEC regulations and NASDAQ listing standards related to codes of conduct and ethics and is posted on the Investor Relations portion of our website at www.cdevinc.com. A copy of our Code of Business Conduct and Ethics is also available free of charge, upon request directed to Centennial Resource Development, Inc., 1001 17th Street, Suite 1800, Denver, Colorado, 80202, Attention: General Counsel. We intend to satisfy the disclosure requirements regarding any amendment to, or any waiver of, a provision of the Code of Business Conduct and Ethics by posting such information on our website within four business days following the date of any such amendment or waiver.
Annual Board and Committee Evaluation Process
 The Board and each of our committees conducted self-evaluations related to their performance in 2019, including an evaluation of each director. The N&CG Committee supervises the performance evaluations and uses various processes from year to year in order to solicit feedback, including Board and committee-level questionnaires prepared by each of the Board and committee members, the responses to which are used to evaluate the effectiveness of Board and committee performance and to identify areas for improvement and issues for further discussion. Following a discussion of the results of the evaluations, the Board and each committee review and discuss the evaluation results and take this information into account when assessing the qualifications of the Board and its directors, further enhancing the effectiveness of the Board and its committees over time.
Policies Relating to our Board
Stockholder Communications with the Board
All stockholders who wish to contact the Board may send written correspondence to Centennial Resource Development, Inc., 1001 17th Street, Suite 1800, Denver, Colorado, 80202, Attention: General Counsel. Communications may be addressed to an individual director, to the non-management or independent directors as a group or to the Board as a whole, marked as confidential or otherwise. Communications not submitted confidentially, which are addressed to directors that discuss business or other matters relevant to the activities of our Board, will be preliminarily reviewed by the office of the General Counsel and then distributed either in summary form or by delivering a copy of the communication. Communications marked as confidential will be distributed, without review by the office of the General Counsel, to the director or group of directors to whom they are addressed, unless there are safety or security concerns that mitigate against further transmission.
Separate Sessions of Independent Directors
Our Corporate Governance Guidelines require the Board to hold executive sessions for the independent directors, without any non-independent directors or management present, on a regularly scheduled basis but not less than twice per year. Our independent directors met in executive session on four occasions in 2019. Each of our independent directors attended each of the executive sessions.
Director Attendance at Annual Meeting of Stockholders
Although we do not have a formal policy regarding director attendance at our annual meeting of stockholders, we encourage directors to attend. Nine board members attended the 2019 annual meeting of stockholders.
Stockholder Engagement 
Stockholder engagement is a very important part of our business practices. We value our stockholders’ views on a variety of important topics, including their perspective on our operations and performance, executive compensation and environmental, social and governance initiatives, among others. In 2019, members of our Board and senior management met with stockholders owning approximately 70% of the outstanding shares of our Class A Common Stock. Listed below are highlights of actions we

15




have taken in 2019 and early 2020 as a result of stockholder engagement and in an effort to better align our environmental, social and corporate governance practices with best practices for public companies in our industry:
We approved majority voting for uncontested director elections in early 2019, which was approved by our stockholders at the 2019 annual meeting of stockholders.
We added Steven J. Shapiro, an independent director, to our Board in 2019 following a thorough director search by the N&CG Committee.
We acted to separate the roles of Chairman and Chief Executive Officer following Mr. Papa’s retirement.
We enhanced our website disclosure in 2019 and early 2020 to better describe our environmental, social and corporate governance commitments and practices.
We implemented a water recycling program in 2019, which allowed for the recycling and reuse of over three million barrels of water.
We updated our Audit Committee Charter in 2019 to more clearly delegate authority to the Audit Committee to oversee risk exposures, risk management policies we implement and the steps taken by our management team relating to significant risk exposures.


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AUDIT COMMITTEE REPORT

The Audit Committee has reviewed and discussed with management of the Company and KPMG LLP, the Company’s independent registered public accounting firm, the audited financial statements of the Company for the fiscal year ended December 31, 2019 (the “Audited Financial Statements”).
The Audit Committee has discussed with KPMG LLP the matters required to be discussed by the Public Company Accounting Oversight Board (the “PCAOB”) Auditing Standard No. 61, as in effect on the date of this proxy statement.
The Audit Committee has: (i) considered whether non-audit services provided by KPMG LLP are compatible with its independence; (ii) received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence; and (iii) discussed with KPMG LLP its independence.
Based on the reviews and discussions described above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in the annual report on Form 10-K for the fiscal year ended December 31, 2019 for filing with the SEC.

Respectfully submitted,

The Audit Committee

Jeffrey H. Tepper (Chair)
Maire A. Baldwin
Karl E. Bandtel
Steven J. Shapiro


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COMPENSATION DISCUSSION AND ANALYSIS
In this Compensation Discussion and Analysis, we address our philosophy, programs and processes related to the compensation paid or awarded to our “named executive officers,” or “NEOs,” for 2019, including the elements of our compensation program for named executive officers, material compensation decisions made under that program during 2019 and the material factors considered in making those decisions. Our named executive officers include our principal executive officer, principal financial officer and our three other most highly compensated executive officers. Our named executive officers for 2019 are:
Mark G. Papa, Chief Executive Officer and Chairman of the Board;
George S. Glyphis, Vice President and Chief Financial Officer;
Sean R. Smith, Vice President and Chief Operating Officer;
Davis O. O’Connor, Vice President and General Counsel; and
Brent P. Jensen, Vice President and Chief Accounting Officer.
Executive Summary
Compensation Philosophy, Objectives and Rewards
Our executive compensation program has been designed to attract, motivate, reward and retain high caliber management with the skills and competencies that we believe are essential to our success and to align executive compensation with our short-term and long-term business objectives, business strategy and financial performance. To achieve our compensation objectives, we generally provide executives with a compensation package consisting primarily of the following fixed and variable elements:
Compensation Element
 
Compensation Objective
Annual Base Salary
 
Provide competitive fixed compensation based on the NEO’s title, role, experience and performance in order to attract and retain individuals with superior talent
Annual Incentive Compensation
 
Provide incentives to attain the Company’s and NEO’s short-term strategic, financial and operational goals
Long-Term Incentive Awards
 
Promote the maximization of stockholder value by aligning the interests of NEOs and stockholders for long-term value creation

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Mix of Compensation Elements for our Named Executive Officers
Our executive compensation program directly links a substantial portion of the executive compensation to the Company’s performance through annual and long-term incentives. The pie charts below show the mix of compensation elements for our Chief Executive Officer and the average mix of compensation elements for our other named executive officers for 2019 based on the information included in the 2019 Summary Compensation Table. As discussed below, consistent with the approach taken in 2018 and at our Chief Executive Officer’s request, the Compensation Committee did not provide additional long-term equity grants to Mr. Papa for 2019; therefore, the “at risk” portion of his compensation was in line with 2018 levels but lower than 2017 levels. These charts highlight the substantial portion of named executive officer compensation that is “at risk” because its value is tied to the Company’s performance.
Chief Executive Officer 2019 Total Compensation Pay Mix
    
https://cdn.kscope.io/e1cb3cfff8fd23af8a8666cec1114ebb-ceocomppaymixa02.jpg


Other NEOs’ 2019 Total Compensation Pay Mix

https://cdn.kscope.io/e1cb3cfff8fd23af8a8666cec1114ebb-neocomppaymixa03.jpg

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Executive Compensation Highlights
We believe our executive compensation program is competitive with our compensation peer group and aligned with current compensation trends and best practices and contains features that are intended to optimize returns to our stockholders. The following table highlights several features of our compensation practices.
 
What We Do
 
 
What We Don’t Do
ü
Pay for performance - each of our NEO’s total compensation is substantially weighted toward compensation that is “at risk” and tied to the performance of the Company and the NEO.
 
û
Allow hedging or pledging of any Company securities by any director, officer or employee.
ü
Maintain equity ownership guidelines for our officers and directors requiring substantial Company stock ownership.
 
û
Provide tax gross-ups for severance or change in control payments to our NEOs or other officers or employees.
ü
Review comparative compensation data and generally target total NEO compensation between the 50th and 75th percentile of our compensation peer group.
 
û
Maintain defined benefit or supplemental executive retirement plans.
ü
Have an independent compensation consultant retained by our Compensation Committee.
 
û
Utilize performance measures that we believe would encourage excessive risk taking.
ü
Have a clawback policy that is applicable to our NEOs.
 
û
Provide significant perquisites to any of our NEOs or other officers.
ü
Have double-trigger change in control severance for both cash severance payments and equity vesting under our Severance Plan.
 
û
Have employment agreements with our NEOs or other officers.
ü
Conduct an annual risk assessment of compensation practices to ensure avoidance of excessive risk taking.
 
û
Guarantee bonuses for any of our NEOs or other officers.
ü
Have performance-based restricted stock units that are capped at target if our total stockholder return is less than or equal to zero for the applicable performance period.
 
û
Permit repricing of underwater stock options without stockholder approval.
ü
Provide stockholders with annual “say-on-pay” votes
 
 
 
2019 Company Performance Highlights
During 2019, we achieved the following operational and financial performance highlights, among others:
Drove capital efficiency and cost discipline, which resulted in a substantial reduction in total capital expenditures for 2019 compared to 2018 levels;
Achieved the midpoint of 2019 drilling and completions capital expenditures guidance while completing 20% more wells than forecasted at the midpoint of our fiscal year 2019 guidance;
Achieved a 15% unlevered before-tax rate of return on our 2019 capital investment program, which was slightly below our target for 2019, and reflects an outsized decline in anticipated future commodity prices relative to our initial expectations, which was partially offset by significant improvements in capital efficiency realized during 2019;
Substantially outperformed production costs per barrel of oil equivalent targets for cash general and administrative expense, gathering, processing and transportation expense, cash interest expense and depreciation, depletion and amortization;
Increased daily oil and oil equivalent production volumes 23% and 25% from 2018 levels, respectively; significantly exceeding the midpoint of our initial fiscal year 2019 production guidance;
Increased total proved reserves by 15% with organic reserve replacement ratio of 243%;
Improved our liquidity profile by issuing $500 million in 8-year senior unsecured notes to repay credit facility borrowings; and
Maintained a safety and environmental track record that significantly outperformed industry average.




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Compensation for our Chief Executive Officer
Since 2016, when we first became a public company, a substantial majority of total compensation awarded to Mr. Papa, our Chief Executive Officer, was in the form of stock options and restricted stock, which vest in three substantially equal annual installments following the date of grant. At Mr. Papa’s request, his base salary was not increased in 2019 and has remained unchanged since it was initially set by the Compensation Committee in 2016. Furthermore, at his request and consistent with the approach taken in 2018, the Compensation Committee did not provide any long-term incentive compensation to Mr. Papa for 2019. As a result, Mr. Papa’s total compensation for 2019 was generally in line with 2018 but substantially lower than his total compensation for 2017, as illustrated in the diagram below.
Our Chief Executive Officer’s Total Compensation (2017 - 2019)*
https://cdn.kscope.io/e1cb3cfff8fd23af8a8666cec1114ebb-ceocompchanges.jpg
Consideration of 2019 “Say-on-Pay” Advisory Votes
At the 2019 Annual Meeting of Stockholders, approximately 99.7% of the votes cast were in favor of the non-binding advisory vote to approve compensation for our named executive officers (commonly referred to as a “say-on-pay” vote). The Board and the Compensation Committee took the results of the “say-on-pay” vote into account when evaluating the compensation program for our named executive officers for 2019. Based in part on the level of support from our stockholders, the Compensation Committee elected not to make significant changes to the compensation programs for our named executive officers during 2019. We appreciate our stockholders’ continuing annual feedback regarding our executive pay practices, as we value our stockholders’ evaluation of our executive compensation program and policies. As discussed in more detail in Proposal 2 below, the Board has recommended that stockholders vote, on a non-binding, advisory basis, to approve the compensation of the named executive officers as described in this proxy statement. The Compensation Committee will continue to review stockholder votes on our executive compensation and determine whether to make changes to the program accordingly.

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Determination of Compensation
Our executive compensation program has been designed to attract, motivate, reward and retain high caliber management with the skills and competencies we believe are essential to our success and to align executive compensation with our short-term and long-term business objectives, business strategy and financial performance. We link pay and performance to foster a culture of individual accountability and, in evaluating executive officer performance, place particular emphasis on the unlevered before-tax rate of return on our capital investment program, which is described in greater detail below in the section entitled “Annual Incentive Compensation.”
Role of the Compensation Committee
The Compensation Committee administers and determines the parameters of our executive officer compensation program, including appropriate target levels and performance measures and the allocation between short-term and long-term compensation and between cash and equity-based awards, in order to establish an overall compensation program it believes is appropriate for each named executive officer. The Compensation Committee has principal authority for determining and approving the compensation awards for our executive officers and is charged with reviewing our executive compensation policies and practices to ensure adherence to our compensation philosophies and objectives. In making decisions, the Compensation Committee takes into account, among other factors:
achievement of individual and Company performance goals and expectations relating to the named executive officer’s position at the Company;
alignment of named executive officer compensation with short-term and long-term Company performance;
competitiveness of compensation with compensation peer group companies, internal pay equity among individuals with similar expertise levels and experience and the unique skill sets of the individual;
market demand for individuals with the named executive officer’s specific expertise and experience;
advice, data and analysis provided by the Compensation Committee’s independent compensation consultant;
general industry compensation data;
the named executive officer’s background, experience and circumstances, including prior related work experience and training; and
the recommendations of the Company’s Chief Executive Officer.
The Compensation Committee generally targets total compensation opportunities for our executive officers between the 50th and 75th percentile of our compensation peer group on an aggregate basis. However, the Compensation Committee retains discretion to allow for individual adjustments based on factors and considerations specific to the individual.
Role of Compensation Consultant in Determining Executive Compensation
In determining 2019 executive compensation, the Compensation Committee received information and reports from Longnecker & Associates (“Longnecker”), an independent compensation consultant retained by the Compensation Committee. Longnecker provided data, analysis and advice to the Compensation Committee, including market information that the Compensation Committee used when determining whether our executive compensation is competitive, commensurate with the executive officers’ responsibilities and consistent with market trends in executive compensation practices for companies in our industry. Longnecker does not provide services to us other than consulting services related to the compensation and benefits of our directors, officers and employees. The Compensation Committee has considered the adviser independence factors required under SEC rules as they relate to Longnecker and does not believe Longnecker’s work in 2019 raised a conflict of interest.

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Use of Competitive Market Data
A key objective of our executive compensation program is to ensure that the total compensation opportunities available to our executive officers are competitive with those of oil and gas exploration and production companies with whom we compete for executive talent, investment dollars and business opportunities. We maintain a peer group for executive compensation and performance reference purposes to, among other things, assist in evaluating our executive compensation program against this key objective. Our criteria for the selection of peer companies within our General Industry Classification Standard Industry Code (i.e., oil and gas exploration and production companies) include revenue, assets, market capitalization, enterprise value, location (footprint in the Permian Basin) and complexity of operations. The Compensation Committee, with input and advice from Longnecker and Company management, typically reviews the peer group on an annual basis.
In January 2019, with input and advice from Longnecker and Company management, the Compensation Committee updated the peer group used for 2019 compensation purposes. Energen Corporation, which had been a member of the 2018 peer group, ceased to be a publicly traded corporation after it was acquired by Diamondback Energy, Inc. on November 29, 2018, and was therefore removed from the 2019 peer group. As a result of the acquisition, Diamondback Energy, Inc. became a significantly larger company with a market capitalization and other financial metrics that deviated substantially from our company and the remainder of the peer group; therefore, the Compensation Committee also removed Diamondback Energy, Inc. from the 2019 peer group. In addition, in early 2019, QEP Resources Inc., which had been a member of the 2018 peer group, announced it was exploring a sales process following receipt of an acquisition offer from Elliott Management Corp., and the Compensation Committee determined to remove QEP Resources Inc. from the 2019 peer group given the perceived likelihood it would be acquired during 2019. After taking into account the removal of these companies from the peer group, Longnecker recommended adding two new companies, Jagged Peak Energy Inc. and Oasis Petroleum Inc., which each have operations in the Permian Basin and financial metrics that are aligned with those of the Company. The Compensation Committee approved these recommendations, resulting in the inclusion of the following companies in the 2019 peer group:
Callon Petroleum Company
Oasis Petroleum Inc.
Cimarex Energy Co.
Parsley Energy, Inc.
Jagged Peak Energy Inc.(1)
PDC Energy, Inc.
Laredo Petroleum, Inc.
SM Energy Company
Matador Resources Company
WPX Energy, Inc.
 
 
(1) On January 10, 2020, Jagged Peak Energy Inc. was acquired by Parsley Energy, Inc. and ceased to be a publicly traded company, and therefore ceased to be a member of our peer group on such date.
Role of Executive Officers in Determining Executive Compensation
Our Chief Executive Officer provides the Compensation Committee with a review of the performance of our executive officers, other than himself, and makes recommendations to the Compensation Committee to assist it in determining executive compensation levels, other than his own. During 2019, our Chief Executive Officer reviewed compensation assessments and data provided by Longnecker prior to and in connection with the recommendations he made to the Compensation Committee. While the Compensation Committee utilized this information and valued management’s observations with regard to compensation, the ultimate decisions regarding 2019 executive compensation were made by the Compensation Committee.
Elements of Our Executive Compensation Program
For 2019, the primary elements of our named executive officers’ compensation were base salaries, annual incentive compensation and long-term equity-based compensation.
Base Salaries
The base salaries of our named executive officers are an important part of their total compensation package, and are intended to reflect their respective positions, duties and responsibilities and to provide a fixed base of cash compensation. Base salary is a visible and stable fixed component of our compensation program. The Compensation Committee may adjust base salaries based on a number of factors, including experience, responsibilities, individual contributions, number of years in the position and competitive data. In addition, the Compensation Committee may evaluate our named executive officers’ base salaries, together with other components of their compensation, to ensure that the executive’s total compensation is consistent with our overall compensation philosophy and market practices of our compensation peer group.
With the exception of base salary increases in connection with promotions, the Compensation Committee generally evaluates whether to increase the base salaries of our named executive officers in August of each year. In determining whether to adjust base salaries in 2019, the Compensation Committee considered, among other things, the Company’s goals for 2018

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and its performance as measured against those goals, compensation alignment with performance, the performance and individual contributions of each executive, the recommendations of our Chief Executive Officer, competitive market data provided by Longnecker and the level of fixed cash compensation that the Compensation Committee believed to be necessary to retain the services of our named executive officers in a competitive talent market. Based upon these considerations, the Compensation Committee increased base salaries, effective August 25, 2019, for all of our named executive officers except for Mr. Papa. At Mr. Papa’s request, his base salary was not increased and has remained unchanged since it was initially set by the Company in 2016.
The table below sets forth the annual base salaries of our named executive officers for 2019 and 2018.
Named Executive Officer
 
2018 Base Salary
(Effective 8/25/2018)
 
2019 Base Salary
(Effective 8/25/2019)
Mark G. Papa
 
$800,000
 
$800,000
George S. Glyphis
 
$428,480
 
$443,477
Sean R. Smith
 
$475,000
 
$491,625
Davis O. O’Connor
 
$385,632
 
$399,129
Brent P. Jensen
 
$338,000
 
$349,830
Annual Incentive Compensation
The Compensation Committee believes that the payment of annual incentive compensation provides motivation necessary to retain the named executive officers and reward them for short-term company performance. The Company’s annual incentive compensation program is designed to encourage named executive officers to contribute to the profitability, growth and increased value of the Company. Each named executive officer has a target incentive compensation amount, expressed as a percentage of the named executive officer’s base salary. After the year is completed, the Compensation Committee reviews Company and individual performance and determines what it believes to be the appropriate level of annual incentive compensation, if any, for the named executive officers. The Company’s annual incentive compensation program does not provide for minimum (guaranteed) awards to any of the named executive officers, and the maximum award that any named executive officer can receive is 300% of the named executive officer’s base salary. Furthermore, the Company’s annual incentive compensation program provides the Compensation Committee with discretion to adjust payouts to the named executive officers and other officers and employees of the Company based on individual performance and relevant market adjustments. The table below sets forth the target annual incentive compensation percentage (expressed as a percentage of base salary) of our named executive officers for 2019.
Named Executive Officer
 
2019 Target Percentage
Mark G. Papa
 
170%
George S. Glyphis
 
100%
Sean R. Smith
 
100%
Davis O. O’Connor
 
85%
Brent P. Jensen
 
70%
In evaluating 2019 performance, the Compensation Committee focused on the Company’s performance goals for 2019 and the individual contributions of each named executive officer. As in prior years, the Compensation Committee considered our unlevered before-tax rate of return on our 2019 capital investment program (the “Rate of Return Metric”) as the most significant performance goal. The calculation of the Rate of Return Metric is based on the estimated recoverable reserves (“net” to our interest) for all operated wells turned on production in 2019, the estimated net present value of the future net cash flows from such reserves (for which we utilize certain assumptions regarding future commodity prices and operating costs) and our direct net costs incurred in the drilling and completion of such wells (inclusive of well-level facilities expenditures). This calculation also includes certain indirect capital expenditures, such as infrastructure-related expenditures, capital expenditures related to the acquisition of undeveloped leasehold through organic oil and gas leasing and other related land expenditures, and expenditures for seismic, geological and geophysical services and data. The calculation also includes the impact of financial commodity derivative contracts, general and administrative expenses and other similar expenses. Such calculation excludes interest and income tax expenses. The Rate of Return Metric cannot be calculated from our consolidated audited financial statements.

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In determining annual incentive compensation for 2019, the Compensation Committee assigned a weighting of 65% to the Rate of Return Metric and a 15% weighting to our production and unit cost targets, considered together. The table below sets forth the specific Rate of Return Metric and production and unit cost goals for 2019.
Performance Category
 
Performance Goal
 
Assessment
Rate of Return Metric
 
Achieve at least 17% unlevered before-tax rate of return on 2019 capital investment program
 
Achieved a 15% unlevered before-tax rate of return on 2019 capital investment program
Production and Unit Cost
 
Net average daily production (Bo/d): 39,000
 
Achieved 42,692 Bo/d
Production and Unit Cost
 
Lease operating expense ($/Boe): $4.65
 
Achieved $5.26/Boe
Production and Unit Cost
 
Cash general and administrative expense ($/Boe): $2.50
 
Achieved $1.90/Boe
Production and Unit Cost

 
Gathering, processing and transportation expense ($/Boe): $3.00
 
Achieved $2.62/Boe
Production and Unit Cost
 
Cash interest expense ($/Boe): $2.30
 
Achieved $2.06/Boe
Production and Unit Cost

 
Depreciation, depletion and amortization ($/Boe): $16.50
 
Achieved $16.00/Boe

The Compensation Committee also considered our other 2019 performance goals, including our 2019 goals to: drive capital efficiency and cost discipline; delineate and develop certain zones in Texas; improve liquidity profile by accessing the bond market; identify lease exploration opportunities; develop a power plan to handle anticipated load over the next several years; increase overall inventory of drilling locations; and maintain our top-tier environmental, health and safety culture, among others. The Compensation Committee weighted these additional performance goals as the remaining 20% factor in determining the annual incentive compensation for the named executive officers for 2019.
In February 2020, the Compensation Committee met and evaluated the named executive officers’ performance individually and against the 2019 performance goals described above and determined that, overall, the management team was in line with expectations for the year. Therefore, the Compensation Committee determined to award annual incentive compensation equal to 100% of each named executive officer’s target amount. As in prior years, the Compensation Committee elected to pay 75% of the annual incentive compensation amount in cash. In lieu of paying cash with respect to the remaining 25%, and to encourage retention and further align the interests of the named executive officers with those of our stockholders, for every $1 of the annual incentive compensation amount not paid in cash, the Compensation Committee awarded $2 in value in restricted shares of our Class A Common Stock vesting in three annual installments, subject to continued service with us. The table below summarizes the annual incentive compensation paid to each named executive officer for 2019.
 
 
 
 
Cash Component
 
Equity Component
 
Total Annual Incentive Compensation
Named Executive Officer
 
Current Salary
 
Amount
 
% of Salary
 
# of Shares
 
Amount
 
% of Salary
 
Amount
 
% of Salary
Mark G. Papa
 
$800,000
 
$1,020,000
 
128%
 
226,666
 
$680,000
 
85%
 
$1,700,000
 
213%
George S. Glyphis
 
$443,477
 
$332,608
 
75%
 
73,913
 
$221,739
 
50%
 
$554,347
 
125%
Sean R. Smith
 
$491,625
 
$368,719
 
75%
 
81,937
 
$245,813
 
50%
 
$614,532
 
125%
Davis O. O’Connor
 
$399,129
 
$254,445
 
64%
 
56,543
 
$169,630
 
43%
 
$424,075
 
106%
Brent P. Jensen
 
$349,830
 
$183,661
 
53%
 
40,813
 
$122,441
 
35%
 
$306,102
 
88%
Long-Term Incentive Compensation
The Compensation Committee believes that employees who are in a position to make a substantial contribution to our long-term success should have a significant and ongoing stake in our success. Long-term incentive compensation, generally granted through stock-based awards, creates an ownership culture among our employees that provides an incentive to contribute to the continued growth and development of our business and aligns interest of executives with those of our stockholders.
During 2019, the Compensation Committee evaluated various factors in determining the number and type of long-term incentive awards to grant to named executive officers. These included the base salary and target annual cash incentive compensation of the named executive officers, the value of total compensation package deemed appropriate to attract and retain highly qualified named executive officers in light of the competitive environment, a named executive officer’s ability to influence and create long-term stockholder value and the stock-based holdings of the named executive officer, the individual’s personal experience and performance in recent periods and competitive market data provided by Longnecker. The Compensation Committee also included its overall evaluation of each individual and company performance based on the performance goals described above in determining the number and type of long-term incentive awards.

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Based upon the Compensation Committee’s review of competitive market data, and taking into account the advice and information received from Longnecker, the Compensation Committee determined that 66.7% of the 2019 total long-term incentive compensation awarded to Messrs. Glyphis, Smith, O’Connor and Jensen should be in the form of restricted stock awards that vest based on continuous employment and the passage of time, with the remaining 33.3% in the form of a target number of performance restricted stock units that vest based on performance measures tied to the absolute and relative total stockholder return (“TSR”) of our company as compared to our 2019 compensation peer group over a three year performance period. The Compensation Committee believes the time-based restricted stock serves to promote the retention of executives, while the performance restricted share units promote the long-term interests of our stockholders and align our executives’ interests with those of our stockholders by tying the ultimate payout of those units to the absolute and relative TSR of our company as compared to our 2019 compensation peer group.
At Mr. Papa’s request, the Compensation Committee did not provide any long-term incentive awards to him for 2019. The Compensation Committee also did not award any stock options to any of the named executive officers in 2019.
In February 2019, the Compensation Committee elected to pay a portion of 2018 annual incentive bonuses for all named executive officers, other officers and certain employees in restricted shares of our Class A Common Stock that vest in three annual installments subject to continued service with us (collectively, the “2018 annual equity incentive awards”). The 2018 annual equity incentive awards were issued in February 2019 and consisted of 59,554 shares for Mr. Papa, 18,763 shares for Mr. Glyphis, 20,800 shares for Mr. Smith, 14,353 shares for Mr. O’Connor and 10,360 shares for Mr. Jensen, valued at $747,998, $235,663, $261,248, $180,274 and $130,122, respectively, based on a five-day trailing average closing price of our Class A Common Stock ending on and including February 11, 2019 of $12.56 per share. The grant date fair value of these shares was $756,931 for Mr. Papa, $238,478 for Mr. Glyphis, $264,368 for Mr. Smith, $182,427 for Mr. O’Connor and $131,676 for Mr. Jensen, based on the $12.71 per share closing price of our Class A Common Stock on the grant date.
The following table sets forth the restricted shares of Class A Common Stock and target number of performance restricted stock units granted to our named executive officers in 2019 but excludes the 2018 annual equity incentive awards referenced in the prior paragraph. Refer to the 2019 Grants of Plan-Based Awards table below for additional information regarding the equity awards issued to our named executive officers in 2019.
Named Executive Officer
 
Shares of Restricted Stock Granted (#)
 
Target Performance Restricted Stock Units Granted (#)
Mark G. Papa
 
 
George S. Glyphis
 
283,106
 
141,341
Sean R. Smith
 
351,052
 
175,263
Davis O. O’Connor
 
192,512
 
96,112
Brent P. Jensen
 
147,215
 
73,497
The performance restricted stock units are performance-vested and provide a target number of shares of Class A Common Stock that will be earned at the end of the three-year performance period if our TSR for the period equals the 50th percentile of our compensation peer group. The number of performance restricted stock units actually earned for the performance period will range from 0% of the target number of shares to 200% of the target number of shares depending on the Company’s relative TSR percentile ranking. However, if the Company experiences a negative TSR over the performance period, measured on an absolute basis, the number of shares that may be earned is capped at 100% of the target number of shares, regardless of the Company’s relative TSR performance.
In the event that our Compensation Committee determines that, due to a reduction in the size of the peer group or other unusual, extraordinary or nonrecurring transactions or events materially affecting the award of performance restricted stock units, an adjustment in the peer group is necessary or appropriate to avoid the dilution or enlargement of benefits or potential benefits intended to be made available under such award, the Compensation Committee may adjust the peer group (including by removing, substituting or selecting new constituent companies).

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The following table illustrates the shares that would be earned at various relative TSR percentiles, which reflects 11 performance ranks based on 10 companies in our 2019 compensation peer group when we issued the performance restricted stock units, under both a positive and negative absolute TSR scenarios.
Performance Rank
 
TSR Percentile Ranking
 
Payout as % of Target (Positive TSR)
 
Payout as % of Target (Negative TSR)
1
 
100.0%
 
200%
 
100%
2
 
90.0%
 
180%
 
100%
3
 
80.0%
 
160%
 
100%
4
 
70.0%
 
140%
 
100%
5
 
60.0%
 
120%
 
100%
6
 
50.0%
 
100%
 
100%
7
 
40.0%
 
75%
 
75%
8
 
30.0%
 
50%
 
50%
9
 
20.0%
 
—%
 
—%
10
 
10.0%
 
—%
 
—%
11
 
—%
 
—%
 
—%
As is described above, the Compensation Committee elected to pay a portion of 2019 annual incentive bonuses for all named executive officers, other officers and certain employees in restricted shares of our Class A Common Stock that vest in three annual installments subject to continued service with us. These awards were issued in February 2020 and consisted of 226,666 shares for Mr. Papa, 73,913 shares for Mr. Glyphis, 81,937 shares for Mr. Smith, 56,543 shares for Mr. O’Connor and 40,813 shares for Mr. Jensen. The grant date fair value of these shares was $605,198 for Mr. Papa, $197,348 for Mr. Glyphis, $218,772 for Mr. Smith, $150,970 for Mr. O’Connor and $108,971 for Mr. Jensen, based on the $2.67 closing price per share of our Class A Common Stock on the grant date.
Retirement Plans and Other Employee Benefits
Our named executive officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits and life insurance, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans. Our named executive officers may participate in a 401(k) defined contribution plan (the “401(k) Plan”), subject to limits imposed by the Internal Revenue Code of 1986, as amended (the “Code”), to the same extent as our other full-time employees. In 2019, the 401(k) Plan provided for matching contributions equal to 100% of the first 8% of each employee’s eligible compensation contributed to the 401(k) Plan. Employees are immediately 100% vested in the matching contributions. We do not typically provide any perquisites or special personal benefits to our named executive officers.
Compensation of our Chief Executive Officer
Mr. Papa served as an advisor to Riverstone from February 2015 through December 2019. Mr. Papa spent approximately 90% of his working time during 2019 providing services to us as our Chief Executive Officer and approximately 10% of his working time providing services to Riverstone on matters unrelated to the Company. The Compensation Committee was aware of Mr. Papa’s service to Riverstone and considered it when determining an appropriate level of compensation for services as our Chief Executive Officer.
Employment, Severance or Change in Control Agreements
We have not entered into any employment agreements with our named executive officers. However, we consider a strong workforce to be essential to our success. To that end, we recognize that the uncertainty which may exist among employees with respect to their “at-will” employment with us could result in the departure or distraction of personnel to our detriment. Accordingly, to encourage the continued attention and dedication of our employees, and to allow our management team to focus on the value to stockholders of strategic alternatives without concern for the impact on their continued employment, on May 2, 2018, our Board adopted the Centennial Resource Development, Inc. Severance Plan (the “Severance Plan”) under which all of our regular, full-time U.S. employees are eligible to receive certain “double trigger” severance payments and benefits upon a qualifying termination of employment within a specified period following a change in control. In October 2019, we amended and restated the Severance Plan to raise the multiplier used to calculate the cash severance payable to employees that experience a qualifying termination following a change of control, among other changes. For a more detailed description of the Severance Plan, see “Potential Payments Upon Termination or a Change of Control.”

27




Company Guidelines Regarding Stock Ownership
Effective November 2, 2017, our Board adopted stock ownership guidelines, to be administered by the Compensation Committee, for our named executive officers and certain other officers (collectively, “Covered Executives”) as well as for non-employee directors of the Company, which are intended to demonstrate to our stockholders, the investing public and other employees that such Covered Executives and non-employee directors are invested in and committed to the Company, and to further align their interests with the interests of our stockholders. Under the guidelines, each Covered Executive must own stock in the Company equal to a multiple of his or her base salary. The Chief Executive Officer must own an amount equal to six times his annual base salary, the Chief Operating Officer and Chief Financial Officer each must own an amount equal to three times his annual base salary, and the General Counsel and Chief Accounting Officer each must own an amount equal to two times his annual base salary. Other Covered Executives must own an amount equal to two times his or her annual base salary, and non-employee directors must each own an amount equal to five times his or her annual cash retainer.
Stock ownership for the purpose of these guidelines, whether (i) owned individually by the named executive officer, or jointly with, or separately by, a spouse, domestic partner and/or minor children, either directly or indirectly, or (ii) held in trust for the benefit of the named executive officer or a spouse, domestic partner and/or minor children, includes the following:
Shares of the Company’s Class A Common Stock, whether purchased on the open market or obtained through the exercise of stock options or vesting of stock-based compensation;
Unvested stock-based awards subject to time-based vesting conditions;
Vested deferred stock units; and
Shares of the Company’s Class A Common Stock held in the Covered Executive’s Company 401(k) or other retirement plan, if any, or in the Company’s employee stock ownership plan, if any.
Covered Executives and non-employee directors generally have five years from the later of the date of adoption of the guidelines or the date she or he became a Covered Executive or non-employee director to come into full compliance with the guidelines. A Covered Executive or non-employee director who is not in compliance with the guidelines on the applicable compliance date is prohibited from selling or transferring any Company stock, except as needed to pay income tax liabilities relating to the vesting or exercise price of a stock option, and may be subject to such other discipline as determined by the Compensation Committee. There is an exception to the holding requirement for severe hardship or compliance with court or domestic relations orders, subject to approval by the Compensation Committee.
Company Anti-Hedging Policy
Our Insider Trading and Regulation FD Policy prohibits all of our directors, officers and other employees, as well as those acting on behalf of the Company, such as auditors, agents and consultants, from engaging in certain speculative transactions in our securities, including short-term trading, short sales, transactions in puts, calls or other derivatives, margin accounts, pledging for collateral purposes and hedging. To our knowledge, all such covered individuals are in compliance with this policy.
Clawback Policy
Our Board, at the recommendation of our Compensation Committee, adopted a clawback policy effective August 1, 2018, which applies to each of our named executive officers. Under the policy, recoupment of cash incentive compensation or performance-based equity compensation would be generally required in the event the Company restates its financial statements as a result of a material error in such financial statements if the material error was caused by the fraud or intentional misconduct of one of the officers covered by the policy. In the event of such misconduct, we may recoup cash incentive compensation or performance-based equity compensation that was paid, granted, earned or vested based wholly or in part upon the attainment of any financial reporting measure during the three years prior to the restatement. The policy gives the Compensation Committee discretion to determine whether a clawback of compensation should be initiated in any given case, as well as the discretion to make other determinations, including whether a covered individual’s conduct meets the specified standard, the amount of compensation to be clawed back and the form of reimbursement to the Company. In order to comply with applicable law, the clawback policy will be updated or modified once the SEC adopts final clawback rules pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Tax Treatment of NEO Compensation
Section 162(m) of the Code (“Section 162(m)”) imposes an annual deduction limit of $1 million on the amount of compensation paid by a public company to “covered employees.” Prior to the Tax Cuts and Jobs Act of 2017 (“TCJA”), the deduction limit did not apply to “performance-based compensation” which satisfied the requirements of Section 162(m). Performance restricted stock unit awards and stock options issued under our 2016 Long Term Incentive Plan prior to November 2, 2017 were generally intended to satisfy the requirements of the Section 162(m) performance-based compensation

28




exemption. The TCJA eliminated the performance-based compensation exemption, although compensation paid pursuant to a written binding contract which was in effect on November 2, 2017 may be “grandfathered” and still qualify for the performance-based compensation exception under certain circumstances. Newly proposed U.S. Department of Treasury regulations require a corporate partner to include its distributive share of compensation paid by a partnership to covered employees of the corporate partner for purposes of applying the Section 162(m) deduction limit for tax years ending after December 20, 2019. Accordingly, we expect to include our distributive share of compensation paid by our subsidiary, Centennial Resource Production, LLC, which has elected to be treated as a partnership for U.S. federal income tax purposes, when determining the effect of 162(m) on the deductibility of compensation paid to our covered employees for 2019 and future tax years. While our Compensation Committee considers the impact of Section 162(m) and other tax rules when developing, structuring and implementing our executive compensation programs, the Compensation Committee also believes that it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, some of our compensation awards are nondeductible.  


29




COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with members of management and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Respectfully submitted,

The Compensation Committee

Maire A. Baldwin (Chair)
Matthew G. Hyde
Steven J. Shapiro
Jeffrey H. Tepper


30




Executive Compensation
The following table sets forth the compensation paid to or earned by our named executive officers in their capacities as named executive officers of the Company during 2019, 2018 and 2017:
2019 Summary Compensation Table
Name and Principal Position
 
Year
 
Salary ($)
 
Bonus ($)(1)
 
Stock Awards($)(2)
 
Option Awards ($)
 
Non-Equity Incentive Plan Compensation ($)(3)
 
All Other
Compensation ($)(4)
 
Total ($)
Mark G. Papa,
Chief Executive Officer
 
2019
 
800,695
 
340,000
 
8,933
 
 
1,360,000
 
3,708
 
2,513,336
 
 
2018
 
799,305
 
374,000
 
23,935
 
 
1,496,000
 
 
2,693,240
 
 
2017
 
800,000
 
2,040,000
 
15,041
 
7,150,000
 
 
 
10,005,041
George S. Glyphis,
Vice President and Chief Financial Officer
 
2019
 
434,124
 
110,870
 
2,628,622
 
 
443,477
 
19,861
 
3,636,954
 
 
2018
 
417,422
 
117,832
 
2,239,217
 
 
471,328
 
16,500
 
3,262,299
 
 
2017
 
398,880
 
618,000
 
2,131,767
 
 
 
13,625
 
3,162,272
Sean R. Smith,
Vice President and Chief Operating Officer
 
2019
 
481,257
 
122,907
 
3,259,126
 
 
491,625
 
19,861
 
4,374,776
 
 
2018
 
457,112
 
130,625
 
2,983,826
 
 
522,500
 
16,500
 
4,110,563
 
 
2017
 
434,249
 
672,075
 
2,803,914
 
 
 
16,200
 
3,926,438
Davis O. O’Connor,
Vice President and General Counsel
 
2019
 
390,712
 
84,815
 
1,787,702
 
 
339,260
 
25,277
 
2,627,766
 
 
2018
 
375,680
 
90,142
 
1,550,105
 
 
360,566
 
16,500
 
2,392,993
Brent P. Jensen,
Vice President and Chief Accounting Officer
 
2019
 
342,453
 
61,221
 
1,366,971
 
 
244,882
 
23,405
 
2,038,932
 
 
2018
 
329,277
 
65,065
 
1,091,377
 
 
260,260
 
16,500
 
1,762,479
 
(1) 
Amounts for 2019 represent the discretionary portion of annual incentive compensation awarded in recognition of 2019 performance under the Company’s annual incentive compensation program, which was paid in the form of restricted shares of our Class A Common Stock that will vest in three substantially equal annual installments on each of the first three anniversaries of March 1, 2020, subject to the executive’s continued service. For purposes of valuing these restricted stock awards, the Class A Common Stock was assumed to have a value of $3.00 per share. The grant date value of the restricted stock award received by each named executive officer, calculated using $2.67 per share closing price of our Class A Common Stock on the date of the grant, was $302,599 for Mr. Papa, $98,674 for Mr. Glyphis, $109,386 for Mr. Smith, $75,485 for Mr. O’Connor and $54,485 for Mr. Jensen. See “Compensation Discussion and Analysis—Elements of Our Executive Compensation Program—Annual Incentive Compensation” for more information regarding compensation awarded in recognition of 2019 performance.
(2)  
Amounts in this column reflect the aggregate grant date fair value of restricted stock and performance restricted stock units granted during 2019 computed in accordance with FASB’s ASC Topic 718, Stock-based Compensation (“ASC Topic 718”), excluding the effect of estimated forfeitures. Fair value of the performance restricted stock units was determined using a Monte Carlo simulation. The assumptions used by the Company in calculating these amounts for 2019 are included in Note 7 to Consolidated Financial Statements in the Company’s annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”). The maximum possible value of the 2019 performance restricted stock units, based on the closing price per share of our Class A Common Stock on the date they were granted ($5.94), was as follows: $1,679,131 for Mr. Glyphis, $2,082,124 for Mr. Smith, $1,141,811 for Mr. O’Connor and $873,144 for Mr. Jensen. For additional information regarding the stock-based awards granted to the named executive officers in 2019, refer to the 2019 Grants of Plan-Based Awards table.
(3) 
Amounts for 2019 represent the annual incentive compensation awarded in recognition of 2019 performance under the Company’s annual incentive compensation program. 25% of the amount disclosed in this column for each named executive officer was paid in the form of restricted shares of our Class A Common Stock that will vest in three substantially equal annual installments on each of the first three anniversaries of March 1, 2020, subject to the executive’s continued service. For purposes of valuing these restricted stock awards, the Class A Common Stock was assumed to have a value of $3.00 per share. The grant date value of the restricted stock award received by each named executive officer, calculated using $2.67 per share closing price of our Class A Common Stock on the date of the grant, was $302,599 for Mr. Papa, $98,674 for Mr. Glyphis, $109,386 for Mr. Smith, $75,485 for Mr. O’Connor and $54,485 for Mr. Jensen. See “Compensation Discussion and Analysis—Elements of Our Executive Compensation Program—Annual Incentive Compensation” for more information regarding compensation awarded in recognition of 2019 performance.
(4) 
Amounts in this column reflect matching contributions to the 401(k) Plan made by the Company on the named executive officer’s behalf and/or the amount of imputed income associated with the Company-paid basic life insurance maintained on the named executive officer’s behalf. See “2019 Compensation-Retirement and Other Employee Benefits” for more information on matching contributions to the 401(k) Plan.

31




2019 Grants of Plan-Based Awards
Name
 
Grant Date
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
 
Estimated Future Payouts Under Stock-based Incentive Plan Awards
 
All Other Stock Awards: Number of Shares of Stock or Units (#)(2)
 
Grant Date Fair value of Stock and Option Awards ($)(3)
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
Mark G. Papa
 
2/25/2019(1)
 

 


 


 


 


 


 
59,554

 
756,931


 

 

 
1,360,000

 
2,400,000

 


 


 


 


 


George S. Glyphis
 
2/25/2019(1)
 

 


 


 


 


 


 
18,763

 
238,478


 
7/30/2019
 

 


 


 

 

 

 
283,106

 
1,681,650


 
7/30/2019
 

 

 

 
70,670

 
141,341

 
282,682

 


 
839,566


 

 

 
443,477

 
1,330,431

 


 


 


 


 


Sean R. Smith
 
2/25/2019(1)
 

 


 


 


 


 


 
20,800

 
264,368


 
7/30/2019
 

 


 


 

 

 

 
351,052

 
2,085,249


 
7/30/2019
 

 

 

 
87,631

 
175,263

 
350,526

 


 
1,041,062


 

 

 
491,625

 
1,474,875

 


 


 


 


 


Davis O. O’Connor
 
2/25/2019(1)
 

 


 


 


 


 


 
14,353

 
182,427


 
7/30/2019
 

 


 


 

 

 

 
192,512

 
1,143,521


 
7/30/2019
 

 

 

 
48,056

 
96,112

 
192,224

 


 
570,905


 

 

 
339,260

 
1,197,387

 


 


 


 


 


Brent P. Jensen
 
2/25/2019(1)
 

 


 


 


 


 


 
10,360

 
131,676


 
7/30/2019
 

 


 


 

 

 

 
147,215

 
874,457


 
7/30/2019
 

 

 

 
36,748

 
73,497

 
146,994

 


 
436,572


 

 

 
244,881

 
1,049,490

 


 


 


 


 


 

(1) 
A portion of each named executive officer’s 2018 annual bonus was paid in 2019 in the form of restricted stock. Half of the value of these grants was previously reported in the “Non-Equity Incentive Plan Compensation” column of the Company’s 2018 Summary Compensation Table, with the other half of the value being reported in the “Bonus” column. For purposes of valuing the restricted stock, the Company assumed a value of $12.56 per share; however, the actual grant date fair value of the restricted stock based on the closing price on the grant date was $12.71 per share. The amount by which the actual grant date fair value of the award exceeded the assumed value has been included as a 2019 payment in the “Stock Awards” column of the Company’s 2019 Summary Compensation Table, above.

(2)  
The award will vest and, if applicable, become exercisable in three substantially equal annual installments following the date of grant, subject to the named executive officer’s continued service with us.

(3) 
All awards were made pursuant to the LTIP. Amounts in this column reflect the aggregate grant date fair value of awards granted during 2019 computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. The assumptions used by the Company in calculating these amounts are included in Note 7 to the 2019 Form 10-K.


32




Outstanding Equity Awards at 2019 Fiscal Year-End
Name
 
 
 
Option Awards
 
Stock Awards
 
 
 
Number of Securities Underlying Unexercised Options
 
 
Option Exercise Price
($)
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
(#)(1)
 
Market Value of Shares or Units of Stock That Have Not Vested
($)
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)(2)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(2)
 
Grant Date
 

Exercisable
 
Unexercisable(1)
 
 
 
 
 
 
Mark G. Papa
 
10/27/2016
 
1,000,000

 

 
14.52

 
10/26/2026
 

 

 

 


 
2/8/2017
 
666,666

 
333,334

 
18.03

 
2/7/2027
 

 

 

 


 
2/28/2017
 

 

 

 

 
10,900

 
50,358

 

 


 
2/23/2018
 

 

 

 

 
29,550

 
136,521

 

 


 
2/25/2019
 

 

 

 

 
59,554

 
275,139

 

 


 

 

 

 

 

 

 

 

 

George S. Glyphis
 
10/27/2016
 
250,000

 

 
14.52

 
10/26/2026
 

 

 

 


 
2/28/2017
 

 

 

 

 
3,497

 
16,156

 

 


 
8/2/2017
 

 

 

 

 
18,771

 
86,722

 
28,156

 
130,081


 
2/23/2018
 

 

 

 

 
8,952

 
41,358

 

 


 
8/1/2018
 

 

 

 

 
36,641

 
169,281

 
24,732

 
114,262


 
2/25/2019
 

 

 

 

 
18,763

 
86,685

 

 


 
7/30/2019
 

 

 

 

 
283,106

 
1,307,950

 
70,670

 
326,495


 

 

 

 

 

 

 

 

 

Sean R. Smith
 
10/27/2016
 
300,000

 

 
14.52

 
10/26/2026
 

 

 

 


 
2/28/2017
 

 

 

 

 
3,847

 
17,773

 

 


 
8/2/2017
 

 

 

 

 
24,699

 
114,109

 
37,048

 
171,162


 
2/23/2018
 

 

 

 

 
9,735

 
44,976

 

 


 
8/1/2018
 

 

 

 

 
48,854

 
225,705

 
32,976

 
152,349


 
2/25/2019
 

 

 

 

 
20,800

 
96,096

 

 


 
7/30/2019
 

 

 

 

 
351,052

 
1,621,860

 
87,631

 
404,855


 

 

 

 

 

 

 

 

 

Davis O. O’Connor
 
10/27/2016
 
125,000

 

 
14.52

 
10/26/2026
 

 

 

 


 
2/28/2017
 

 

 

 

 
1,949

 
9,004

 

 


 
8/2/2017
 

 

 

 

 
12,844

 
59,339

 
19,265

 
89,004


 
2/23/2018
 

 

 

 

 
6,043

 
27,919

 

 


 
8/1/2018
 

 

 

 

 
25,367

 
117,196

 
17,122

 
79,104


 
2/25/2019
 

 

 

 

 
14,353

 
66,311

 

 


 
7/30/2019
 

 

 

 

 
192,512

 
889,405

 
48,056

 
222,019


 

 

 

 

 

 

 

 

 

Brent P. Jensen
 
3/24/2017
 
83,333

 
41,667

 
17.17

 
3/24/2027
 
18,279

 
84,449

 

 


 
8/2/2017
 

 

 

 

 
8,151

 
37,658

 
12,226

 
56,484


 
2/23/2018
 

 

 

 

 
4,943

 
22,837
 

 


 
8/1/2018
 

 

 

 

 
17,851

 
82,472

 
12,049

 
55,666


 
2/25/2019
 

 

 

 

 
10,360

 
47,863

 

 


 
7/30/2019
 

 

 

 

 
147,215

 
680,133

 
36,748

 
169,776

 

(1)  
The award will vest and, if applicable, become exercisable in three substantially equal annual installments following the date of grant, subject to the named executive officer’s continued service with us.

(2)  
Represents performance restricted stock units, which vest based on the Company’s TSR as compared to the TSR of the compensation peer group over a three-year performance period. The number of units reported is based on the number of performance stock units granted to each executive multiplied by the performance multiplier for the threshold level of performance, which is next highest performance level based on performance at 2019 fiscal year-end. The threshold performance multipliers for the performance stock units are 50%, 45% and 50% for the units granted on August 2, 2017, August 1, 2018 and July 30, 2019, respectively. The market or payout value for these performance restricted stock units is calculated using the $4.62 per share closing price of our Class A Common Stock on December 31, 2019.

33




Option Exercises and Stock Vested in 2019
Name
 
Stock Awards
Number of shares acquired on vesting (#)
 
Value realized on vesting ($)
Mark G. Papa
 
25,673

 
317,522

George S. Glyphis
 
45,063

 
296,673

Sean R. Smith
 
57,840

 
370,126

Davis O. O’Connor
 
30,495

 
197,736

Brent P. Jensen
 
37,826

 
280,804


2019 Pension Benefits
None of our named executive officers participated in any defined benefit pension plans in 2019.
2019 Nonqualified Deferred Compensation
None of our named executive officers participated in any non-qualified deferred compensation plans in 2019.
Potential Payments upon Termination or a Change in Control
Change of control severance protection is provided to all of our regular, U.S. full-time employees, including our named executive officers, under the Severance Plan, which was first adopted by our Board in May 2018 and was amended and restated by our Board in October 2019. The Severance Plan has a “double trigger” mechanism, which requires first that a qualifying change of control event has occurred, and second that, within a specified period thereafter, the employee has incurred a qualifying termination.
Under the Severance Plan, if, within 24 months following a change in control, we terminate the employment of one of our named executive officers without cause or if the named executive officer resigns for “good reason,” then such named executive officer will be entitled to receive the following severance benefits and payments, subject to the executive’s execution and non-revocation of a release of claims:
a cash payment equal to 2.75 (for our Chief Executive Officer) or 2.25 (for our other named executive officers) times the named executive officer’s annual base salary;
a cash payment equal to 2.75 (for our Chief Executive Officer) or 2.25 (for our other named executive officers) times the average of the actual annual performance bonuses paid to the named executive officer in the three full fiscal years prior to the year of termination (or, if fewer, the number of full fiscal years the employee has performed services for us and been eligible for an annual bonus), excluding any portion of an annual bonus that we reasonably determine is attributable to payment of a portion of the annual bonus in property and is over and above the amount of the annual bonus that the named executive officer would have been paid if his entire annual bonus had been paid in cash;
a cash payment equal to 125% of the aggregate COBRA premiums that the named executive officer would need to pay to continue coverage of his and his family’s benefit plans for two years following the termination date;
outplacement benefits for one year following the termination date;
vesting of all unvested equity or equity-based awards under any of the Company’s equity compensation plans that vest solely based upon the passage of time; and
vesting of all unvested equity or equity-based awards under any of the Company’s equity compensation plans that vest based on the attainment of performance vesting conditions at the level that would apply based on actual performance calculated as if the termination date were the final day of the applicable performance period.
As referenced above, if a named executive officer resigns for “good reason” following the change in control, he or she will be entitled to the severance benefits. “Good reason” is generally defined in the Severance Plan to mean the occurrence of any of the following without the named executive officer’s prior written consent, subject to certain notice and cure rights: (i) a material diminution in the executive’s responsibilities, authorities and duties, (ii) a material reduction in the executive’s base salary or target annual bonus opportunity, (iii) a requirement that the executive relocate his principal location of employment to a location that is more than fifty (50) miles from the current work location or (iv) our failure to cause a successor to our business or assets to assume liabilities under the Severance Plan.
The following table provides estimates of the payments and benefits that would be paid to each named executive officer under each element of our compensation program assuming that such named executive officer’s employment was terminated on December 31, 2019 and the “double trigger” requirements under the Severance Plan were satisfied. In all cases, the amounts were valued as of December 31, 2019, based upon, where applicable, $4.62 per share (the closing price of our Class A

34




Common Stock on December 31, 2019). The amounts in the table below are calculated as of December 31, 2019 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made will be based on the dates and circumstances of the applicable event. Other than under the Severance Plan and except for rights to vested benefits under the terms of our employee benefit plans on the same terms as apply to all of our other full-time employees, our named executive officers are not entitled to any payments or other benefits in connection with a termination of employment or a change in control.
Name

Salary ($)

Cash Bonus ($)

COBRA Premiums and Outplacement Benefit ($)

Accelerated Equity Vesting ($)

Total ($)
Mark G. Papa

2,200,000


4,959,167


12,500


462,018


7,633,685

George S. Glyphis

997,823


1,266,308


72,073


1,708,152


4,044,356

Sean R. Smith

1,106,156


1,390,931


50,280


2,120,519


4,667,886

Davis O. O’Connor

898,040


862,580


68,012


1,169,174


2,997,806

Brent P. Jensen

787,118


749,897


68,012


955,412


2,560,439

CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median employee (as described below) to that of our Chief Executive Officer.
The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pursuant to Item 402(u), we identified the median employee from our entire employee population (other than our Chief Executive Officer), whether employed on a full-time or part-time basis, as of December 31, 2019, which consisted of 195 employees (all of whom are located in the United States). Within this group of employees, the median employee was identified by using a total target cash compensation measure, which was calculated by annualizing on a straight-line basis the salary of each employee as of December 31, 2019 and adding each employee’s target bonus and the amount of employer-paid benefits received by such employee in 2019. The compensation measure was consistently applied to all employees.
Using this methodology, we identified a median employee. We then calculated that employee’s annual total compensation in the same manner as the named executive officers’ total compensation, as reported in the 2019 Summary Compensation Table.
For 2019, the annual total compensation of our median employee was $142,221, and the annual total compensation of our Chief Executive Officer was $2,513,336, as reported in the 2019 Summary Compensation Table. Based on this information, for 2019, the ratio of our Chief Executive Officer’s annual total compensation to the annual total compensation of our median employee was estimated to be approximately 18 to 1.
Compensation of Our Directors
Effective December 31, 2017, our Board approved a non-employee director compensation policy, or the “Director Compensation Policy,” which has been further updated thereafter, including the most recent revisions adopted by our Board in July 2019. The Director Compensation Policy provides our non-employee directors who are not affiliated with Riverstone or Natural Gas Partners with an annual cash retainer of $87,500 per year, payable quarterly in arrears and subject to proration for any partial year of service, and an annual equity grant on December 31 of each year for a number of restricted shares of our Class A Common Stock equal to the quotient obtained by dividing $162,500 by the average daily closing price of one share of our Class A Common Stock over the five consecutive trading days ending on the day before the applicable grant date. The restricted shares of Class A Common Stock vest in a single installment on the first anniversary of the grant date, subject to the director’s continued service as a non-employee director. The Director Compensation Policy also provides for an additional annual cash retainer of $50,000 per year for our Lead Independent Director and additional equity retainers of $20,000, $15,000 and $15,000 per year for the chair of the Audit Committee, Compensation Committee and N&CG Committee, respectively.


35




2019 Director Compensation
The following table contains information concerning the compensation of our non-employee directors for 2019.
Name

Fees Earned in Cash ($)

Stock Awards ($)(1)

Total ($)
Maire A. Baldwin

137,500

168,452

305,952
Karl Bandtel

87,500

168,452

255,952
Jeffrey H. Tepper

87,500

168,452

255,952
Matthew G. Hyde

87,500

168,452

255,952
Steven J. Shapiro(2)

18,071

32,910

50,981
Pierre F. Lapeyre, Jr.(3)



David M. Leuschen(3)



Robert M. Tichio(3)



Tony R. Weber(4)
 
 
 
 
(1) 
Amounts in this column reflect the aggregate grant date fair value of restricted shares computed in accordance with ASC Topic 718. As of December 31, 2019, Ms. Baldwin and Messrs. Bandtel, Tepper, Hyde and Shapiro held 39,798, 39,798, 40,919, 36,435 and 46,002 unvested shares of our restricted stock, respectively. None of our non-employee directors held any of our stock options or other stock-based awards as of such date.
(2) 
Mr. Shapiro was appointed to our Board on October 17, 2019.
(3) 
Messrs. Lapeyre, Leuschen and Tichio did not receive any compensation for serving as directors in 2019 given their affiliation with Riverstone.
(4) 
Mr. Weber did not receive any compensation for serving as directors in 2019 given his affiliation with Natural Gas Partners. Mr. Weber ceased serving on our Board, effective as of May 9, 2019.
Compensation Risk Assessment
Management has conducted a risk assessment of our compensation plans and practices and concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The objective of the assessment was to identify any compensation plans or practices that may encourage employees to take unnecessary risk that could threaten the Company. No such plans or practices were identified by management. The Compensation Committee has also reviewed the risks and rewards associated with our compensation plans and practices and agrees with management’s conclusion.
* * * * *

36




EXECUTIVE OFFICERS
The following sets forth, as of March 19, 2020 the ages, positions and selected biographical information for our executive officers who are not directors:
Sean R. Smith - Vice President and Chief Operating Officer
Sean R. Smith, age 47, has been our Chief Operating Officer since October 2016. As previously announced and discussed in more detail in “Corporate Governance—Leadership Transition” above, following the retirement of Mark G. Papa, Mr. Smith will become our Chief Executive Officer and be added to our Board as a Class III director, effective June 1, 2020. We believe that Mr. Smith’s role as the Chief Executive Officer, as well as his substantial experience with and understanding of the energy industry and public companies generally and the Company and its assets specifically, qualify him to serve as a member of our Board. 
Prior to his current position, Mr. Smith served as Vice President, Geosciences of Centennial Resource Production, LLC (“CRP”) since May 2014. Prior to joining CRP, from February 2013 to May 2014, Mr. Smith worked at QEP Resources, where he served in several roles, including as a General Manager, leading the geoscience, regulatory and reservoir engineering departments for the Williston, Powder River, and Denver Julesburg Basins. Prior to QEP Resources, from 2005 to February 2013, Mr. Smith worked at Resolute Energy Corporation as a Manager and Geologist. He has also worked in various geotechnical roles at Kerr-McGee and Sanchez Oil & Gas. Mr. Smith earned his Bachelor of Arts in Geology from Lawrence University. He is licensed with the Texas Board of Professional Geoscientists and is a member of the American Association of Petroleum Geologists.
George S. Glyphis - Vice President and Chief Financial Officer
George S. Glyphis, age 50, has been our Chief Financial Officer since October 2016. He has served as Vice President and Chief Financial Officer of CRP since July 2014. Prior to joining CRP, Mr. Glyphis served as a Managing Director in the Oil & Gas Investment Banking practice at J.P. Morgan where his client base was comprised primarily of upstream and integrated oil and gas companies. In his 21 years at J.P. Morgan, Mr. Glyphis led the origination and execution of transactions including initial public offerings, equity follow-on offerings, high yield and investment grade bond offerings, corporate mergers and acquisitions, asset acquisition and divestitures, and reserve-based and corporate lending. Mr. Glyphis earned his Bachelor of Arts in History from the University of Virginia.
Davis O. O’Connor - Vice President and General Counsel
Davis O. O’Connor, age 65, has served as our Vice President and General Counsel since October of 2016. Prior to that, Mr. O’Connor served as General Counsel of CRP on a contract basis since May 2014. Before CRP, Mr. O’Connor served as Vice President and General Counsel of Berry Petroleum Company (NYSE: BRY) until Berry merged with LinnCo, LLC and Linn Energy, LLC in December 2013. After earning his Bachelor of Arts and Juris Doctor degrees from Cornell University and Cornell Law School, Mr. O’Connor joined the Denver office of Holland & Hart LLP as an associate attorney. In 1985, he was promoted to partner and later served on the firm’s Management Committee and chaired its Minerals Practice Group. In 2010, Mr. O’Connor left Holland & Hart LLP and joined Berry. Mr. O’Connor is also a member of the Rocky Mountain Mineral Law Foundation.
Brent P. Jensen - Vice President and Chief Accounting Officer
Brent P. Jensen, age 50, has served as our Vice President and Chief Accounting Officer since March 2017. Prior to that, Mr. Jensen served as Vice President, Finance and Treasurer of Whiting Petroleum Corporation (“Whiting”) from March 2015 to March 2017. Mr. Jensen joined Whiting in August 2005 as Controller and became Controller and Treasurer in January 2006, and he was the designated principal accounting officer at Whiting from 2006 until his departure in 2017. Mr. Jensen was previously with PricewaterhouseCoopers L.L.P. in Houston and Los Angeles, where he held various positions in their oil and gas audit practice since 1994, which included assignments of four years in Moscow, Russia and three years in Milan, Italy. He has over 25 years of oil and gas accounting experience and is a Certified Public Accountant inactive. Mr. Jensen holds a Bachelor of Arts degree from the University of California, Los Angeles.

37




CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Review and Approval of Related Party Transactions
Our Board has adopted a written policy regarding related party transactions, a copy of which is available on our website at www.cdevinc.com. Under the policy, our Audit Committee reviews and, where the Audit Committee determines them to be in our best interests, approves all transactions and arrangements that have an aggregate value exceeding $120,000, in which (a) the Company participates and (b) any directors, director nominees and executive officers or holders of more than 5% of any class of our voting securities, and their respective immediate family members (each, a “Related Person”), have a direct or indirect material interest. In determining whether a related party transaction or arrangement is in our best interests, the Audit Committee considers, among other factors, the position within or relationship of the related party with us, the materiality of the transaction or arrangement, the business purpose for and reasonableness of the transaction or arrangement, whether the transaction or arrangement is comparable to one that could be available on an arms-length basis to us or is on terms we offer generally to persons who are not related, whether the transaction is in the ordinary course of our business and was proposed and considered in the ordinary course, and the effect of the transaction or arrangement on our business and operations. The policy provides that the following do not create a material direct or indirect interest on behalf of the related party and are therefore not related party transactions:
reimbursements or payments of business expenses;
executive officer or director compensation in accordance with the disclosure exceptions provided for in Instruction 5 to Item 404(a) of Regulation S-K (or any successor rule);
any charitable contribution, grant, endowment or pledge by us to a charitable organization, foundation or university where the related party’s only relationship with that organization is as a director and the aggregate amount involved does not exceed $200,000;
any transaction in which the interest of the Related Person arises solely from the ownership of a class of the Company’s equity securities and all holders of that class receive the same benefit on a pro rata basis (e.g. dividends);
a transaction in which the interest of the Related Person arises solely from the ownership of shares of our Class C Common Stock and/or common units in CRP; and
any transaction with an entity at which the Related Person’s only relationship is as a director.
Annually, the Audit Committee reviews any previously approved related party transaction or arrangement that is continuing and determines based on then existing facts and circumstances whether it is in our best interest to continue, modify or terminate each such transaction or arrangement.
The related party transactions policy supplements the conflict of interest provisions in our Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics requires us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our Board (or the appropriate committee of our Board) or as disclosed in our public filings with the SEC. Under our Code of Business Conduct and Ethics, conflict of interest situations include, among others, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company, and any circumstance, event, relationship or situation in which the personal interest of any of our directors, officers or employees interferes or appears to interfere with our interests as a whole. A copy of our Code of Business Conduct and Ethics is available on our website at www.cdevinc.com. We intend to satisfy the disclosure requirement regarding any amendment to, or any waiver of, a provision of the Code of Business Conduct and Ethics by posting such information on our website.
Although our management believes that the terms of the related party transactions described below are reasonable, it is possible that we could have negotiated more favorable terms for such transactions with unrelated third parties.
Riverstone Affiliated Companies
From time to time, we sell our produced oil and gas and other hydrocarbons to affiliates of Riverstone. In 2019, we sold natural gas to Lucid Energy Delaware, LLC, a midstream company affiliated with Riverstone, and the Company received approximately $3.6 million in revenue in connection with those sales, which was offset by approximately $2.6 million in gathering, processing and transportation expenses that the Company paid to Lucid Energy Delaware, LLC in 2019.

38




SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us regarding ownership of shares of our Common Stock as of March 13, 2020 by:
each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock;
each of our named executive officers and directors for 2019; and
all of our current executive officers and directors, as a group.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership of our Common Stock is based on 276,020,471 shares of our Class A Common Stock and 1,034,119 shares of Class C Common Stock issued and outstanding as of March 13, 2020.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of voting Common Stock beneficially owned by them.
Name of Beneficial Owner
 
Number of Shares Beneficially Owned
 
% of Shares Beneficially Owned
5% or Greater Stockholders
 
 
 
 
Funds affiliated with Riverstone Holdings(1)
 
84,958,270

 
29.9
%
Funds affiliated with FMR LLC(2)(3)
 
41,340,075

 
14.9
%
Funds affiliated with Prescott Group Capital Management, L.L.C.(4)
 
23,591,072

 
8.5
%
Funds affiliated with The Vanguard Group, Inc.(5)
 
18,253,699

 
6.6
%
Directors and Named Executive Officers
 
 
 
 
Mark G. Papa(6)
 
3,452,428

 
1.2
%
George S. Glyphis(7)(9)
 
885,764

 
*

Sean R. Smith(8)(9)
 
668,964

 
*

Davis O. O’Connor(10)
 
351,187

 
*

Brent P. Jensen(11)
 
306,176

 
*

Maire A. Baldwin(12)
 
74,346

 
*

Karl E. Bandtel(13)
 
74,346

 
*

Matthew G. Hyde(14)
 
59,796

 
*

Pierre F. Lapeyre Jr.(1)
 
84,958,270

 
29.9
%
David M. Leuschen(1)
 
84,958,270

 
29.9
%
Steven J. Shapiro(15)
 
146,002

 
 
Jeffrey H. Tepper(16)
 
115,467

 
*

Robert M. Tichio
 

 
—%

All directors and executive officers, as a group (13 individuals)
 
89,065,349

 
31.9
%
 
*Less than one percent.
(1) 
Includes 51,356,105 shares of Class A Common Stock held of record by Riverstone VI Centennial QB Holdings, L.P. (“Riverstone QB Holdings), 15,179,971 shares of Class A Common Stock held of record by REL US Centennial Holdings, LLC (“REL US”), 3,729,961 shares of Class A Common Stock held of record by Riverstone Non-ECI USRPI AIV, L.P. (“Riverstone Non-ECI”) and 7,865,731 shares of Class A Common Stock and warrants to purchase an additional 6,826,502 shares of Class A Common Stock held of record by Silver Run Sponsor, LLC (“Silver Run Sponsor”). David Leuschen and Pierre F. Lapeyre, Jr. are the managing directors of Riverstone Management Group, L.L.C. (“Riverstone Management”) and have or share voting and investment discretion with respect to the securities beneficially owned by Riverstone Management. Riverstone Management is the general partner of Riverstone/Gower Mgmt Co Holdings, L.P. (“Riverstone/Gower”), which is the sole me