DIAMONDBACK ENERGY, INC. - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 

   Filed by Registrant  Filed by a Party other than the Registrant

 

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DIAMONDBACK ENERGY, INC.

 

 

(Name of Registrant as Specified In Its Charter)

 

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About Diamondback

 

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

 

Core Values

 

Diamondback Energy and the culture we have developed are grounded in a unique set of core values that are adhered to throughout the entire organization. By establishing core values, we have set the bar extremely high for all of our employees in terms of how they operate and interact, both within the office and out in the field.

 

 
 

 

MESSAGE FROM OUR CHAIRMAN

 

500 West Texas, Suite 1200

Midland, Texas 79701

 

 

STEVEN E. WEST

CHAIRMAN OF THE BOARD

 

April 23, 2021

 

 

Dear Diamondback Energy, Inc. Stockholder:

 

On behalf of your board of directors and management, you are cordially invited to attend the Annual Meeting of Stockholders to be held at 1200 N Walker Ave, Oklahoma City, Oklahoma 73103 on Thursday, June 3, 2021, at 11:30 a.m.

 

We intend to hold our annual meeting in person. However, we are monitoring the public health, travel and business and social gathering concerns of our stockholders and employees in light of the ongoing COVID-19 pandemic, as well as any related restrictions and protocols by federal, state and local governments. We plan to take any necessary and appropriate precautions with respect to attendance at, and admission to, our annual meeting. We may also determine it to be necessary or appropriate to hold a virtual annual meeting of stockholders by means of remote communication. We will announce any such alternative arrangements and provide detailed instructions as soon as practicable in advance of the meeting by press release and posting on our website at www.diamondbackenergy.com, as well as through an SEC filing. If you are planning to attend the annual meeting, please be sure to check our website for any updates in the days before our annual meeting.

 

It is important that your shares be represented at the meeting. Whether or not you plan to attend the meeting in person, we urge you to grant your proxy to vote your shares by telephone or through the Internet by following the instructions included on the Notice of Internet Availability of Proxy Materials that you received, or if you requested to receive a paper copy of the proxy card, to mark, date, sign and return the proxy card in the envelope provided. Please note that submitting a proxy will not prevent you from attending the meeting in person and voting at such meeting. Please note, however, if a broker or other nominee holds your shares of record and you wish to vote at the meeting, you must obtain from that registered holder a proxy card issued in your name.

 

You will find information regarding the matters to be voted on at the meeting in the proxy statement. Your interest in Diamondback Energy, Inc. is appreciated. We look forward to your vote at the annual meeting to be held on June 3, 2021.

 

Sincerely,

 

 

           
 

Notice
of Annual Meeting of Stockholders

TO BE HELD ON

JUNE 3, 2021

 

11:30 a.m., local time

 

1200 N Walker Ave

 

Oklahoma City, Oklahoma 73103

 

 

TO THE STOCKHOLDERS OF DIAMONDBACK ENERGY, INC.:

 

The Annual Meeting of Stockholders of Diamondback Energy, Inc. will be held on June 3, 2021 at 11:30 a.m., local time, at 1200 N Walker Ave, Oklahoma City, Oklahoma 73103, for the following purposes:

 

     
      1. To elect eight directors to serve until the Company’s 2021 Annual Meeting of Stockholders;
      2. To hold an advisory vote on the Company’s executive compensation;
      3. To approve an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares;
      4. To approve the Company’s 2021 Amended and Restated Equity Incentive Plan;
      5. To ratify the appointment of Grant Thornton LLP as the Company’s independent auditors for the fiscal year ending December 31, 2021; and
      6. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
      COVID-19 CONSIDERATIONS AND THE ANNUAL MEETING:
         
      We intend to hold the Annual Meeting in person. However, we are monitoring the public health, travel and business and social gathering concerns of our stockholders and employees in light of the ongoing COVID-19 pandemic, as well as any related restrictions and protocols from federal, state and local governments. We plan on taking any necessary and appropriate precautions with respect to attendance at and admission to the Annual Meeting. We may also determine it to be necessary or appropriate to hold a virtual annual meeting of stockholders by means of remote communication. We will announce any such alternative arrangements and provide detailed instructions as soon as practicable in advance of the meeting by press release and posting on our website at www.diamondbackenergy.com, as well as through an SEC filing. If you are planning to attend the Annual Meeting, please be sure to check our website for any updates in the days before the Annual Meeting. As always, we encourage you to vote your shares prior to the Annual Meeting.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 2
 

We are providing access to our proxy materials, including this proxy statement and our 2020 Annual Report to Stockholders, over the Internet. As a result, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy materials. The notice contains instructions on how to access those proxy materials over the Internet, as well as instructions on how to request a paper or email copy of our proxy materials. Those stockholders who request a paper copy of our proxy materials as provided in the Notice of Internet Availability will receive such proxy materials by mail. This electronic distribution process reduces the environmental impact and lowers the costs of printing and distributing our proxy materials.

 

Your vote is important. Please carefully consider the proposals and vote in one of these ways:

 

     
             
INTERNET   BY TELEPHONE   BY MAIL   ANNUAL MEETING
Follow the instructions on the Notice of Internet Availability of Proxy Materials or the proxy card to vote through the Internet   Follow the instructions on the proxy card to vote by phone   If you request to receive a paper copy of our proxy materials, mark, sign, date and promptly return the proxy card in the postage-paid envelope   Submit a ballot at the Annual Meeting

 

Only stockholders of record at the close of business on April 8, 2021 or their proxy holders may vote at the meeting.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 3, 2021. THIS PROXY STATEMENT AND THE COMPANY’S 2020 ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT WWW.ENVISIONREPORTS.COM/FANG.

 

By Order of the Board of Directors,

 

Matt Zmigrosky

Executive Vice President, General
Counsel and Secretary

April 23, 2021

 

The Notice of Internet Availability of Proxy Materials is first being mailed to stockholders on April 23, 2021.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 3
 

Table of Contents

 

 
 

 

PROXY SUMMARY 06
VOTING MATTERS 06
   
ABOUT THE ANNUAL MEETING 10
   
PROPOSAL 1: ELECTION OF DIRECTORS 14
DIRECTOR NOMINATIONS 14
   
CORPORATE GOVERNANCE MATTERS 20
CORPORATE GOVERNANCE HIGHLIGHTS 20
CORPORATE GOVERNANCE GUIDELINES 21
DIRECTOR QUALIFICATIONS AND NOMINATION PROCESS 21
DIRECTOR INDEPENDENCE 23
BOARD LEADERSHIP STRUCTURE 23
BOARD MEETINGS, COMMITTEES AND MEMBERSHIP 24
BOARD EVALUATION PROCESS 26
BOARD’S ROLE IN RISK OVERSIGHT 26
STOCKHOLDER ENGAGEMENT 27
CORPORATE RESPONSIBILITY AND SUSTAINABILITY 28
CODE OF BUSINESS ETHICS AND CONDUCT 30
COMMUNICATIONS WITH THE BOARD 31
DIRECTOR COMPENSATION 31
   
AUDIT COMMITTEE REPORT 32
   
EXECUTIVE OFFICERS 33
   
COMPENSATION DISCUSSION AND ANALYSIS 35
EXECUTIVE SUMMARY 35
2021 COMPENSATION DECISIONS AND EXECUTIVE COMPENSATION PROGRAM ENHANCEMENTS 39
HIGHLIGHTS OF EXECUTIVE COMPENSATION BEST PRACTICES 40
EXECUTIVE COMPENSATION POLICY AND OBJECTIVES 41
2020 COMPENSATION PROGRAM DESIGN AND STRUCTURE 41
EXECUTIVE COMPENSATION PROGRAM ELEMENTS 42
PROCESS FOR DETERMINING EXECUTIVE COMPENSATION 48
COMPETITIVE BENCHMARKING 49
OTHER SIGNIFICANT COMPENSATION POLICIES AND PRACTICES 50
BENEFIT PLANS 52
COMPENSATION COMMITTEE REPORT 54
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 54
   
COMPENSATION TABLES 55
SUMMARY COMPENSATION TABLE 55
2020 GRANTS OF PLAN-BASED AWARDS UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN 57
2020 GRANTS OF PLAN-BASED AWARDS UNDER THE VIPER LTIP 57
2020 GRANTS OF PLAN-BASED AWARDS UNDER THE RATTLER LTIP 58
OUTSTANDING EQUITY AWARDS AT FISCAL 2020 YEAR-END UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN 58
OUTSTANDING EQUITY AWARDS UNDER THE VIPER LTIP AT FISCAL 2020 YEAR-END 59
OUTSTANDING EQUITY AWARDS UNDER THE RATTLER LTIP AT FISCAL 2020 YEAR-END 60
STOCK VESTED DURING FISCAL YEAR 2020 UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN 60
PHANTOM UNITS VESTED UNDER THE RATTLER LTIP DURING FISCAL YEAR 2020 61
PAY RATIO DISCLOSURE 61

 

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POTENTIAL PAYMENTS UPON TERMINATION, RESIGNATION OR CHANGE OF CONTROL FOR FISCAL YEAR 2020 62
2020 EQUITY COMPENSATION PLAN INFORMATION 63
2020 DIRECTOR COMPENSATION 64
   
STOCK OWNERSHIP 65
HOLDINGS OF MAJOR STOCKHOLDERS 65
HOLDINGS OF OFFICERS AND DIRECTORS 66
   
STOCK PERFORMANCE GRAPH 68
   
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 69
REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS 69
VIPER ENERGY PARTNERS LP 69
RATTLER MIDSTREAM PARTNERS LP 70
   
PROPOSAL 2: APPROVE, ON AN ADVISORY BASIS, THE COMPANY’S EXECUTIVE COMPENSATION 72
BOARD VOTING RECOMMENDATION 72
   
PROPOSAL 3: APPROVE AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 SHARES TO 400,000,000 SHARES 73
WHAT AM I VOTING ON? 73
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL? 73
RATIONALE FOR APPROVAL 73
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND? 75
   
PROPOSAL 4: APPROVE THE COMPANY’S 2021 AMENDED AND RESTATED EQUITY INCENTIVE PLAN 76
WHAT AM I VOTING ON? 76
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL? 76
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND? 81
   
PROPOSAL 5: RATIFY THE APPOINTMENT OF OUR INDEPENDENT AUDITORS 82
WHAT AM I VOTING ON? 82
WHAT SERVICES DO THE INDEPENDENT AUDITORS PROVIDE? 82
HOW MUCH WERE THE INDEPENDENT AUDITORS PAID IN 2020, 2019 AND 2018? 82
DOES THE AUDIT COMMITTEE APPROVE THE SEVICES PROVIDED BY GRANT THORNTON? 83
WILL A REPRESENTATIVE OF GRANT THORNTON BE PRESENT AT THE MEETING? 83
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL? 83
HAS GRANT THORNTON ALWAYS SERVED AS DIAMONDBACK’S INDEPENDENT AUDITORS? 83
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND? 83
   
SOLICITATION BY BOARD; EXPENSES OF SOLICITATION 84
   
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS 85
   
AVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO STOCKHOLDERS 86
HOUSEHOLDING 86
   
OTHER MATTERS 87
   
SCHEDULE A: RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW 88
   
   
APPENDIX A: CERTIFICATE OF AMENDMENT NO. 2 TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION A-1
   
   
APPENDIX B: 2021 AMENDED AND RESTATED EQUITY INCENTIVE PLAN B-1

 

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PROXY SUMMARY
   
  THE SUMMARY BELOW HIGHLIGHTS SELECTED INFORMATION IN THIS PROXY STATEMENT. PLEASE REVIEW THE ENTIRE PROXY STATEMENT BEFORE VOTING YOUR SHARES.

 

VOTING MATTERS

 

Proposal   Board
Recommendation
  Page Reference
Proposal 1:  Election of Directors   FOR each Director   14
Proposal 2:  Approve, on an Advisory Basis, the Company’s Executive Compensation   FOR   72
Proposal 3: Approve an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares   FOR   73
Proposal 4:  To approve the Company’s 2021 Amended and Restated Equity Incentive Plan   FOR   76
Proposal 5:  Ratify the Appointment of Our Independent Auditors   FOR   82

 

Director Nominees

 

                Committee Memberships    
Nominee   Age   Director
Since
  Independent   Audit   Compensation   Nominating
and Corporate
Governance
  Safety,
Sustainability
and Corporate
Responsibility
  2020 Board
and Committee
Meeting
Attendance Rate
Vincent K. Brooks   62   2020                   100%
Michael P. Cross   69   2012             100%
David L. Houston   68   2012             96%
Stephanie K. Mains   53   2020                   100%
Mark L. Plaumann   65   2012             100%
Travis D. Stice   59   2012                       100%
Melanie M. Trent   56   2018             100%
Steven E. West*   60   2011                     100%

 

Chair
* Chairman of the Board

 


 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 6
 
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COVID-19 Response

 

In March 2020 in response to the increasing threat caused by the COVID-19 pandemic, Diamondback established an internal, multi-disciplinary team, including the NEOs, to work with outside professional advisors and implement protocols and procedures designed to mitigate risk to our employees and enable our operations to continue safely. As we navigated the challenges presented by the pandemic, our priorities remained protecting the health and safety of our employees and safely executing our operations. We quickly and efficiently migrated to a remote work environment in March 2020. As the pandemic evolved and guidance from federal, state and local authorities materialized, our team worked with outside advisors to develop protocols and procedures designed to allow our field operations to continue safely working and enable a rolling return of certain employees to our offices. Our team continues to monitor the dynamic legal and regulatory environment related to the pandemic.

 

Stockholder Outreach

 

As in the past, we conducted a robust stockholder outreach program during 2020 to solicit feedback on our executive compensation programs, corporate governance, corporate responsibility and sustainability and other important issues.

 

2020 stockholder outreach highlights:

 

Met (telephonically or through video conference due to COVID-19 considerations) or initiated contact with investors representing over 65% of our then outstanding shares.
 
Attended 14 virtual investor conferences and hosted eight virtual bus tours.

 

ESG Highlights

 

38% of Diamondback’s board of directors is now gender or racially diverse (two female directors and one racially diverse director);
 
Announced initiatives to reduce Scope 1 GHG intensity by at least 50% from 2019 levels by 2024 and reduce methane intensity by at least 70% from 2019 levels by 2024
 
Announced “Net Zero Now” strategy under which, as of January 1, 2021, every hydrocarbon produced by Diamondback is anticipated to be produced with zero net Scope 1 emissions

 

Diamondback understands its obligation to be a constructive partner in the environments in which we operate and live. Driven by our core values, Diamondback is laser focused on the safe and responsible development of our resources in the Permian Basin. Our approach to environmental, social and governance (ESG) matters is evidenced through our commitment to people, environmental responsibility, community and sound governance practices.

 

Diamondback acknowledges that its social and environmental license to operate as a public oil and gas company in the United States will continue to be largely influenced by our stockholders. We regularly engage with our stockholders on ESG matters to ensure that our approach to ESG matters aligns with stockholder expectations. At its core, our environmental strategy recognizes that the United States is transitioning to a lower carbon economy. While many of the foremost authorities on energy demand forecast that oil and gas will continue to account for a substantial portion of global energy demand in even the most carbon constrained projections, we embrace the reality that we must adapt our behavior to continue to succeed in the new energy economy.

 

As Diamondback’s ESG strategy evolves, management regularly interacts with the board and its committees, including its nominating and corporate governance committee, compensation committee and recently formed safety, sustainability and corporate responsibility committee. The safety, sustainability and corporate responsibility committee was formed in 2019 to (i) review Diamondback’s policies and performance regarding, and provides guidance on, ESG matters, (ii) advise the board of directors and management on significant public issues that are pertinent to the Company and (iii) assist management in setting strategy, establishing goals and integrating ESG matters into strategic and tactical business activities across the Company.

 

In 2020, Diamondback took a number of significant additional steps on its path to being an industry leader on ESG matters. First, we included specific, measurable environmental and safety performance metrics in our short-term incentive compensation program that incentivize performance on key metrics, including flaring, greenhouse gas (GHG) emissions, recycled water usage, fluid spill control and safety. Diamondback also released its third annual Corporate Responsibility Report, which included an assessment of our portfolio under various low carbon scenarios as outlined by the International Energy Agency. Further, Diamondback completed CDP Global’s (CDP) water security questionnaire. Both the Corporate Responsibility Report and a link to our CDP water security questionnaire can be found on our website at www.diamondbackenergy.com/about/sustainability.


 

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Additionally, Diamondback reinforced its commitment to conducting its business in a manner that respects and promotes the fundamental rights and dignity of all people by adopting its Human Rights Policy. A copy of our Human Rights Policy can be found on our website at www.diamondbackenergy.com/investors/corporate-governance.

 

Diamondback also added Stephanie Mains and Vincent Brooks to the board of directors, further enhancing and diversifying not only our board’s skills and qualifications, but also the ethnic and gender diversity of our board of directors. With these additions, we have now added three diverse members to our board of directors since 2018, and 38% of our board of directors are gender or ethnically diverse.

 

Building on our accomplishments in 2020, in February 2021 we announced significant enhancements to our commitment to ESG performance and disclosure, including Scope 1 and methane emission intensity reduction targets, as well as the implementation of our “Net Zero Now” initiative under which effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions.”

 

For additional information regarding our commitment to ESG matters, please see “Corporate Responsibility and Sustainability” beginning on page 28.

 

Performance Highlights

 

Financial and Operational Highlights  

•   Maintained investment grade credit ratings

•   Completed offering of $500 million of 4.75% senior notes due May 31, 2025, the proceeds of which were used to (i) purchase a portion of Energen’s 4.65% senior notes due 2021 that were tendered pursuant to a tender offer by Energen for all of the outstanding 4.65% senior notes and (ii) repay a portion of the outstanding borrowings under Diamondback’s revolving credit facility

•   Repurchased all of Energen’s outstanding 7.350% medium-term notes due on July 28, 2027

•   In March 2021, completed the issuance of 0.900% senior notes due 2023, 3.125% senior notes due 2031 and 4.400% senior notes due 2051 in the aggregate principal amount of $2.2 billion

•   Achieved 2020 consolidated proved developed finding and development costs of $9.65 per BOE and drill bit finding and development costs of $5.00 per BOE

•   Reduced lease operating expense to $3.87 per BOE and reduced cash general and administrative expense to $0.46 per BOE

•   Generated full year 2020 Free Cash Flow (as defined and reconciled on Schedule A to this proxy statement) of $162 million despite the COVID-19 pandemic and unprecedented commodity price disruptions and their related effects on the oil and natural gas industry

•   Maintained our $1.50 per share annualized dividend through the first three quarters of 2020 despite the challenges presented by the COVID-19 pandemic, and increased our quarterly common stock dividend by 6.7% beginning with the Q4 2020 dividend payment

Strategic Transactions  

•   Announced in December 2020 the proposed acquisition of QEP Resources, Inc. (QEP) in an all-stock merger and the proposed acquisition of leasehold interests and related assets of Guidon Operating LLC (Guidon), each of which was completed in the first quarter of 2021. These acquisitions added material Tier-1 Midland Basin inventory to our acreage portfolio, increasing our net acreage in the Northern Midland Basin by over 81,500 net acres

•   In March 2021, used net proceeds from the senior notes issuance discussed above to complete tender offers for (i) approximately 97% of QEP’s senior notes that remained outstanding following the closing of the QEP merger discussed below and (ii) 46% of Diamondback’s outstanding 5.375% senior notes due 2025

•   Completed Rattler’s first senior notes offering in the aggregate principal amount of $500 million, proceeds from which were used to pay down borrowings under Rattler’s revolving credit facility

Governance and Compensation Highlights  

•   Reduced our Chief Executive Officer’s 2021 long-term incentive (LTI) compensation target by 20% from 2020

•   Reduced our other named executive officers’ 2021 LTI compensation target by 10% from 2020

•   Did not provide for any upward salary adjustments and kept the short-term incentive (STI) targets flat for 2021 for all named executive officers

•   2020 STI scorecard performance payout was reduced to 100% of target for all named executive officers despite achieving actual scorecard performance at approximately 160% of target

•   Updated 2021 annual STI scorecard metrics to include a free cash flow per share metric, with weighting of 20% and increased weighting of environmental and safety metrics to 20%

•   Added both S&P 500 and the XOP Index as peers in our 2021 peer group

•   Adopted a comprehensive clawback policy


 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 8
 
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Compensation Highlights

 

Diamondback’s compensation program reflects our commitment to paying for performance, to crafting compensation packages that reflect each executive’s responsibilities and the market for the executive’s skills and experience, and to aligning executives’ interests with the long-term interests of our stockholders.

 

 

(1) These pay mix charts exclude amounts listed in the column titled “All Other Compensation” in the Summary Compensation Tables set forth on page 55.”


 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 9
 
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ABOUT THE ANNUAL MEETING

 

Who is soliciting my vote?

 

The board of directors of Diamondback Energy, Inc., which we refer to as “Diamondback,” the “Company” and “we” in this proxy statement, is soliciting your vote at the 2021 Annual Meeting of Stockholders.

 

What am I voting on?

 

You are voting on:

 

The election of directors (see Proposal 1 beginning on page 14);
The approval, on an advisory basis, of the compensation paid to the Company’s named executive officers as reported in this proxy statement (see Proposal 2 on page 72);
The approval of an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares (see Proposal 3 on page 73);
To approve the Company’s 2021 Amended and Restated Equity Incentive Plan (see Proposal 4 on page 76);
The ratification of Grant Thornton LLP as our independent auditors for 2021 (see Proposal 5 beginning on page 82); and
Any other business properly coming before the meeting.

 

How does the board of directors recommend that I vote my shares?

 

Unless you give other instructions on your proxy, the persons named as proxy holders on the proxy or proxy card will vote in accordance with the recommendations of our board of directors. The board of directors’ recommendation can be found with the description of each item in this proxy statement. In summary, the board of directors recommends a vote:

 

FOR” the proposal to elect nominated directors;
FOR” the proposal to approve, on an advisory basis, the compensation paid to the Company’s named executive officers as reported in this proxy statement;
FOR” the approval of an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares;
FOR” the approval of the Company’s 2021 Amended and Restated Equity Incentive Plan; and
FOR” the proposal to ratify Grant Thornton LLP as the Company’s independent auditors for 2021.

 

Who is entitled to vote?

 

You may vote if you were the record owner of our common stock as of the close of business on April 8, 2021. Each share of common stock is entitled to one vote. As of April 8, 2021, we had 180,981,740 shares of common stock outstanding and entitled to vote. There is no cumulative voting.

 

How many votes must be present to hold the meeting?

 

Your shares are counted as present at the Annual Meeting if you attend the meeting and vote in person or if you properly grant your proxy by telephone, Internet or mail. In order for us to hold our meeting, holders of a majority of the voting power of our outstanding shares of common stock as of the close of business on April 8, 2021 must be present in person or by proxy at the meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the meeting.

 

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What is a broker non-vote?

 

If a broker does not have discretion to vote shares held in street name on a particular proposal and does not receive instructions from the beneficial owner on how to vote those shares, the broker may not vote on that proposal. This is known as a broker non-vote. No broker may vote your shares without your specific instructions on any of the proposals to be considered at the Annual Meeting other than on the proposals that are considered to be “routine.” Under the rules of the New York Stock Exchange (NYSE), which apply to brokers regardless of whether an issuer is listed on the NYSE or The Nasdaq Stock Market LLC (Nasdaq), Proposal 3 relating to the increase in the total number of authorized shares of common stock from 200,000,000 to 400,000,000 and Proposal 5 relating to the ratification of our independent auditors are considered to be “routine” matters. Accordingly, brokers will have discretionary authority to vote on Proposals 3 and 5, but will not have discretionary authority to vote on any other proposal at the Annual Meeting without your specific instructions.

 

How many votes are needed to approve each of the proposals?

 

Assuming the presence of a quorum, directors will be elected by the affirmative vote of a majority of the votes cast, in person or by proxy, which means that the number of shares voted “FOR” a director nominee must exceed the number of votes cast “AGAINST” that nominee. Abstentions and broker non-votes will not be counted for voting purposes with respect to the re-election of directors. Stockholders may not cumulate their votes with respect to the re-election of directors. If any incumbent director is not elected because he or she does not receive a majority of the votes cast, he or she is required to immediately tender his or her resignation for consideration by our board of directors. Our board of directors will evaluate whether to accept or reject such resignation, or whether other action should be taken; provided, however, that the board will act on such resignation and publicly disclose its decision to accept or reject such resignation and the rationale behind such decision within 90 days from the date of the certification of the director election results. Unless you indicate otherwise, the persons named as your proxies will vote your shares “FOR” all the nominees for director named in Proposal 1.

 

Each of Proposals 2, 4 and 5 requires the affirmative “FOR” vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Only votes for or against Proposals 2 and 4 will be counted as votes cast, and abstentions and broker non-votes will not be counted for voting purposes.

 

Proposal 3 requires the affirmative “FOR” vote of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions will have the same effect as negative votes in determining whether Proposal 3 was approved by our stockholders. As discussed above, brokers will have discretionary authority with respect to Proposal 3 and no broker non-votes are anticipated with respect to Proposal 3.

 

With respect to Proposal 5, abstentions will not be counted. As discussed above, brokers will have discretionary authority with respect to Proposal 5 and no broker non-votes are anticipated with respect to Proposal 5.

 

How do I vote?

 

You can vote either in person at the meeting or by proxy without attending the meeting.

 

To vote by proxy, you may vote by telephone or through the Internet by following the instructions included on the Notice of Internet Availability of Proxy Materials or proxy card, or, if you request to receive a paper copy of the proxy card, by returning a signed, dated and marked proxy card. If you are a registered holder or hold your shares in street name, votes submitted by Internet or telephone must be received by 1:00 a.m. central time on June 3, 2021.

 

Even if you plan to attend the meeting, we encourage you to vote your shares by proxy. If you plan to vote in person at the Annual Meeting, and you hold your stock in street name, you must obtain a proxy from your broker and bring that proxy to the meeting. See also “How to attend the Annual Meeting and are there are alternative remote arrangements for the Annual Meeting in light of COVID-19 concerns?” below.

 

May I change my vote?

 

Yes. You may change or revoke your vote at any time before the polls close at the Annual Meeting. You may do this by:

 

Submitting another valid proxy bearing a later date and returning it to us prior to the meeting;
Sending our Corporate Secretary a written document revoking your earlier proxy; or
Voting again at the meeting.

 

However, if your shares are held in street name by a broker or other nominee, you must contact your broker or such other nominee to revoke your proxy.

 

Who counts the votes?

 

We have hired Computershare Trust Company, N.A., our transfer agent, to count the votes represented by proxies cast by telephone, Internet, mail or ballot. Employees of Computershare Trust Company, N.A. will act as inspectors of election.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 11
 
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Will my vote be confidential?

 

Yes. As a matter of Company policy, proxies, ballots and voting tabulations that identify individual stockholders are treated as confidential. Only the tabulation agent and the inspectors of election have access to your vote. Directors and employees of the Company may see your vote only if there is a contested proxy solicitation, as required by law or in certain other special circumstances.

 

Will my shares be voted if I don’t provide my proxy and don’t attend the Annual Meeting?

 

If you do not provide a proxy or vote your shares held in your name, your shares will not be voted.

 

If you hold your shares in street name, your broker may be able to vote your shares for certain “routine” matters even if you do not provide the broker with voting instructions. As discussed above, the proposals relating to the increase in the total number of authorized shares of common stock and the ratification of Grant Thornton LLP as our independent auditors for 2021 are considered routine. For matters not considered “routine,” if you do not give your broker instructions on how to vote your shares, the broker may not vote on that proposal. This is a broker non-vote.

 

The proposals to elect directors, to approve, on an advisory basis, the Company’s executive compensation and to approve the Company’s 2021 Amended and Restated Equity Incentive Plan are not considered routine. As a result, no broker may vote your shares on these proposals without your specific instructions.

 

How are votes counted?

 

In the election of directors contemplated by Proposal 1, you may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to one or more of the nominees. For Proposals 2, 3, 4 and 5 you may vote “FOR,” “AGAINST” or “ABSTAIN.

 

What if I submit my proxy but don’t indicate my vote on the proposals?

 

If you submit a proxy by telephone or Internet, or if you request a paper copy of our proxy materials and return a signed proxy card by mail, in each case without indicating your vote, your shares will be voted “FOR” the director nominees listed on the card, “FOR” approving, on an advisory basis, the Company’s executive compensation as described in this proxy statement, “FOR” approving an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares, “FOR” the approval of the Company’s 2021 Amended and Restated Equity Incentive Plan and “FOR” the ratification of Grant Thornton LLP as the Company’s independent auditors for 2021.

 

Could other matters be decided at the Annual Meeting?

 

We are not aware of any other matters that will be considered at the Annual Meeting. If any other matters arise at the Annual Meeting, the persons named in your proxies will vote in accordance with their best judgment.

 

Who can attend the meeting?

 

The Annual Meeting is open to all holders of our common stock.

 

What do I need to bring to attend the Annual Meeting?

 

You will need proof of ownership of our common stock to attend the meeting in person. If your shares are in the name of your broker or bank or other nominee, you will need to bring evidence of your stock ownership, such as your most recent brokerage statement. All stockholders will be required to present valid picture identification. IF YOU DO NOT HAVE VALID PICTURE IDENTIFICATION AND PROOF THAT YOU OWN SHARES OF OUR STOCK, YOU MAY NOT BE ADMITTED INTO THE MEETING.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 12
 
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How to attend the Annual Meeting and are there alternative remote arrangements for the Annual Meeting in light of COVID-19 concerns?

 

The Annual Meeting will be held at 1200 N Walker Ave, Oklahoma City, Oklahoma 73103. From I-40, take exit 150A - Shields Blvd. Turn left (North) onto Shields. Shields will turn into E.K. Gaylord. Continue on E.K. Gaylord. E.K. Gaylord will then turn into North Broadway. Continue driving on North Broadway to NW 11th Street and turn left (West). Continue on NW 11th Street to N. Walker Avenue and the Ambassador Hotel is on the Northeast corner of NW 11th Street and Walker Avenue. Please note that there may be construction along this route and it is subject to detours.

 

For the safety of our stockholders and employees, we are monitoring the public health, travel and business and social gathering concerns of our stockholders and employees in light of the COVID-19 pandemic, as well as any related restrictions and protocols by federal, state and local governments. We may determine it to be necessary or appropriate to hold a virtual annual meeting of stockholders by means of remote communication.

 

If we determine that it is necessary or appropriate to delay the Annual Meeting to a later date, change the location of the Annual Meeting or hold a virtual annual meeting of stockholders due to developments regarding the COVID-19 pandemic, we will announce any such alternative arrangements and provide instructions for the Annual Meeting as promptly as practicable in advance of the meeting, including how to demonstrate your ownership of our common stock as of the record date for the Annual Meeting, login instructions and related details regarding attending the virtual annual meeting of stockholders.

 

How can I access the Company’s proxy materials and annual report electronically?

 

This proxy statement and the Company’s 2020 Annual Report to Stockholders are available at www.envisionreports.com/FANG.

 

Why did I receive a Notice of Internet Availability of Proxy Materials instead of a paper copy of the proxy materials?

 

We are providing access to our proxy materials, including this proxy statement and our 2020 Annual Report to Stockholders, over the Internet in accordance with the rules of the Securities and Exchange Commission, or the SEC. As a result, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy materials. Your Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials over the Internet, as well as instructions on how to request a paper copy of our proxy materials by mail.

 

Our proxy materials are also available at www.envisionreports.com/FANG.

 

How can I request a full set of proxy materials?

 

You may request, without charge, a full set of our proxy materials, including our 2020 Annual Report to Stockholders, for one year following the annual meeting of stockholders. If a broker or other nominee holds your shares of record, you may request a full set of our proxy materials by following the instructions contained in the Notice of Internet Availability of Proxy Materials that you received.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 13
 
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PROPOSAL 1

ELECTION OF DIRECTORS

 

DIRECTOR NOMINATIONS

 

The board is committed to recruiting and nominating directors for election who will collectively provide the board with the necessary diversity of skills, backgrounds and experiences to meet the Company’s ongoing needs and support oversight of our business strategy and priorities. In recommending candidates for election to the board, the nominating and corporate governance committee evaluates a candidate’s character, judgment, skill set, experience, independence, other time commitments and any other factors that the nominating and corporate governance committee deems relevant in light of the current needs of the board. The board believes that an important factor in its composition is diversity. To reflect this determination, the nominating and corporate governance committee seeks to include diverse candidates in all director searches, including by affirmatively instructing any search firms retained to assist the committee in identifying director candidates to seek to include diverse candidates. In addition, in determining whether to recommend incumbent directors for re-election to the board, the nominating and corporate governance committee also reviews and considers the director’s board and committee meeting attendance, the level of support that the director’s nomination received at the most recent annual stockholders’ meeting, director tenure and the well-roundedness of the board as a whole.

 

In 2020, the nominating and corporate governance committee recommended to the board, and the board approved, the nomination of Steven E. West, Travis D. Stice, Vincent K. Brooks, Michael P. Cross, David L. Houston, Stephanie K. Mains, Mark L. Plaumann and Melanie M. Trent to serve for a one-year term ending at the 2021 Annual Meeting, but in any event, until his or her successor is elected and qualified, unless ended earlier due to his or her death, resignation, disqualification or removal from office. All of these director nominees, except for Mr. Stice, our Chief Executive Officer, are independent under the Nasdaq listing standards and SEC rules, comprising a supermajority of independent directors currently serving on our board of directors.

 

About Director Nominees

 

Our board of directors currently consists of eight members who are elected annually. In the event any nominee should be unavailable to serve at the time of the meeting, the proxies may be voted for a substitute nominee selected by the board.

 

Biographical information with respect to each of the director nominees, together with a list of competencies that contributed to the conclusion that such person should serve as a director, are presented below. An overview of the core competencies of each director nominee is featured in a skills matrix on page 6.

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THESE DIRECTORS

 

Steven E. West, Chairman of the Board

Age 60

Director since: 2011

INDEPENDENT

Skills and Experience:

•  Corporate Governance

•  Finance/Capital Markets

•  Financial Reporting/Accounting Experience

•  Industry Background

 

 

•  Environmental, Health, Safety & Sustainability

•  Executive Experience

•  Executive Compensation

•  Risk Management

Mr. West has served as a director of the Company since December 2011 and Chairman of the Board since October 2012. Mr. West served as our Chief Executive Officer from January 2009 to December 2011. From January 2011 until December 2016, Mr. West was a partner at Wexford Capital LP, or Wexford Capital, focusing on Wexford Capital’s private equity energy investments. From August 2006 until December 2010, Mr. West served as senior portfolio advisor at Wexford Capital. From August 2003 until August 2006, Mr. West was the Chief Financial Officer of Sunterra Corporation, a former Wexford Capital portfolio company. From December 1993 until July 2003, Mr. West held senior financial positions at Coast Asset Management and IndyMac Bank. Prior to that, Mr. West worked at First Nationwide Bank, Lehman Brothers and Peat Marwick Mitchell & Co., the predecessor of KPMG LLP. Since February 2014, Mr. West has also served as Chairman of the Board of the general partner of Viper Energy Partners LP (Nasdaq: VNOM), one of our publicly traded subsidiaries, which we refer to as Viper, and since May 2019, he has served as Chairman of the Board of Rattler Midstream LP (Nasdaq: RTLR), another of our publicly traded subsidiaries, which we refer to as Rattler. Mr. West holds a Bachelor of Science degree in Accounting from California State University, Chico. We believe Mr. West’s background in finance, accounting and private equity energy investments, as well as his executive management skills developed as part of his career with Wexford Capital, its portfolio companies and other financial institutions qualify him to serve on our board of directors. In particular, we believe Mr. West’s strengths in the following core competencies provide value to our board of directors: Corporate Governance; Finance/Capital Markets; Financial Reporting/Accounting Experience; Industry Background; Environmental, Health, Safety & Sustainability; Executive Experience; Executive Compensation; and Risk Management.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 14
 
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Travis D. Stice

Age 59

Director since:2012

Skills and Qualifications:

•  Industry Background

•  Finance/Capital Markets

•  Environmental, Health, Safety & Sustainability

•  Executive Experience

 

 

•  Executive Compensation

•  Risk Management

Mr. Stice has served as our Chief Executive Officer since January 2012 and as a director of the Company since November 2012. Mr. Stice has also served as the Chief Executive Officer and a director of the general partner of Viper since February 2014 and as the Chief Executive Officer and a director of the general partner of Rattler since July 2018. Prior to these positions with Diamondback and the general partners of Viper and Rattler, Mr. Stice served as Diamondback’s President and Chief Operating Officer from April 2011 to January 2012. From November 2010 to April 2011, Mr. Stice served as a Production Manager of Apache Corporation, an oil and gas exploration company. He served as a Vice President of Laredo Petroleum Holdings, Inc., an oil and gas exploration and production company, from September 2008 to September 2010 and as a Development Manager of ConocoPhillips/Burlington Resources Mid Continent Business Unit, an oil and gas exploration company, from April 2006 until August 2008. Prior to that, Mr. Stice held a series of positions of increasing responsibilities at Burlington Resources until that company was acquired by ConocoPhillips in March 2006. He started his career with Mobil Oil in 1985. Mr. Stice has 37 years of industry experience and over 28 years of management experience. Mr. Stice graduated from Texas A&M University with a Bachelor of Science degree in Petroleum Engineering. Mr. Stice is a registered engineer in the State of Texas, and is a 37-year member of the Society of Petroleum Engineers. We believe that Mr. Stice’s leadership within the Company, his management experience and his knowledge of the critical internal and external challenges facing the Company and the oil and natural gas industry as a whole qualify him for service on our board of directors. In particular, we believe Mr. Stice’s strengths in the following core competencies provide value to our board of directors: Industry Background; Environmental, Health, Safety & Sustainability; Finance/Capital Markets; Executive Experience; Executive Compensation; and Risk Management.

 

Vincent K. Brooks

Age 62

Director since: 2020

INDEPENDENT

Skills and Qualifications:

•  Corporate Governance

•  Government, Legal & Regulatory

•  Environmental, Health, Safety & Sustainability

•  Executive Experience

 

 

•  Executive Compensation

•  Risk Management

•  Congressional Engagement; National Security and Cyber Defense and Protection

Vincent “Vince” Brooks has served as a director of the Company since April 2020. A career Army officer who served in the U.S. Army for over 42 years, retiring from active duty in 2019 as a four-star general, General Brooks spent his final seventeen years as a general officer and in nearly all of those years in command of large, complex military organizations in challenging situations. Most recently, from 2016 until his retirement, he was the commander of all Korean and United States forces in the Republic of Korea. In the two positions prior to Korea he served as the commander of all United States Army forces throughout the Indo-Asia Pacific region from 2013 to 2016 during the strategic rebalancing to Asia, and as the commander of all United States Army forces in the Middle East and Central Asia from 2011 to 2013 during the reduction of forces in Iraq and the buildup of forces in Afghanistan as well as the phenomenon known as “the Arab Spring.” During his tenure in the Army, he gained uncommon experience in leading through complex, ambiguous situations with significant national security interests and risks at stake. He handled crisis management, public communications, risk management and mitigation, budgetary assessment, leadership and management, international relations and interactions, cyber defense and protection, congressional engagement and strategic planning. Since 2020, General Brooks has also served as a director and a member of the compensation committee and nominating and corporate governance committee of Jacobs Engineering Group, Inc. (NYSE: J) and as a director of Verisk Analytics (Nasdaq: VRSK). General Brooks has also served on the board of the Gary Sinise Foundation since March 2019 and on the board of the Korea Defense Veterans Association since February 2020. General Brooks is also a visiting Senior Fellow at Harvard Kennedy School’s Belfer Center for Science and International Affairs, a Distinguished Fellow at the University of Texas with both the Clements Center for National Security and the Strauss Center for International Security and Law, an Executive Fellow with the Institute for Defense and Business, and the President of VKB Solutions LLC. General Brooks holds a Bachelor of Science in Engineering from the U.S. Military Academy at West Point, a Master of Military Art and Science from the U.S. Army School of Advanced Military Studies and holds an honorary Doctor of Laws from the New England School of Law and an honorary Doctor of Humanities from New England Law | Boston. General Brooks qualifies as an independent director under the Nasdaq listing standards. The Company believes that General Brooks’ strong leadership skills, together with his knowledge of policy, strategy and his diverse background qualifies him for service on our board of directors. In particular, we believe General Brooks’ strengths in the following core competencies provide value to our board of directors. Corporate Governance; Government, Legal & Regulatory; Environmental, Health, Safety & Sustainability; Executive Experience; Executive Compensation; Risk Management; and Congressional Engagement, National Security & Cyber Defense and Protection.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 15
 
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Michael P. Cross

Age 69

Director since: 2012

INDEPENDENT

Skills and Qualifications:

•  Corporate Governance

•  Finance/Capital Markets

•  Financial Reporting/Accounting Experience

•  Government, Legal & Regulatory

•  Industry Background

 

 

•  Environmental, Health, Safety & Sustainability

•  Executive Experience

•  Executive Compensation

•  Risk Management

Mr. Cross has served as a director of the Company since October 2012. Mr. Cross is owner of Michael P. Cross, Inc., an independent oil and natural gas producer, and serves as its President, a position he has held since January 2007. Mr. Cross also currently serves as a director of Warren Equipment Company, a position he has held since 2002. Mr. Cross served as a member of the executive committee of the Oklahoma Energy Resources Board from February 2005 until March 2014, where he was a member of the executive committee from 2007 until 2014. Mr. Cross served as a member of the Board of Directors of the Oklahoma Independent Petroleum Association for over 18 years, and was inducted into its Wildcatters Hall of Honor. Mr. Cross served on the Board of Directors for OGE Enogex GP LLC from October 2007 to October 2008. Mr. Cross also served as Chief Executive Officer and President of Windsor Energy Resources, Inc. from December 2005 until December 2006. Mr. Cross served as President of Twister Gas Services, L.L.C., an oil and gas exploration, production and marketing company, from its inception in 1996 until June 2003 and served as President of its predecessor, Twister Transmission Company, from 1990 to 1996. Mr. Cross graduated from Oklahoma State University with a Bachelor of Science degree in Business Administration. We believe that Mr. Cross’s strong oil and gas background and executive management experience qualify him for service on our board of directors. In particular, we believe Mr. Cross’s strengths in the following core competencies provide value to our board of directors: Corporate Governance; Finance/Capital Markets; Financial Reporting/Accounting Experience; Government, Legal & Regulatory; Industry Background; Environmental, Health, Safety & Sustainability; Executive Experience; Executive Compensation; and Risk Management.

 

David L. Houston

Age 68

Director since: 2012

INDEPENDENT

Skills and Qualifications:

•  Corporate Governance

•  Finance/Capital Markets

•  Financial Reporting/Accounting Experience

•  Industry Background

 

 

•  Executive Experience

•  Executive Compensation

•  Risk Management

Mr. Houston has served as a director of the Company since October 2012. Since 1991, Mr. Houston has been the principal of Houston Financial, a firm providing wealth management services with a focus on the energy sector. Since 2000, Mr. Houston has managed a mineral trust with approximately 9,200 net acres in Oklahoma, Texas, Kansas and New Mexico, which includes responsibility for leasing and production matters. Mr. Houston served on the board of directors as the Chairman of the Board and a member of the executive committee of Deaconess Hospital, Oklahoma City, Oklahoma, from January 1993 until December 2008 and was involved in negotiating a merger for the hospital. Mr. Houston served as a director of Gulfport Energy Corporation, or Gulfport, from July 1998, and as Chairman of its Board from June 2013, in each case, until June 2020. Mr. Houston also served on Gulfport’s nominating and governance, audit and compensation committees. He served as a director of Bronco Drilling Company from May 2005 until December 2010 and was a member of its audit committee. Mr. Houston received a Bachelor of Science degree in business from Oklahoma State University and a graduate degree in banking from Louisiana State University. He is Chairman-Elect of the Oklahoma State University Foundation and was recognized as a Top 100 Graduate of the Last 100 Years by the Oklahoma State University College of Business. In 2020, Mr. Houston was recognized as a Significant Sig by the Sigma Chi fraternity. We believe that Mr. Houston’s financial background and his executive management experience qualify him for service on our board of directors. In particular, we believe Mr. Houston’s strengths in the following core competencies provide value to our board of directors: Corporate Governance; Finance/Capital Markets; Financial Reporting/Accounting Experience; Industry Background; Executive Experience; Executive Compensation; and Risk Management.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 16
 
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Stephanie K. Mains

Age 53

Director since: 2020

INDEPENDENT

Skills and Qualifications:

•  Corporate Governance

•  Finance/Capital Markets

•  Financial Reporting/Accounting Experience

•  Industry Background

 

 

•  Executive Experience

•  Executive Compensation

•  Risk Management

Ms. Mains has served as director of the Company since April 2020. Ms. Mains has over 30 years of experience across diverse industry segments, including aviation, energy, and transportation. With the last 15 years, building and expanding global businesses serving the oil and gas, utility, distributed power, and electrification spaces. In 2020, she held the interim CEO role for GE Power Conversion, a $1B advanced electrification and digital solutions business, leading the business to a profitable turnaround through COVID-19. From 2015-2019, she served as the President and CEO, Industrial Solutions, a GE and later ABB company. She led Industrial Solutions, a $2.7B GE business delivering technologies that distribute, protect and control electricity, through a transformation and divestiture to ABB. From 2013-2015, Ms. Mains served as President and CEO of GE Distributed Power Global Services, where she integrated and grew a $2.2B global business platform, servicing technologies that provide at the point of use power to the oil and gas, utilities, mining, and industrial segments. From 2006 until 2013, she held positions of increasing responsibility in GE Energy from General Manager to Vice President. During this time, she led the global build-out and transformation of a $4B service operation providing power equipment and services to utility and oil and gas customers. Prior to joining GE Energy, she spent 16 years across multiple GE businesses in financial and leadership positions, including CFO of GE Aviation Services- Contractual Services and Material Solutions, a $4B aviation material services business. Ms. Mains is currently the CEO of LSC Communications-MCL, a portfolio company of Atlas Holdings, LLC. She serves as a director and audit committee member of Gates Industrial Corporation (NYSE:GTES), a director, audit and compensation committee member of LCI Industries (NYSE:LCII), and is a member of the board of managers for Stryten Manufacturing, a privately held portfolio company of Atlas Holdings, LLC. Ms. Mains holds a B.B.A in Finance from the University of Kentucky. Ms. Mains qualifies as an independent director under the Nasdaq listing standards. The company believes that Ms. Mains strong financial and executive management experience, knowledge of the energy, electrical infrastructure, aviation, and transportation industries, diverse background, and service on boards of other public companies qualifies her for service on our board of directors. In particular, we believe Ms. Mains strengths in the following core competencies provide value to our board of directors: Corporate Governance; Finance/Capital Markets; Financial Reporting/ Accounting Experience; Industry Background; Environmental, Health, Safety & Sustainability; Executive Experience; Executive Compensation; and Risk Management.

 

Mark L. Plaumann

Age 65

Director since: 2012

INDEPENDENT

Skills and Qualifications:

•  Corporate Governance

•  Finance/Capital Markets

•  Financial Reporting/Accounting Experience

 

 

•  Executive Experience

•  Executive Compensation

•  Risk Management

Mr. Plaumann has served as a director of the Company since October 2012. He is currently a Managing Member of Greyhawke Capital Advisors LLC, or Greyhawke, which he co-founded in 1998. Prior to founding Greyhawke, Mr. Plaumann was a Senior Vice President of Wexford Capital. Mr. Plaumann was formerly a Managing Director of Alvarez & Marsal, Inc. and the President of American Healthcare Management, Inc. He also was Senior Manager at Ernst & Young LLP. Mr. Plaumann served as a director and audit committee chairman for ICx Technologies, Inc. from 2006 until 2010, served as a director and a member of the audit and compensation committees of Republic Airways Holdings, Inc. from 2002 until 2017 and currently serves as a director of a several private entities. Mr. Plaumann served as a director, an audit committee chairman and a member of the conflicts committee of the general partner of Rhino Resource Partners LP, a coal operating company, from 2010 until 2016. Mr. Plaumann holds an M.B.A. and a B.A. in Business Administration from the University of Central Florida, where he currently serves on the Foundation Board and the Dean’s Advisory Board for the College of Business. We believe that Mr. Plaumann’s service on the boards of other public companies and his executive management experience, including previous experience as chairman of audit committees, qualifies him for service on our board of directors. In particular, we believe Mr. Plaumann’s strengths in the following core competencies provide value to our board of directors: Corporate Governance; Finance/Capital Markets; Financial Reporting/Accounting Experience; Executive Experience; Executive Compensation; and Risk Management.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 17
 
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Melanie M. Trent 

Age 56

Director since: 2018

INDEPENDENT

Skills and Qualifications:

•  Corporate Governance

•  Finance/Capital Markets

•  Financial Reporting Experience

•  Government, Legal & Regulatory

•  Industry Background

 

 

•  Environmental, Health, Safety & Sustainability

•  Executive Experience

•  Executive Compensation

•  Risk Management

Ms. Trent has served as a director of the Company since April 2018. Ms. Trent previously served in various legal, administrative and compliance capacities for Rowan Companies plc, from 2005 until April 2017, including as an Executive Vice President, General Counsel and Chief Administrative officer from 2014 until April 2017, as Senior Vice President, Chief Administrative Officer and Company Secretary from 2011 until 2014, and as Vice President and Corporate Secretary from 2010 until 2011. Prior to her tenure at Rowan, Ms. Trent served in various legal, administrative and investor relations capacities for Reliant Energy Incorporated, served as counsel at Compaq Computer Corporation and as an associate at Andrews Kurth LLP. She serves on the Board of Arcosa, Inc. (NYSE: ACA), a company focused on construction, energy and transportation products and services, and serves on the Audit and Governance and Sustainability Committees. She also serves on the Board of Frank’s International (NYSE:FI), a global oil services company that provides a broad and comprehensive range of highly engineered tubular running services, tubular fabrication, and specialty well construction and well intervention solutions with a focus on complex and technically demanding wells. Ms. Trent serves on the Audit and Compensation Committees and Chairs the Nominating & Governance Committees. Since February 2021, Ms. Trent has also served on the board of directors of Noble Corporation, a leading offshore drilling contractor for the oil and gas industry, is a member of its Nominating, Governance and Sustainability Committee and the Chair of its Compensation Committee. Ms. Trent holds a Bachelor’s degree from Middlebury College and a Juris Doctorate degree from Georgetown University Law Center. We believe that Ms. Trent’s strong legal and executive management experience, diverse background and knowledge of oil and gas and energy industries qualify her for service on our board of directors. In particular, we believe Ms. Trent’s strengths in the following core competencies provide value to our board of directors: Corporate Governance; Finance/Capital Markets; Financial Reporting Experience; Government, Legal & Regulatory; Industry Background; Environmental, Health, Safety & Sustainability; Executive Experience; Executive Compensation; and Risk Management.

 

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 18
 
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Summary of Director Nominee Core Competencies

 

The diversity of experience and wide variety of skills, qualifications and viewpoints of the director nominees embody key competencies that our nominating and corporate governance committee considers valuable to effective oversight of the Company. The following chart illustrates how the current board members individually and collectively represent these core competencies. The lack of an indicator for a particular item does not mean that the director does not possess that qualification, skill or experience, as each director is expected to be knowledgeable in all of these areas. The indicator merely represents a core competency that the director nominee brings to our board. For more information about each director nominee, see the individual biographies set forth beginning on page 14 above.

 

    West   Stice   Brooks   Cross   Houston   Mains   Plaumann   Trent
Corporate Governance                  
Contributes to the board’s understanding of best practices in corporate governance matters.                                
Environmental, Health, Safety & Sustainability                    
Contributes to the board’s oversight and understanding of environmental, health, safety and sustainability issues and their relationship to our business and strategy as we strive to provide the energy necessary for economic growth and social well-being, while securing a stable and healthy environment for the future.                                
Finance/Capital Markets                  
Valuable in evaluating our financial statements, capital structure and financial strategy.                                
Financial Reporting/Accounting Experience                    
Critical to the oversight of our financial statements and financial reports.                                
Government, Legal & Regulatory                          
Contributes to the board’s ability to guide us through government regulations, complex legal matters and public policy issues.                                
Industry Background                    
Offers pertinent background and knowledge to the board, providing valuable perspective on issues specific to our business, operations and strategy, including key performance indicators and the competitive environment.                                
Executive Experience                
Demonstrates leadership ability and provides valuable insights into operations and business strategy through a practical understanding of organizations, processes, strategy, risk management and the methods to drive change and growth.                                
Executive Compensation                
Contributes to the board’s ability to attract, motivate and retain executive talent.                                
Risk Management                
Contributes to the identification, assessment and prioritization of significant risks we face.                                
Congressional Engagement; National Security and Cyber Defense and Protection                              
Demonstrates experience with complex organizations with significant national security interests and risk, international relations and interactions, cyber defense and protection, congressional engagement and strategic planning.                                

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 19
 
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CORPORATE GOVERNANCE MATTERS

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

We believe that effective corporate governance should include regular constructive discussions with our stockholders. We have a proactive stockholder engagement process that encourages feedback from our stockholders. This feedback helps shape our governance practices, which include:

 

In 2020, increased the size of the board of directors to eight directors, enhancing and diversifying our board’s skills, qualifications and viewpoints
Enhanced the gender and racial diversity of our board of directors, adding three diverse candidates since 2018, currently representing approximately 38% of our board membership
Adopted proxy access bylaw provision
Supermajority of independent director nominees under the Nasdaq listing standards and SEC rules
Independent chair of the board of directors
Majority voting to elect directors (for uncontested elections)
Mandatory resignation if a majority vote is not received (for uncontested elections)
Emphasis on diversity in the nominating and corporate governance committee’s charter
Declassified board of directors
Active stockholder outreach with respect to corporate governance and other ESG topics and executive compensation
Active board oversight of risk and risk management
Independent director meetings in executive sessions
Commitment to social responsibility with respect to our people, community and environment
Adopted Human Rights Policy to reinforce our commitment to conducting our business in a manner that respects and promotes the fundamental rights and dignity of all people
Implemented our “Net Zero Now” initiative under which, effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions
In 2020, added specific environmental and safety metrics for determining annual STI compensation and for 2021 increased weighting of current environmental and safety metrics to 20% from 15% previously
Released third annual Corporate Responsibility Report in August 2020, which included an assessment of our current portfolio in various low carbon scenarios as outlined by the International Energy Agency
Maintain active safety, sustainability and corporate responsibility committee of the board of directors
Adopted Corporate Governance Guidelines as another step to reinforce our commitment to sound governance practices and policies
Adopted a comprehensive executive incentive compensation clawback policy
Maintain rigorous stock ownership guidelines for non-employee directors and our executives
Added both S&P 500 and the XOP Index as peers in our 2021 peer group
Developed a comprehensive policy governing corporate political spending and disclosed Diamondback’s 2020 corporate political contribution activity
Annual board and committee self-assessments
Each director attended at least 96% of the 2020 board and committee meetings
All financially literate audit committee members and three of the four members of the audit committee qualify as financial experts

 

For additional discussion of our stockholder engagement and actions that we have taken in response to stockholder feedback, see “Corporate Governance Matters—Stockholder Engagement” on page 27.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 20
 
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CORPORATE GOVERNANCE GUIDELINES

 

The board has adopted our Corporate Governance Guidelines as a way to reinforce its commitment to sound governance practices and policies. These Corporate Governance Guidelines include provisions concerning the following:

 

Role and responsibilities of the board and its committees;
Size of the board;
Selection, qualifications, independence, responsibilities, tenure and compensation of directors
Director resignation process;
Selection of chairman and chief executive officer;
Other public company directorships and committee service;
Board meetings and agendas;
Director access to management and advisors;
Executive sessions of independent directors;
Director orientation and education;
Annual performance evaluations of the board and its committees;
Succession planning;
Director compensation;
Stockholder and third party communications with the board;
Board communications with third parties; and
Confidentiality.

 

Our Corporate Governance Guidelines can be found on our website at www.diamondbackenergy.com under the “Investors—Corporate Governance” caption. You may also obtain copies of the Corporate Governance Guidelines, at no charge to you, by writing to Corporate Secretary, Diamondback Energy, Inc., 500 West Texas Ave, Suite 1200, Midland, TX 79701.

 

DIRECTOR QUALIFICATIONS AND NOMINATION PROCESS

 

Skills and Qualifications We Seek in Directors

 

As provided by the nominating and corporate governance committee’s charter and our Corporate Governance Guidelines, our nominating and corporate governance committee identifies, evaluates and recommends to our board of directors candidates with the goal of creating a balance of knowledge, experience and diversity.

 

It is our policy that potential directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the interests of our stockholders. We also require that the members of our board of directors be able to dedicate the time and resources sufficient to ensure the diligent performance of their duties on our behalf, including attending all meetings of the board of directors and applicable committee meetings. We also require that at least a majority of our directors meet the standards of independence promulgated by Nasdaq and the SEC. For a discussion of the core competencies that each director brings to our board, see “Summary of Director Nominee Core Competencies” above on page 19.

 

Board Refreshment and Diversity

 

Our nominating and corporate governance committee is committed to continuous improvement and employs a rigorous process to ensure that the composition of the board is diverse, balanced and aligned with the evolving needs of the Company. The board ensures refreshment and continued effectiveness by evaluating the composition of the board on a periodic basis to ensure its composition reflects a range of talents, skills and expertise sufficient to provide sound and prudent guidance with respect to our operations and the interests of our stockholders. In particular, the board seeks to maintain a balance of experience in the areas of accounting and finance, management, leadership and oil and gas related industries as well as other core competencies discussed under “Summary of Director Nominee Core Competencies.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 21
 
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Additionally, it is our policy that our nominating and corporate governance committee considers diversity in its evaluation of candidates for board membership. To this end, our board believes that diversity with respect to viewpoint, including such that is held by candidates of different gender, race, ethnicity, background, age, thought and tenure on our board (in connection with the consideration of the renomination of an existing director), should be an important factor in board composition. To reflect this policy and to ensure a competitive recruitment process, our nominating and corporate governance committee, in accordance with its charter, seeks to include diverse candidates in all director searches, taking into account diversity of gender, race, ethnicity, background, age, thought and tenure on our board (in connection with the consideration of the renomination of an existing director), including by affirmatively instructing any search firm retained to assist the nominating and corporate governance committee in identifying director candidates to seek to include diverse candidates from traditional and nontraditional candidate groups. In accordance with its charter, our nominating and corporate governance committee also ensures that diversity considerations are discussed in connection with each potential nominee, as well as on a periodic basis in connection with its periodic review of the composition of the board and the size of the board as a whole.

 

As part of our ongoing commitment to expand the range of talents, skills, expertise and diversity on our board, we have increased the size of our board of directors from five to eight over the course of the last three years, adding three ethnically and gender diverse directors and enhancing and diversifying the skill set of our board of directors in the areas of risk management across energy and other industries and the government sector, national security and cybersecurity, environmental and social responsibility, regulatory and legal compliance, adding Melanie M. Trent in April 2018 and Vincent Brooks and Stephanie Mains in April 2020. These directors advance the operational and executive management expertise and gender, racial and age diversity of our board of directors.

 

How We Select our Director Nominees

 

The board is responsible for nominating directors and filling vacancies that may occur between annual meetings, based upon the recommendation of our nominating and corporate governance committee. The nominating and corporate governance committee considers the Company’s current needs and long-term and strategic plans to determine the skills, experience and characteristics needed by our board. The nominating and corporate governance committee then identifies, considers and recommends director candidates to the board in light of its commitment to board improvement, refreshment and diversity discussed above. Generally, the committee identifies candidates through the business and organizational contacts of our advisors, directors and management team and through the use of third-party search firms.

 

The nominating and corporate governance committee, in accordance with its charter and our Corporate Governance Guidelines, takes into consideration the key qualifications and skills described above when evaluating candidates. The nominating and corporate governance committee also considers whether potential candidates will likely satisfy independence standards for service on the board and its committees and the number of public boards on which the candidate already serves.

 

Stockholder Nomination of Candidates and Proxy Access

 

Under the Company’s bylaws, we provide proxy access, permitting a stockholder, or a group of up to 20 eligible stockholders, that has continuously owned for no less than three years at least 3% of our outstanding common stock, to nominate and include in our proxy materials up to the greater of two directors and 20% of the number of directors currently serving on the Company’s board, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in our bylaws.

 

Stockholders who wish to submit a director nomination proposal, but who do not wish to have such nomination included in the Company’s proxy materials, must notify the Company in writing of the information required by the provisions of our bylaws dealing with such stockholder proposals.

 

See “Submission of Future Stockholder Proposals” below for additional detail and deadlines regarding submitting director nominees.

 

Majority Voting

 

To be elected, a director must receive a majority of the votes cast with respect to that director at the meeting. Our bylaws and Corporate Governance Guidelines provide that if the number of shares voted “FOR” a nominee who is serving as a director (an incumbent) does not exceed 50% of the votes cast “AGAINST” that director, he or she will tender his or her resignation to the board. The board will evaluate whether to accept or reject such resignation, or whether other action should be taken. Within 90 days of the certification of the stockholder vote, the board is required to decide whether to accept the resignation and publicly disclose its rationale for the decision.

 

In a contested election, where the number of nominees exceeds the number of directors to be elected, the required vote would be a plurality of votes cast, which means that the directors receiving the largest number of “FOR” votes will be elected in such contested election.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 22
 
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DIRECTOR INDEPENDENCE

 

Our Corporate Governance Guidelines provide that a majority of the directors of the board must be “independent” in accordance with Nasdaq listing standards. Our board of directors has determined that each of Steven E. West, Vincent K. Brooks, Michael P. Cross, David L. Houston, Stephanie K. Mains, Mark L. Plaumann and Melanie M. Trent meets the standards regarding independence set forth in the Nasdaq listing standards and is free of any relationship which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out their responsibilities as directors of the Company.

 

Our board of directors has determined that each member of the audit committee is independent for purposes of serving on such committee under the Nasdaq listing standards and SEC rules. In addition, our board of directors has determined that each current member of the audit committee is financially literate under the Nasdaq listing standards and that each of Mr. Plaumann, Mr. Cross and Mr. Houston qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d) of Regulation S-K.

 

Our board of directors has also determined that each member of the compensation committee and the nominating and corporate governance committee meets the independence requirements applicable to those committees under the Nasdaq rules. In addition, our board of directors determined that each member of our compensation committee is a “non-employee director” in accordance with Rule 16b-3 under the Exchange Act.

 

In addition, each member of the safety, sustainability and corporate responsibility committee is independent under the Nasdaq listing standards, although Nasdaq does not set independence standards for this committee.

 

Executive Sessions of Independent Directors

 

Our independent directors have the opportunity to meet in an executive session following each regularly scheduled meeting of the board of directors and its committees. Our independent directors met in an executive session on three (3) occasions in 2020.

 

BOARD LEADERSHIP STRUCTURE

 

In accordance with our Corporate Governance Guidelines, the positions of Chairman of the Board and Chief Executive Officer are held by two different individuals. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business and operations, while allowing our Chairman of the Board to lead the board in its fundamental role of providing advice to and oversight of management. The Chairman of the Board provides leadership to our board of directors and works with the board of directors to define its structure and activities in the fulfillment of its responsibilities. The Chairman of the Board sets the board agendas, with the input from other members of the board and our management, facilitates communications among and information flow to directors, has the power to call special meetings of our board of directors and stockholders and presides at meetings of our board of directors and stockholders. The Chairman of the Board also advises and counsels our Chief Executive Officer and other officers.

 

We believe that our directors bring a broad range of leadership experience to the boardroom and regularly contribute to the thoughtful discussion involved in effectively overseeing the business and affairs of the Company. We believe that the atmosphere of our board is collegial, that all board members are well engaged in their responsibilities, and that all board members express their views and consider the opinions expressed by other directors. Seven of the eight directors on our board, including the Chairman of the Board, are independent under the Nasdaq listing standards and SEC rules, and Mr. Houston has been appointed as the lead director among our independent directors. In such capacity, Mr. Houston’s duties include presiding at all meetings of the board at which the Chairman of the Board is not present, including executive sessions of the independent directors, and serving as a liaison between the Chairman of the Board and independent directors, We believe that all of our independent directors have demonstrated leadership in business enterprises and are familiar with board processes. Our independent directors are involved in the leadership structure of our board by serving on our audit, nominating, compensation and safety, sustainability and corporate responsibility committees, each having a separate independent chairperson. Specifically, the chair of our audit committee oversees the accounting and financial reporting processes, as well as compliance with legal and regulatory requirements. The chair of our compensation committee oversees the annual performance evaluation of our Chief Executive Officer and our compensation policies and practices and their impact on risk and risk management. The chair of our nominating and corporate governance committee monitors matters such as the composition of the board and its committees, board performance and best practices in corporate governance. As such, each committee chair provides independent leadership for purposes of many important functions delegated by our board of directors to such committee. The chair of our safety, sustainability and corporate responsibility committee provides leadership with respect to best practices in the areas environmental, sustainability and corporate and social responsibility.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 23
 
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BOARD MEETINGS, COMMITTEES AND MEMBERSHIP

 

In 2020, our board of directors met fifteen (15) times, in person or, due to COVID-19 considerations, remotely via electronic or telephonic means. In addition to these meetings, the board of directors adopted resolutions by unanimous written consent. Each director attended at least 96% of the meetings of the board of directors and the meetings of the committees on which he or she served. To the extent a director was unable to attend a meeting in 2020, he or she met telephonically with the Chief Executive Officer to receive a report regarding the materials reviewed at the meeting.

 

Recognizing that director attendance at our Annual Meeting can provide our stockholders with an opportunity to communicate with directors about issues affecting the Company, we actively encourage our directors to attend the Annual Meeting of Stockholders. Three (3) out of eight of our directors attended our 2020 Annual Meeting of Stockholders in person, and all five (5) remaining directors attended our 2020 Annual Meeting of Stockholders telephonically due to COVID-19 considerations.

 

Board Committee Membership

 

The table below shows the membership of each of the board’s committees, as well as information about each committee’s principal functions.

 

Audit Committee

 

Members   Principal Functions   Number of
Meetings in
2020
Mark L. Plaumann*
Michael P. Cross
David L. Houston
Melanie M. Trent
 

•  Reviews and discusses with management and the independent auditors the integrity of our accounting policies, internal controls, financial statements, accounting and auditing processes and risk management compliance, including cybersecurity risks.

•  Monitors and oversees our accounting, auditing and financial reporting processes generally, including the qualifications, independence and performance of the independent auditor.

•  Monitors our compliance with legal and regulatory requirements.

•  Establishes procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

•  Reviews and approves related party transactions.

•  Appoints, determines compensation, evaluates and terminates our independent auditors.

•  Pre-approves audit and permissible non-audit services to be performed by the independent auditors.

•  Prepares the report required by the SEC for the inclusion in our annual proxy statement.

•  Reviews and reassesses the adequacy of the audit committee charter on a periodic basis.

•  Inform our independent auditors of the audit committee’s understanding of significant relationships and transactions with related parties and review and discuss with our independent auditors the auditors’ evaluation of our identification of, accounting for and disclosure of our relationships and transactions with related parties, including any significant matters arising from the audit regarding our relationships and transactions with related parties.

•  Conducts a periodic performance evaluation of the committee.

  Four (4)
* Committee Chairperson.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 24
 
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Compensation Committee

 

Members   Principal Functions   Number of
Meetings in
2020
Michael P. Cross*
David L. Houston
Mark L. Plaumann
Melanie M. Trent
Stephanie K. Mains**
 

•  Oversees and administers our executive compensation policies, plans and practices and evaluates their impact on risk and risk management.

•  Reviews and makes recommendations to the board of directors with respect to compensation plans and policies for employees generally.

•  Discharges the board of directors’ responsibilities relating to the compensation of our Chief Executive Officer and other executive officers.

•  Where appropriate or required, makes recommendations to our stockholders with respect to incentive compensation and equity-based plans.

•  Reviews, approves and administers our Executive Annual Incentive Compensation Plan, including the establishment of performance criteria and targets and awards under such plan.

•  Reviews, approves and administers our equity-based compensation plans, including the grants of stock options, restricted stock units and other equity awards under such plans.

•  Makes recommendations to the board with respect to director compensation.

•  Determines any stock ownership guidelines for our chief executive officer and other executive officers and directors.

•  Conducts a periodic performance evaluation of the committee.

•  Reviews disclosure related to executive compensation in our proxy statement.

•  Reviews and reassesses the adequacy of the compensation committee charter.

•  Advise the board of directors regarding the stockholder advisory vote on executive compensation and golden parachutes, including the frequency of such votes.

•  Reviews and considers the stockholder advisory vote on executive compensation when determining policies and making decisions on executive compensation.

•  Has the sole authority to appoint, compensate and oversee work of any compensation consultant and other advisors with respect to executive compensation and assistance with other charter responsibilities and determines any conflict of interest with such compensation consultant.

  Two (2)
* Committee Chairperson.
** Ms. Mains was appointed to serve on the compensation committee effective as of July 1, 2020.

 

Nominating and Corporate Governance

 

Members   Principal Functions   Number of
Meetings in
2020
David L. Houston*
Michael P. Cross
Mark L. Plaumann
Melanie M. Trent
 

•  Assists the board of directors in developing criteria for, identifying and evaluating individuals qualified to serve as members of our board of directors.

•  Identifies and recommends director candidates to the board of directors to be submitted for election at the Annual Meeting and to fill any vacancies on the board of directors.

•  Evaluates candidates for board of directors’ membership, including those recommended by stockholders of the Company.

•  Periodically reviews and makes recommendations regarding the composition and size of the board of directors and each of its committees.

•  Conducts a periodic performance evaluation of the committee.

•  Reviews and reassesses the adequacy of the nominating and corporate governance committee charter and recommends any proposed changes to the board of directors for approval.

  One (1)
* Committee Chairperson.

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 25
 
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Safety, Sustainability and Corporate Responsibility Committee

 

Members   Principal Functions   Number of
Meetings in
2020
Melanie M. Trent*
Michael P. Cross
David L. Houston
Mark L. Plaumann
Vincent Brooks**
 

•  Periodically reviews and discusses with management the Company’s strategy, policies and practices regarding environmental, safety and social responsibility, or ESG, matters, makes related recommendations to the board of directors and conducts any necessary investigations or studies.

•  Oversees management’s monitoring and adherence to the Company’s policies on ESG matters and the quality of the Company’s procedures and disclosure for identifying, assessing, monitoring and managing the principal environmental, health, safety and social risks in the Company’s business.

•  Considers and recommends to the Board regarding current and emerging trends, major legislative and regulatory developments and other public policy issues that are reasonably likely to affect the business operations, performance or public image of the Company.

•  Oversees the Company’s policy on corporate charitable and philanthropic activities, public policy advocacy efforts, including political contributions, and policies promoting diversity, inclusion and human and workplace rights.

•  Conducts a periodic performance evaluation of the committee.

•  Reassesses and reports to the board of directors on the adequacy of the committee charter.

  Three (3)
* Committee Chairperson.
** Mr. Brooks was appointed to serve on the safety, sustainability and corporate responsibility committee effective as of July 1, 2020.

 

Committee Charters

 

The charters for our audit committee, compensation committee, nominating and corporate governance committee and safety, sustainability and corporate responsibility committee can be found on our website at www.diamondbackenergy.com under the “Investors—Corporate Governance” caption. You may also obtain copies of these charters at no charge to you, by writing to Corporate Secretary, Diamondback Energy, Inc., 500 West Texas Ave, Suite 1200, Midland, TX 79701.

 

BOARD EVALUATION PROCESS

 

The board is committed to continuous improvement with respect its ability to carry out its responsibilities. In accordance with our Corporate Governance Guidelines, the board and its committees conduct self-evaluations relating to their performance. These self-evaluations are a critical tool in assessing the composition and effectiveness of the board, its committees and its directors and presents an opportunity to identify areas of strength and areas capable of improvement. Our nominating and corporate governance committee supervises these evaluations, which are conducted by outside counsel and include an assessment of, among other things:

 

the effectiveness of the board and committee structure;
board and committee composition, including assessment of skills, experience and occupational and personal backgrounds;
board culture and dynamics, including the effectiveness of discussion and debate at board and committee meetings;
the quality of board and committee agendas and the appropriateness of board and committee priorities; and
the quality of communication between management and board members.

 

The board considers the results of the evaluations to assess whether the board and its committees have the necessary diversity of skills, backgrounds and experiences to meet the Company’s needs and to further enhance the effectiveness of the board and its committees over time.

 

BOARD’S ROLE IN RISK OVERSIGHT

 

As an exploration and production company, we face a number of risks, including risks associated with supply of and demand for oil and natural gas, volatility of oil and natural gas prices, exploring for, developing, producing and delivering oil and natural gas, declining production, environmental and other government regulations and taxes, weather conditions, including hurricanes and freezing temperatures, that can affect oil and natural gas operations over a wide area, adequacy of our insurance coverage, political instability or armed conflict in oil and natural gas producing regions and overall economic environment. Management is responsible for the day-to-day

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 26
 
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management of risks we face as a company, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

 

Our board of directors believes that full and open communication between management and the board of directors is essential for effective risk management and oversight. Our Chairman of the Board meets regularly with our Chief Executive Officer and our Chief Financial Officer to discuss strategy and risks facing the Company. Our executive officers regularly attend the board meetings and are available to address any questions or concerns raised by the board on risk management-related and any other matters. Other members of our management team periodically attend the board meetings or are otherwise available to confer with the board to the extent their expertise is required to address risk management matters. Periodically, our board of directors receives presentations from senior management on strategic matters involving our operations. During such meetings, our board of directors also discusses strategies, key challenges, and risks and opportunities for the Company with senior management.

 

Committee Risk Oversight Responsibilities

 

While our board of directors is ultimately responsible for risk oversight at the Company, the board’s four committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. The audit committee assists the board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and discusses policies with respect to risk assessment and risk management. Cybersecurity plays an integral role in our risk management strategy, and cybersecurity preparedness continues to be an area of increasing focus for our board, the audit committee and our management team. The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating and corporate governance committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure and executive officers, and corporate governance. The safety, sustainability and corporate responsibility committee assists the board in fulfilling its oversight responsibility over management’s monitoring and adherence to the Company’s policies on ESG matters and the quality of the Company’s procedures for identifying, assessing, monitoring and managing the principal environmental, health, safety and social risks in the Company’s business.

 

STOCKHOLDER ENGAGEMENT

 

We value the views of our stockholders and embrace active stockholder engagement as an important tenet of good governance. Because positive and ongoing dialogue builds informed relationships that promote transparency and accountability, members of senior management employ a year-round approach, including proactive engagement as well as responsiveness to specific areas of focus. Information and feedback received through our engagement activities is shared with our board, which helps inform its decisions. In response to feedback obtained during our stockholder outreach efforts, the following past actions, some of which had already been independently considered for implementation by our board of directors or committees, were undertaken:

 

Our board of directors amended our bylaws to provide our stockholders with proxy access;
Our board of directors also previously amended our bylaws to provide for the majority vote requirement to elect directors to our board, which replaced the prior plurality voting standard applicable to our director election;
Our board of directors and the nominating and corporate governance committee approved enhancements to the nominating committee charter and director nomination process that focused on increasing the size of the board and number of independent directors, with a supermajority of the board currently being independent;
We increased the size and enhanced the ethnic and gender diversity and skill set of our board of directors, adding three diverse candidates between April 2018 and April 2020, currently representing approximately 38% of our board membership;
Our board of directors created the safety, sustainability and corporate responsibility committee focused on sound strategy and best policies and practices regarding environmental, safety and social responsibility matters;
Our board of directors adopted Corporate Governance Guidelines as an additional step to reinforce our commitment to prudent corporate governance practices and policies;
The compensation committee fully transitioned to three-year performance-based equity awards, with no two-year performance-based equity awards granted or vesting during 2019 or 2020 and no two-year performance-based awards contemplated in the future, and implemented double-trigger change of control provisions in Company equity awards granted since the beginning of 2018;
The compensation committee enhanced the disclosure of targets and goals for performance-based awards, the discussion of equity award process for our named executive officers and the underlying rationale for such awards;

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 27
 
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The compensation committee added the return on average capital employed and ESG goals among metrics for determining cash performance awards in 2020 and increased the weighting attributable to the ESG component of our STI metrics to 20% for 2020;
Our board of directors implemented and maintains rigorous stock ownership guidelines for our non-employee directors in addition to the previously adopted stock ownership guidelines for all of our executive officers;
Our board of directors adopted a comprehensive executive incentive compensation clawback policy;
We released our third annual Corporate Responsibility Report, which included an assessment of our current portfolio in various low carbon scenarios as outlined by the International Energy Agency;
We adopted a Human Rights Policy;

 

During 2020, we continued our stockholder outreach efforts and solicited feedback on our executive compensation programs, corporate governance, corporate responsibility and other important issues. We met or initiated contact with investors representing over 65% of our outstanding shares. In addition, members of Company senior management attended 14 virtual investor conferences and hosted eight virtual bus tours. We also had discussions of certain of these matters with other investors during investor presentation events and earnings and other investor calls throughout the year.

 

These discussions have provided us an opportunity to further explore issues important to us and our stockholders, including corporate governance policies, executive compensation and corporate sustainability and environmental policies. In particular, we received constructive feedback that helped shape a number of executive compensation enhancements made for 2021 and will assist us in further refining our corporate responsibility reports in the future. We look forward to continued engagement with stockholders throughout the year so that we can incorporate their ideas to further strengthen our executive compensation programs, continue our commitment to ESG matters, improve our disclosure practices and enhance our governance practices.

 

CORPORATE RESPONSIBILITY AND SUSTAINABILITY

 

As an oil and gas company, we understand that we have the potential to make a uniquely positive impact in the world. We provide affordable, domestically produced energy that helps run our homes, businesses, transportation networks and other key components of our economy. As we continue to provide a critical product that contributes to economic growth and society, we view the connection between responsible operations and business success a fundamental necessity. We are committed to the safe and responsible development of our resources in the Permian Basin. We operate in the same areas in which a majority of our employees and their families live, and are dedicated to preserving and protecting the environment for the benefit of our stockholders, employees and our community. We have identified key areas of focus, including energy, emissions, waste and spills, water use, compliance, health and safety, training and education, and community, and have described below certain of our efforts relating to these areas. We have also established the safety, sustainability and corporate responsibility committee of our board of directors that oversees, among other things, our management’s monitoring and adherence to our policies on ESG matters and the quality of our procedures for identifying, assessing, monitoring and managing the principal environmental, health, safety and social risks in our business and provides leadership with respect to best practices in the areas environmental, sustainability and corporate and social responsibility.

 

Commitment to Protecting People

 

The well-being of our employees and contractors matters to us. Whether it is minimizing workplace incidents or preparing for the unexpected, we continue to make protecting our people a fundamental component of our corporate responsibility efforts. We maintain a formal health and safety program that includes employee training and new hire orientation on a variety of environmental and safety topics, including proper reporting. We also ensure our employees have all necessary equipment to operate safely. Employees undergo significant training and education each year to become knowledgeable on regulatory compliance, industry standards and innovative opportunities to effectively manage the challenges of developing our resources. In light of the nature of our work and the locations of some sites in and near communities, we also proactively prepare for the unexpected by developing emergency response plans to cover potentially hazardous situations.

 

For 2020, we further demonstrated our commitment to safety by adding a performance metric to our annual incentive compensation scorecard that measures our total recordable incident rate. We also grew our Health, Safety and Environmental organization by adding a full-time, field-dedicated coordinator to monitor specific facilities and help prevent potential issues.

 

Diamondback also demonstrated its commitment to employee safety through its ongoing efforts in response to the COVID-19 pandemic. We established an internal, multi-disciplinary team to work with outside professional advisors and implement protocols and procedures designed to mitigate risk to our employees and operations. We quickly and efficiently migrated to a remote work environment in March 2020. As the pandemic evolved and guidance from federal, state and local authorities materialized, our team worked with outside advisors to develop protocols and procedures designed to allow our field operations to continue safely working and enable a rolling return of certain employees to our offices.

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 28
 
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Commitment to Environmental Responsibility

 

We are committed to exploration, exploitation, acquisition and production of oil, natural gas and natural gas liquids in an environmentally responsible manner and in compliance with applicable federal, state and local laws, including laws regulating emissions of greenhouse gases, such as methane. We take actions beyond those required by law to reduce methane emissions, recycle an increasing percentage of water and make significant investment in infrastructure to reduce environmental impact. In keeping with that commitment, our overall approach includes these key activities:

 

Investing in and implementing the best available technology and innovative methods for drilling and completing wells, which has allowed us to achieve the same or improved results with less proppant, fewer wells and a greatly reduced environmental footprint;
Minimizing our environmental impact and improve safety for all stakeholders;
Implementing our “Net Zero Now” initiative under which, effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions;
Planning to purchase carbon credits to offset the remaining emissions to the extent our greenhouse gas and methane intensity targets do not eliminate our carbon footprint;
Committed to reducing Scope 1 GHG intensity by at least 50% from 2019 levels by 2024;
Committed to reducing methane intensity by at least 70% from 2019 levels by 2024;
Motivating our executive and senior management to strive to achieve measurable targets and goals with respect to flaring, GHG emissions and total recordable oil spills; increasing weighting of current ESG metrics to 20%;
Focusing on the hydrocarbon gathering infrastructure, as well as sourced water disposal and produced-water recycling;
Minimizing use of water fit for human consumption in our operations;
Safely transporting oil and gas and minimizing impacts from air emissions, flared gas and spills; and
Maximizing fluid transportation via pipelines rather than diesel powered trucks.

 

Commitment to Community

 

Giving back to society and the community in which we operate is part of who we are and we strongly believe these investments of time, money and compassion allow our employees to both experience and demonstrate the core values of our company. We sponsor improvements in public education, participate in, and support, many community and national organizations and actively promote local groups. Below are a few examples of investments of time and money that we made in the communities where we live and work during 2020:

 

We made monetary donations to local charitable organizations to support their efforts during the COVID-19 pandemic, including the West Texas Food Bank and Regional Food Bank of Oklahoma, among others.
We donated personal protective equipment, including masks and gloves, to frontline workers, including healthcare professionals and law enforcement.
We donated iPads to the Midland Memorial Hospital Intensive Care Units to enable COVID-19 patients to see and interact safely with their loved ones.
We provided funding to several summer reading programs in Midland that specialize in helping disadvantaged children.
We held virtual reading sessions with students.
We planted trees at a local Midland park.

 

Moving Forward

 

We are proud of what we have been able to accomplish as a company and believe our achievements to date demonstrate a serious and growing commitment to corporate responsibility. We are firmly resolved to live our core values of leadership, integrity, excellence, people and teamwork, and we will continue to strive for continuous improvement in the years ahead. As we enhance our corporate responsibility efforts and increase stockholder value, we look forward to providing periodic updates in future reports that detail both our challenges and successes.

 

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Highlights of our accomplishments with respect to ESG matters are below.

 

ENVIRONMENTAL    
Emissions  

•  Engaged multiple third-party consultants to analyze and perform direct measurements of vent gasses on our petroleum storage tank emission-control systems and proactively identify, report and repair failures.

•  Continue to invest in and implement upgraded equipment and new, low impact technology, including compressed instrument air systems, and combustion equipment designed to have the highest burn efficiency possible under normal operations.

•  Continue our commitment to engineering and equipment designs that keep our gas in sealed, recoverable vessels to reduce the amount of gas that flashes in tanks.

Water Management  

•  Significantly increased use of recycled water in our production operations.

•  Continued to enhance our tank battery design to include more efficient control technologies, including installing free water knockouts in place of gun barrels on all new tank battery locations.

Spills and Spill Management  

•  Continue focus on low spill rate, reducing total fluid spill rate per 1,000 Bbl produced fluids, achieving spill rate of below industry average.

•  Installed high-liquid-level alarms on all storage tanks as well as high-level “well-kill” systems.

•  Investing in variable frequency drives to maintain pipeline operating pressures.

Climate Change  

•  Committed to understanding the potential impact of growing alternative energy sources and the transition to a lower-carbon economy on our oil and gas portfolio and seek to factor changing conditions into our strategic plans, primarily through scenario planning to assess portfolio resilience over the long term.

•  Implemented our “Net Zero Now” initiative under which, effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions.

•  To the extent our greenhouse gas and methane intensity reduction targets do not eliminate our carbon footprint, we intend to purchase carbon credits to offset the remaining emissions.

•  Continue to search for innovative ways to implement cost-effective, appropriate steps to monitor, measure and reduce our energy use, waste and emissions.

SAFETY  

•  We grew our Health, Safety and Environmental (HSE) organization by adding a full-time, field-dedicated coordinator to monitor specific facilities and help prevent potential issues.

•  We continued investing in new and improved safety technologies, including utilization of a cloud-based application that helps field employees identify and immediately report incidents, potential hazards and near misses using a mobile device.

•  We have an active safety, sustainability and corporate responsibility committee of our board of directors that oversees our policies on ESG matters and the quality of our procedures for identifying, assessing, monitoring and managing the principal environmental, health, safety and social risks in our business and provide leadership with respect to best practices in the areas environmental, sustainability and corporate and social responsibility.

•  Took responsible safety actions to protect health and well-being of our employees in response to the COVID-19 pandemic.

COMMUNITY  

•  Together with 19 fellow energy companies, we participate in the Permian Strategic Partnership, which has committed more than $100 million over a five-year period toward developing superior educational programs, accessible housing, a supportive healthcare system, safer roads and a more skilled workforce for communities across West Texas and south-eastern New Mexico.

 

Our 2020 Corporate Responsibility Report can be found on our website under the “About—Sustainability” caption.

 

CODE OF BUSINESS ETHICS AND CONDUCT

 

We have adopted a Code of Business Conduct and Ethics designed to help directors and employees resolve ethical issues. Our Code of Business Conduct and Ethics embodies our commitment to conduct our businesses in accordance with all applicable laws, rules and regulations and the highest ethical standards. Our Code of Business Conduct and Ethics applies to all directors and employees, including the Chief Executive Officer, the Chief Financial Officer, principal accounting officer and controller and persons performing similar functions. Our Code of Business Conduct and Ethics covers various topics including, but not limited to, conflicts of interest, fair dealing, discrimination and harassment, confidentiality, compliance procedures and employee complaint procedures. Our Code of Business Conduct and Ethics is posted on our website under the “Investors-Corporate Governance” caption. You may also obtain copies of our Code of Business Conduct and Ethics at no charge to you, by writing to Corporate Secretary, Diamondback Energy, Inc., 500 West Texas Ave, Suite 1200, Midland, TX 79701.

 

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COMMUNICATIONS WITH THE BOARD

 

Individuals may communicate with our board of directors or individual directors by writing to Corporate Secretary, Diamondback Energy, Inc., 500 West Texas Ave, Suite 1200, Midland, TX 79701. Our Corporate Secretary will review all such correspondence and forward to our board of directors a summary of all such correspondence and copies of all correspondence that, in the opinion of our Corporate Secretary, relates to the functions of our board of directors or any committee thereof or that he otherwise determines requires their attention. Directors may review a log of all such correspondence received by us and request copies. Concerns relating to accounting, internal control over financial reporting or auditing matters will be immediately brought to the attention of the chairman of the audit committee and handled in accordance with the audit committee procedures established with respect to such matters.

 

DIRECTOR COMPENSATION

 

Members of our board of directors who are also officers or employees of the Company do not receive compensation for their services as directors.

 

Cash Compensation

 

In February 2020, our board of directors approved, based upon the compensation committee’s recommendation and the market study conducted by its independent compensation consultant, modifications to our non-employee director compensation program to increase the base retainer component of director compensation from $65,000 to $80,000 to align our director compensation program more closely with current market practices. Consistent with the prior year practice, we also provide additional annual payments of $120,000 to the Chairman of the Board, $20,000 to the chairperson of the audit committee, $10,000 to each other member of the audit committee, $15,000 to the chairperson of all other committees and $5,000 to each other member of each other committee, with such amounts paid in quarterly installments.

 

Equity Compensation

 

We also provide our non-employee directors with equity compensation under our equity incentive plan. The annual grant of restricted stock is generally made to non-employee directors at the close of business on the date of each annual meeting of our stockholders.

 

In February 2020, our board of directors approved, based upon the compensation committee’s recommendation and the market study conducted by its independent compensation consultant, an increase in the equity compensation component of non-employee director compensation from $180,000 to $200,000, to align our director compensation program more closely with current market practices. In April 2020, our board of directors approved, based on the recommendation of the compensation committee, following consultation with its independent compensation consultant, a further modification to the equity compensation component of director compensation with respect to the awards to be made to non-employee directors at the close of business on the date of the 2020 annual stockholders meeting (the 2020 Awards). As modified, the number of restricted stock units granted to each non-employee director in respect of the 2020 Awards was to be calculated using the higher of (i) the stock price used to calculate equity awards granted to our NEOs on March 1, 2020 ($67.45 per share, calculated based on the average closing share price for the five trading days immediately preceding the last trading day in February 2020) and (ii) the existing methodology under our director compensation program (calculated based on the average closing share price for the five trading days immediately preceding the applicable annual meeting of stockholders). As a result of the COVID-19 pandemic and related energy market disruption, this modification resulted in fewer shares of our common stock granted to our non-employee directors in their 2020 awards.

 

Further details regarding our director compensation in 2020 are set forth under the heading “Compensation Tables— 2020 Director Compensation” below.

 

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AUDIT COMMITTEE REPORT

 

The audit committee is responsible for providing independent, objective oversight for the integrity of the Company’s financial reporting process and internal control system. Other primary responsibilities of the audit committee include the review, oversight and appraisal of the qualifications, independence and audit performance of the Company’s independent registered public accounting firm and providing an open venue for communication among the independent registered public accounting firm, financial and senior management, our internal auditors and the board of directors of the Company. A more detailed description of the responsibilities of the audit committee is set forth in its written charter, which is posted on our website at www.diamondbackenergy.com. The following report summarizes certain of the audit committee’s activities with respect to its responsibilities during 2020.

 

Review with Management and Independent Registered Public Accounting Firm

 

The audit committee has reviewed and discussed with management and Grant Thornton LLP, an independent registered public accounting firm, the audited consolidated financial statements of the Company for the year ended December 31, 2020.

 

Controls and Procedures

 

The audit committee discussed with management and Grant Thornton LLP the quality and adequacy of the Company’s disclosure controls and procedures. The audit committee also reviewed and discussed with management and Grant Thornton LLP the Company’s system of internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

 

Discussions with Independent Auditing Firm

 

The audit committee has discussed with Grant Thornton LLP, independent auditors for the Company, the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees. The audit committee has received the written disclosures and the letter from Grant Thornton LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence and has discussed with that firm its independence from the Company.

 

Recommendation to the Board of Directors

 

Based on its review and discussions noted above, the audit committee recommended to the board of directors that the audited financial statements and management’s report on internal control over financial reporting be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

 

THE AUDIT COMMITTEE

 

Mark L. Plaumann, Chairman
Michael P. Cross
David L. Houston
Melanie M. Trent

 

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EXECUTIVE OFFICERS

 

The following table sets forth the name, age and positions of each of our executive officers as of the record date.

 

Name Age Position
Travis D. Stice 59 Chief Executive Officer and Director
Kaes Van’t Hof 34 Chief Financial Officer and Executive Vice President—Business Development
Teresa L. Dick 50 Chief Accounting Officer, Executive Vice President and Assistant Secretary
Thomas F. Hawkins 66 Executive Vice President—Land
Russell D. Pantermuehl 60 Executive Vice President and Chief Engineer
Jennifer Soliman 51 Executive Vice President and Chief Human Resources Officer
Daniel N. Wesson 37 Executive Vice President—Operations
Matt Zmigrosky 42 Executive Vice President, General Counsel and Secretary

 

Biographical information for Mr. Stice is set forth in this proxy statement under the heading “Election of Directors and Director Biographies.”

 

KAES VAN’T HOF. Mr. Van’t Hof has served as Chief Financial Officer and Executive Vice President of Business Development since March 2019. Prior to his current position with us, he served as our Senior Vice President of Strategy and Corporate Development from January 2017 to February 2019 and as our Vice President of Strategy and Corporate Development since joining us in July 2016. Mr. Van’t Hof has served as President and director of the general partner of Viper since March 2017 and as President and director of the general partner of Rattler since July 2018. Before joining Diamondback, Viper and Rattler, Mr. Van’t Hof served as Chief Executive Officer for Bison Drilling and Field Services from September 2012 to June 2016. From August 2011 to August 2012, Mr. Van’t Hof was an analyst for Wexford Capital responsible for developing operating models and business plans, including for our initial public offering, and before that worked for the Investment Banking - Financial Institutions Group of Citigroup Global Markets, Inc. from February 2010 to July 2011. Mr. Van’t Hof was a professional tennis player from May 2008 to January 2010. Mr. Van’t Hof received a Bachelor of Science in Accounting and Business Administration from the University of Southern California.

 

TERESA L. DICK. Ms. Dick has served as our Executive Vice President and Chief Accounting Officer since March 2019. Ms. Dick served as our Executive Vice President and Chief Financial Officer from February 2017 to February 2019, as our Assistant Secretary since October 2012, as our Chief Financial Officer and Senior Vice President from November 2009 to February 2017 and as our Corporate Controller from November 2007 until November 2009. Ms. Dick has served as Chief Financial Officer, Executive Vice President and Assistant Secretary of the general partner of Viper since February 2017 and served as its Chief Financial Officer, Senior Vice President and Assistant Secretary from February 2014 to February 2017. Ms. Dick has also served as Chief Financial Officer, Executive Vice President and Assistant Secretary of the general partner of Rattler since July 2018. From June 2006 to November 2007, Ms. Dick held a key management position as the Controller/Tax Director at Hiland Partners, a publicly-traded midstream energy master limited partnership. Ms. Dick has over 20 years of accounting experience, including over eight years of public company experience in both audit and tax areas. Ms. Dick received her Bachelor of Business Administration degree in Accounting from the University of Northern Colorado. Ms. Dick is a certified public accountant and a member of the American Institute of CPAs and the Council of Petroleum Accountants Societies.

 

THOMAS F. HAWKINS. Mr. Hawkins has served as our Executive Vice President of Land since March 2019. Prior to his current position with us, Mr. Hawkins served as our Senior Vice President—Land from March 2017 until March 2019. Mr. Hawkins has also served as Executive Vice President—Land of the general partner of Viper since March 2019 and served as its Senior Vice President—Land from March 2017 to March 2019. Prior to his employment with us, Mr. Hawkins was an independent Consultant for Land Activities from July 2016 to February 2017. Mr. Hawkins has over 38 years of experience in the oil and gas industry. Mr. Hawkins spent seven years with Oasis Petroleum, Inc., an active oil and gas company in the Williston Basin, as its Senior Vice President of Land (or in similar capacities) from March 2009 until June 2016, retiring from that position. Prior to his tenure at Oasis Petroleum, Inc., Mr. Hawkins spent 31 years at ConocoPhillips and Burlington Resources (which ConocoPhillips acquired in 2006) in various operations and managerial positions in Land, Marketing, Planning and the Corporate Acquisitions and Divestitures group, retiring in February 2009. While at ConocoPhillips (Burlington Resources), Mr. Hawkins has worked in several major regions in the continental United States, including the San Juan Basin, the Williston Basin and the Austin Chalk/Wilcox Trends in South Texas. Mr. Hawkins holds a Bachelor of Business Administration degree in Finance from the University of Texas at El Paso.

 

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RUSSELL D. PANTERMUEHL. Mr. Pantermuehl has served as our Executive Vice President and Chief Engineer since March 2019. Prior to his current position with us, Mr. Pantermuehl served as our Executive Vice President—Reservoir Engineering from February 2017 until March 2019, and served as our Vice President—Reservoir Engineering from August 2011 to February 2017. Mr. Pantermuehl has also served as Executive Vice President and Chief Engineer of the general partner of Viper since March 2019, as its Executive Vice President—Reservoir Engineering from February 2017 to March 2019 and as its Vice President—Reservoir Engineering from February 2014 to February 2017. Prior to his positions with us and Viper, Mr. Pantermuehl served as a reservoir engineering supervisor for Concho Resources Inc., an oil and gas exploration company, from March 2010 to August 2011 where he was responsible for reserve reporting and estimates of the Midland Basin Wolfberry assets. Mr. Pantermuehl worked for ConocoPhillips Company as a reservoir engineering advisor from January 2005 to March 2010 where he provided advice with respect to ConocoPhillips’ Bakken assets, reserve reporting and capital allocation. Mr. Pantermuehl received a Bachelor of Science degree in Petroleum Engineering from Texas A&M University.

 

JENNIFER SOLIMAN. Ms. Soliman has served as our Executive Vice President and Chief Human Resources Officer since March 2019. Prior to her current position with us, Ms. Soliman served as our Senior Vice President and Chief Human Resources Officer from January 2018 until March 2019. Prior to joining us, Ms. Soliman served as Senior Vice President and Chief Human Resources Officer at Sunnova Energy Corporation from December 2015 to January 2018, and prior to that, served in various human resources leadership roles at Freedom Oil & Gas Ltd. (formerly, Maverick Drilling & Exploration Ltd.), Woodside USA and BP America, each an oil and gas company, and Koch Industries, Inc., a diversified industrial, including chemicals and refining. Ms. Soliman serves on the board of Jones Partners at the Rice Business School and previously served as a member of the United States Air Force Reserves. Ms. Soliman holds a Bachelor of Arts degree in Organizational Behavior from Rollins College and a Master of Business Administration degree from Rice University.

 

DANIEL N. WESSON. Mr. Wesson has served as our Executive Vice President—Operations since March 2020. Prior to his current position with us, Mr. Wesson served as our Senior Vice President of Operations from February 2019 until March 2020. Mr. Wesson served as our Vice President of Operations from April 2017 to February 2019 and as our Completions Manager from January 2013 to April 2017. He joined us as an Operations Engineer in February 2012. Prior to joining us, Mr. Wesson served in various operations and engineering roles for BOPCO L.P. from 2010 to 2012 and ConocoPhillips from 2007 to 2010. Mr. Wesson received his Bachelor of Science degree in Mechanical Engineering from Louisiana State University and is a member of the Permian Basin Society of Petroleum Engineers.

 

MATT ZMIGROSKY. Mr. Zmigrosky has served as our Executive Vice President, General Counsel and Secretary since February 2019. Since February 2019, Mr. Zmigrosky has also served as Executive Vice President, General Counsel and Secretary of both the general partner of Viper and Rattler. Before joining us and the general partners of Viper and Rattler, Mr. Zmigrosky was in the private practice of law, most recently as a partner in the corporate section of Akin Gump Strauss Hauer & Feld LLP from October 2012 to February 2019, where he worked extensively with Diamondback and its subsidiaries. Mr. Zmigrosky holds a Bachelor of Science in Management degree in finance from Tulane University and a Juris Doctorate degree from Southern Methodist University Dedman School of Law.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

TABLE OF CONTENTS

 

  EXECUTIVE SUMMARY 35  
  2021 COMPENSATION DECISIONS AND EXECUTIVE COMPENSATION PROGRAM ENHANCEMENTS 39  
  HIGHLIGHTS OF EXECUTIVE COMPENSATION BEST PRACTICES 40  
  EXECUTIVE COMPENSATION POLICY AND OBJECTIVES 41  
  2020 COMPENSATION PROGRAM DESIGN AND STRUCTURE 41  
  EXECUTIVE COMPENSATION PROGRAM ELEMENTS 42  
  PROCESS FOR DETERMINING EXECUTIVE COMPENSATION 48  
  COMPETITIVE BENCHMARKING 49  
  OTHER SIGNIFICANT COMPENSATION POLICIES AND PRACTICES 50  
  BENEFIT PLANS 52  
  COMPENSATION COMMITTEE REPORT 54  
  COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 54  

 

EXECUTIVE SUMMARY

 

This compensation discussion and analysis identifies Diamondback’s named executive officers (NEOs) for 2020, describes the Company’s executive compensation program, including the objectives and rationale for each element of compensation, and presents the compensation outcomes for our NEOs relative to our 2020 performance.

 

Named Executive Officers

 

For 2020, our NEOs were:

 

 

Biographical information for each of our NEOs currently serving as our executive officers and other key executives of Diamondback can be found on page 32.

 

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2020 and Q1 2021 Operational and Financial Performance Highlights and Key Strategic Transactions

 

Despite the challenges presented by the COVID-19 global pandemic, the actions of OPEC+ and the resulting impacts on the U.S. and global oil and natural gas industry in 2020, Diamondback consistently adapted its operations with the goal of protecting stockholder returns over the long term. Diamondback reduced activity, improved its execution processes and focused on protecting its balance sheet and cash flow to maintain its financial strength and position the Company to thrive as the industry exits the bottom of the cycle. Additionally, in response to the COVID-19 pandemic, Diamondback established an internal multi-disciplinary team, including the NEOs, to work with outside professional advisors and implement protocols and procedures designed to mitigate risk to our employees and enable our operations to continue safely. These proactive operational adjustments positioned us to, among other things, enter into two significant, accretive transactions in the fourth quarter of 2020 to add over 80,000 net acres to our position in the Midland Basin.

 

OPERATIONAL EXCELLENCE AND CAPITAL EFFICIENCY  

•   Achieved 2020 consolidated proved developed finding and development costs of $9.65 per BOE and drill bit finding and development costs of $5.00 per BOE

•   Reduced lease operating expense to $3.87 per BOE and reduced cash general and administrative expense to $0.46 per BOE

FINANCIAL STRENGTH  

•   Maintained investment grade credit ratings

•   Completed offering of $500 million of 4.75% senior notes due May 31, 2025, the proceeds of which were used to purchase a portion of Energen’s 4.65% senior notes due 2021 that were tendered pursuant to a tender offer by Energen for all of the outstanding 4.65% senior notes and to repay a portion of the outstanding borrowings under Diamondback’s revolving credit facility

•   Repurchased all of Energen’s outstanding 7.350% medium-term notes due on July 28, 2027

•   In March 2021, used net proceeds from the senior note issuance discussed below to complete tender offers for (i) approximately 97% of QEP’s senior notes that remained outstanding following the closing of the QEP merger discussed below and 46% of Diamondback’s outstanding 5.375% senior notes due 2025

PORTFOLIO STRENGTH  

•   Increased our total proved reserves by 17%, with such reserves consisting of approximately 58% oil

•   Increased our proved developed reserves by 8%, with such revenues representing approximately 62% of our total proved reserves

PORTFOLIO MANAGEMENT  

•   Announced in December 2020 the proposed acquisition of QEP in an all-stock merger and the proposed acquisition of leasehold interests and related assets of Guidon, each of which was completed in the first quarter of 2021. These acquisitions added material Tier-1 Midland Basin inventory to our acreage portfolio, increasing our net acreage in the Northern Midland Basin by over 81,500 net acres

•   Completed Rattler’s first $500 million senior notes offering, proceeds from which were used to pay down borrowings under Rattler’s revolving credit facility

•   In March 2021, completed the issuance of 0.900% senior notes due 2023, 3.125% senior notes due 2031 and 4.400% senior notes due 2051 in the aggregate principal amount of $2.2 billion discussed above

STOCKHOLDER INITIATIVES  

•   Maintained our $1.50/share base dividend through the first three quarters of 2020 despite the challenges presented by the COVID-19 pandemic

•   Increased our quarterly common stock dividend by 6.7% beginning with the Q4 2020 dividend payment

ESG COMMITMENT  

•   Released our third annual Corporate Responsibility Report in August 2020, which included an assessment of our current portfolio in various low carbon scenarios as outlined by the International Energy Agency

•   Completed CDP’s water security questionnaire

•   Added two experienced, diverse members to our Board of Directors

•   Developed a comprehensive policy governing political spending and disclosed Diamondback’s 2020 political contribution activity

•   Adopted a Human Rights Policy

•   Adopted a clawback policy that allows for the recoupment and/or forfeiture of certain executive officer incentive compensation in the event of a restatement

•   Announced initiatives to reduce Scope 1 GHG intensity by at least 50% from 2019 levels by 2024 and reduce methane intensity by at least 70% from 2019 levels by 2024

•   Announced “Net Zero Now” strategy under which, as of January 1, 2021, every hydrocarbon produced by Diamondback is anticipated to be produced with zero net Scope 1 emissions

 

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Summary of Key Compensation Actions Related to 2020 Compensation

 

Actions Taken in February 2020

 

BASE SALARIES AND ANNUAL INCENTIVE AWARDS

 

In 2020, the compensation committee held all base salaries and annual incentive award targets flat for our NEOs versus 2019, except for Daniel N. Wesson, whose salary and annual incentive award target were increased in recognition of his promotion as our Executive Vice President—Operations. For more information, see “Executive Compensation Program Elements—Base Salary” beginning on page 43 and “Executive Compensation Program Elements—Performance-Based Annual Incentive Bonus” beginning on page 43.

 

Actions Taken in February 2021

 

COMPENSATION COMMITTEE APPLIED NEGATIVE DISCRETION TO ACHIEVEMENT OF ANNUAL INCENTIVE METRICS

 

In establishing the 2020 short-term annual incentive performance metrics in late March 2020, the compensation committee considered the announcement of significant reductions in Diamondback’s capital budget and operating plan in response to commodity price deterioration from the combined effects of the COVID-19 pandemic, the actions of OPEC+ and the imbalance in supply and demand for oil and natural gas. Leaning on its operational excellence and cost structure, Diamondback was able to achieve the 2020 short-term annual incentive plan performance metrics at 160% of target. However, following consultation with Meridian Compensation Partners (Meridian), its independent compensation consultant, and taking into account all aspects of Diamondback’s performance in 2020, including its stock performance in light of industry conditions, the compensation committee exercised negative discretion and reduced the annual incentive bonus for all executive officers from 160% of target to 100% of target. The Company’s performance under the short-term annual incentive plan is discussed under “Executive Compensation Program Elements—Performance-Based Annual Incentive Bonus” beginning on page 43.

 

ACHIEVEMENT OF LONG-TERM INCENTIVE METRICS

 

The compensation committee certified the vesting of the 2018 performance-based long-term equity awards at 111.6% of targeted payout based on the Company’s relative TSR performance at the 53rd percentile of the peer group for the three-year period ended December 31, 2020. For more information regarding the Company’s TSR performance for the applicable performance period, see “Executive Compensation Program Elements—Satisfaction of Performance Targets for 2018 Performance-Based Awards for Performance Period ended December 31, 2020 and Equity Payouts Made on Such Awards” beginning on page 47.

 

2020 “Say On Pay” Advisory Vote, Stockholder Outreach and Actions Taken in Response

 

Diamondback has historically undertaken significant stockholder engagement efforts regarding our executive compensation structure to ensure our stockholders fully understand, and continue to support, our executive compensation programs with the confidence that the Company is committed to transparency and demonstrating its responsiveness to stockholder feedback. Diamondback’s open and productive relationship with its stockholders has historically resulted in strong stockholder support of its executive compensation programs. At each of our 2019 and 2018 annual meetings of stockholders, approximately 98% of the total votes cast were voted in favor of the Company’s say on pay proposal. However, at our 2020 annual meeting of stockholders, approximately 55% of the total votes cast were voted in favor of our say on pay proposal.

 

In response to the concerns evidenced by the 2020 say on pay results, the Chairman of the board, members of the compensation committee and certain executive officers conducted a comprehensive engagement with 17 of our largest stockholders representing, at the time, approximately 51% of our outstanding common stock to solicit feedback regarding the say on pay results and the Company’s executive compensation programs. These meetings were in addition to the Company’s annual engagement efforts that are discussed further under “Corporate Governance Matters—Stockholder Engagement” on page 27.

 

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The results of these engagement meetings reconfirmed to us the significant support for the Company’s overall approach to compensation and appreciation for the compensation committee’s commitment to transparency and responsiveness. However, these engagement meetings highlighted that the significant negative vote in the Company’s 2020 say on pay proposal related almost exclusively to the one-time awards made to certain executive officers in connection with the 2019 initial public offering of Rattler Midstream LP (the “Rattler IPO”), and, in particular, the largest award. The consistent feedback from many significant stockholders was that any future sizable, transaction-based awards will be met with skepticism, particularly if they are not tied to measurable performance metrics. The Company understands these concerns and has no current intention to make any future one-time, transaction-based awards to its executive officers.

 

Although the stockholder feedback was heavily focused on the Rattler IPO awards, the Company did receive additional feedback during this engagement process, and the compensation committee has taken the following actions in direct response:

 

  Stockholder Feedback     Diamondback Response
Short-term annual incentive compensation performance metrics should include more metrics focused on financial returns, with heavier weightings (e.g., free cash flow)   2021 short-term annual incentive compensation plan added a free cash flow per share performance metric with a 20% weighting
      Financial metrics will have an aggregate 40% weighting in our 2021 short-term annual incentive compensation scorecard
Short-term annual incentive compensation performance metrics focused on generation of free cash flow, return on average capital employed and environmental and safety should be weighted more heavily than those focused on cost and capital efficiency   The compensation committee has increased the weighting of the environmental and safety performance metrics in the 2021 short-term annual incentive compensation plan from 15% to 20%. The compensation committee maintained the return on average capital employed performance metric at 20% and set the new free cash flow per share performance metric at a 20% weighting
The peer group used for the Company’s performance based long-term incentive awards should include the S&P 500   The compensation committee included both the S&P 500 and the XOP in the 2021 peer group and maintained an Absolute TSR Modifier for 2021 long term incentive awards
The Company should adopt a clawback policy   The Company adopted a comprehensive clawback policy

 

The Company and the compensation committee took the 2020 say on pay results extremely seriously. We believe that we have addressed the feedback received and look forward to future meaningful stockholder engagement regarding the Company’s executive compensation practices.

 

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2021 COMPENSATION DECISIONS AND EXECUTIVE COMPENSATION PROGRAM ENHANCEMENTS

 

2021 Executive Compensation Program Enhancements

 

Since Diamondback went public in 2012, our compensation committee has consistently been proactive in implementing changes to our compensation practices with the intention of incentivizing our management team in ways that translate to stockholder value creation and encourage responsible governance practices. For example, we have not included a production or reserves growth metric in our scorecard for the annual performance-based cash incentive plan since 2014. We added a return on average capital employed metric to our performance factors in 2018 and, in early 2020, the compensation committee took an additional step by adding specific, measurable environmental and safety targets to the scorecard for our annual cash incentive program. While 2020 was one of the most challenging years, if not the most challenging year, in our Company’s history, Diamondback navigated the year patiently with a focus on execution and protecting long-term stockholder value. As discussed above, we again undertook significant stockholder engagement efforts in 2020 regarding executive compensation both before, and in response to, receiving our 2020 say on pay results. In response to significant stockholder feedback, and following consultations with its independent compensation consultant, our compensation committee has made the following enhancements to our 2021 compensation program:

 

Annual Base Salaries   No Adjustment to Base Salaries for any NEO. Did not adjust the 2021 annual base salaries for our NEOs from the prior year levels. Maintained Mr. Stice’s base salary at current level for second consecutive year.
LTI Awards  

Reduced LTI Compensation for All NEOs. Reduced Mr. Stice’s LTI compensation target by 20% from 2020, and reduced the LTI compensation target for each other NEO by 10% from 2020.

 

Additional Enhancements to Performance-based LTI Award (60% of the Total LTI Award). Added S&P 500 and XOP Index to peer group utilized to determine relative TSR performance, and maintained absolute TSR modifier to LTI compensation that reduces payouts if absolute TSR performance is negative and has a multiplier upon achieving a performance period annual TSR of greater than 15%.

Annual Short-Term Cash Incentive Awards  

Increased focus on financial performance metrics and environmental and safety metrics.

Added Free Cash Flow per Share Metrics having a weight of 20%.

Increased weighting of environmental and safety metrics from 15% to 20%

Made No Adjustment to Target Levels as Percentage of NEO Base Salary.

General Industry Benchmarking Data   Diverse Benchmarking Analysis. In addition to reviewing peer compensation information and advice provided by Meridian in connection with establishing 2021 executive compensation, the compensation committee guided by the chair, analyzed compensation information for 29 industrial and manufacturing companies with financial measures, including enterprise value, market capitalization and revenues, comparable to Diamondback.
Robust Clawback Policy   We adopted a standalone clawback policy that provides for the recoupment and/or forfeiture of certain executive officer incentive compensation in the event of financial errors that result in a restatement of financial statements, in addition to “clawback” provisions contained in our 2019 Amended and Restated Equity Incentive Plan.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 39
 
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HIGHLIGHTS OF EXECUTIVE COMPENSATION BEST PRACTICES

 

The following highlights our commitment to the best compensation practices.

 

WHAT WE DO   WHAT WE DON’T DO
We provide pay for performance - The majority of our executive officers’ compensation is long-term, “at risk” and is paid only if the Company achieves certain performance objectives, which are designed to increase the value of our stock.   No hedging of Company securities, including our publicly traded options, puts, calls and short sales, by executive officers or directors.
All of our performance-based equity awards granted since 2018 vest over a three-year performance period, subject to achieving a specified total stockholder return measured against our peer group and satisfaction of continuous service requirements.   No pledging of our common stock as collateral for a loan or holding of our common stock in margin accounts by our directors and executive officers.
All Diamondback equity awards granted in 2020 and thereafter contain double-trigger change of control provisions.   No tax gross-ups for executive officers. 
We require substantial stock ownership for our non-employee directors and executive officers and they must maintain their applicable stock ownership levels for as long as they serve on our board or are employed by us.   No repricing of underwater stock options or stock appreciation rights.
We maintain a competitive compensation package designed to attract, motivate and reward experienced and talented executive officers.   No severance compensation unless departing executive officers agree not to compete with us for a specified period of time after the end of their employment.
We hold annual advisory “say-on-pay” vote.   No performance metrics that would encourage excessive risk taking by our executive officers.
We engage in active stockholder outreach with respect to executive compensation and corporate governance.   No significant perquisites to our executive officers.
Each member of our compensation committee meets the independence requirements under SEC rules and Nasdaq listing standards.   No pension or supplemental retirement benefits to our executive officers (other than under our broad-based 401(k) plan).
We use external, independent compensation consultants who are retained by, and report directly to, the compensation committee to assist the Company with, among other things, conducting competitive benchmarking to align the Company’s compensation program with prevailing market practices.   No employment agreements with our NEOs and other executive officers. All of such prior employment agreements (to the extent applicable) were replaced by the executive severance plan in February 2020 to provide a uniform framework for compensation and severance benefits that are consistent with market practices.
We adopted a standalone clawback policy that provides for the recoupment and/or forfeiture of certain executive officer incentive compensation in the event of financial errors that result in a restatement of financial statements. Additionally, our 2019 Amended and Restated Equity Incentive Plan contains “clawback” provisions that each award pursuant to that plan is subject to repayment or forfeiture in accordance with applicable laws, our policies and any relevant provisions in the related award agreements. Under the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act, our Chief Executive Officer and Chief Financial Officer may be subject to clawbacks in the event of a restatement.      
We utilize a balanced approach to compensation, which combines performance and time-based, short-term and long-term, and cash and equity compensation components      
We benchmark executive compensation against general industry peers      
We devote significant time to analyzing and preparing for executive succession and related retention matters      

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 40
 
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EXECUTIVE COMPENSATION POLICY AND OBJECTIVES

 

Our executive compensation policy is guided by several key principles described below:

 

Pay for Performance   •   A majority of total compensation to our executive officers is performance-based, including both long-term performance-based equity and short-term performance-based cash incentive awards. Performance-based equity awards are based on relative TSR (enhanced in 2020 by an absolute TSR modifier and in 2021 by revisions to the peer group to include the S&P 500 and XOP Index to account for performance against the broader market) and annual cash incentive awards are based on rigorous operational, financial and environmental and safety performance metrics; and
    •   Our compensation structure motivates executives and other employees to deliver outstanding financial performance and meet or exceed general and specific business, operational and individual objectives.
Alignment with Stockholder Interests   •   We provide a majority of the total compensation to our executive officers in equity, thus ensuring an alignment of interests between our executives and senior management and our stockholders.
Competitive Compensation that Attracts, Motivates and Retains Talent   •   Our compensation programs are competitive, with compensation and incentive levels that are relevant to the market and our industry, which enhances our ability to attract, motivate and retain knowledgeable and experienced senior management talent
Risk Management Principles   •   Our compensation committee consists entirely of independent directors who engage external, independent compensation consultants to assist in constructing an executive compensation program that aligns with prevailing market trends and good governance practices.

 

2020 COMPENSATION PROGRAM DESIGN AND STRUCTURE

 

During 2020, the Company’s executive compensation program included both fixed and variable, at-risk elements, as shown below.

 

  Direct
Compensation Element
Form of Compensation Purposes and Alignment
with Long-Term Stockholder Interests
FIXED Base Salary Cash

•   Provide a fixed level of compensation for performing applicable executive functions

•   Based on level of responsibility, experience, individual performance, industry and market criteria and competition for talent

VARIABLE,
AT RISK
Performance-Based Annual Short-Term Incentive Cash

•   Reward short-term financial and operational performance over a one-year performance period

   Based on pre-established performance metrics and goals (with payout caps).

Performance-Based Restricted Stock Unit Award

 of LTI opportunity

Equity—PSUs with a three-year performance period

•   Align interests of our executives with our stock performance and long-term interests of our stockholders

•   Based on attainment of specific performance goals established by the compensation committee, our TSR relative to our proxy peer group during the performance  period and continuous service requirements.

Time-Based Restricted Stock Unit Award

 

 of LTI opportunity

Equity (RSUs)

•   Provide a retention incentive, facilitate stock ownership and align our executives’ interest with long-term stockholder interests

•   Vest in three approximately equal annual installments, with the first installment vesting on the date of grant and the remaining installments vesting in March of each subsequent year, assuming continuous service

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 41
 
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EXECUTIVE COMPENSATION PROGRAM ELEMENTS

 

Our compensation committee determines the mix of compensation, both among short-term and long-term compensation and cash and non-cash compensation, to establish compensation packages that it believes are appropriate for each of our NEOs. While emphasizing pay for performance, the compensation committee believes that the mix of base salary, annual incentive bonus awards based on pre-established financial and operational performance targets, performance-weighted equity awards, time-based equity awards, and the other benefits that are available to our NEOs will accomplish our overall compensation objectives. We believe that these elements of compensation create competitive compensation opportunities to align and drive executive performance in support of our business strategies and to attract, motivate and retain high quality talent with the skills and competencies we require.

 

 

(1) These pay mix charts exclude amounts listed in the column titled “All Other Compensation” in the Summary Compensation Tables set forth on page 55.”

 

 

(1) For purposes of this graph, “target compensation” consists of the annual base salary, target annual incentive bonus opportunity and the grant date fair value of the performance-based and time-based equity awards granted in each year presented.
(2) For purposes of this graph, “realizable compensation” consists of the annual base salary earned for each year presented, the annual incentive bonus earned for each year presented and, with respect to time-based equity awards, the value of the shares underlying the applicable award (whether or not vested) based on the closing price per share of the Company’s common stock on the applicable date presented. With respect to performance-based equity awards granted in 2018, the value of realizable compensation presented represents the value of the total number of shares granted upon certification of the vesting percentage for such award calculated using the closing price per share of the Company’s common stock on the applicable date presented. With respect to performance-based equity awards granted in 2019 and 2020, the value of realizable compensation presented represents the value of the total number of shares that would have been granted if the performance period for the applicable award ended on December 31, 2020 calculated using the closing price per share of the Company’s common stock on December 31, 2020. The CEO target versus realizable compensation for 2018 excludes the one-time restricted stock unit award granted under the Viper LTIP. See “Awards under Long-Term Incentive Plans of Diamondback’s Publicly Traded Subsidiaries” for more information regarding such one-time award. The grant date fair value of this one-time award was $1,113,405, and the realizable value of this award based on the closing price per unit of Viper’s common units on December 31, 2020 was $558,144, or approximately 50% of the grant date fair value of such award. The CEO target versus realizable compensation for 2019 excludes a one-time restricted stock unit award granted under the RTLR LTIP. The grant date fair value of this one-time award was $2,195,434 and the realizable value of this award based on the closing price per unit of Rattler’s common units on December 31, 2020 was $1,083,431, or approximately 49% of the grant date fair value of such award.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 42
 
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Pay for Performance Driven Compensation Structure

 

As illustrated above, the total direct compensation of our NEOs is heavily weighted towards variable, at-risk compensation that is tied to performance. Our Chief Executive Officer’s pay mix in 2020 was 88% aligned with our stockholders and our other NEOs’ average pay mix was 86% aligned with our stockholders. The performance component of our Chief Executive Officer’s and our other NEOs’ pay mix represented 60% and 58%, respectively, of such executive officers total direct compensation.

 

The following describes each element of our executive compensation program, which we use to meet our compensation objectives discussed above.

 

Base Salary

 

The compensation committee evaluates our NEOs’ base salaries together with other components of their compensation to ensure that the executive’s total compensation is in line with our overall compensation philosophy and market practices in our peer group or our industry in general. In setting our NEOs’ base salaries for 2020, the compensation committee considered, among other factors:

 

the market and peer group data included in the study conducted by Meridian Compensation Partners (Meridian), the compensation committee’s independent compensation consultant for 2020, discussed below;
the recommendations of our Chief Executive Officer with respect to the base salaries for other NEOs;
the complexity of the individual’s role within the Company;
the individuals’ expertise and experience;
executive promotions and individual performance; and
contribution to the Company’s achievement of certain financial and operational metrics discussed in this compensation discussion and analysis.

 

The compensation committee maintained annual base salaries for 2020 at the same levels as 2019, other than with respect to Mr. Wesson. The salary for Mr. Wesson increased 22% in recognition of his promotion in February 2020 to Executive Vice President and enhanced responsibilities within the organization, and related peer benchmarking considerations. The compensation committee set the following annual base salaries for our NEOs for 2020.

 

Named Executive Officer  2020 Base Salary 2019 Base Salary 
Travis D. Stice  $1,250,000   $1,250,000 
Kaes Van’t Hof  $520,000   $520,000 
Teresa L. Dick  $447,000   $447,000 
Russell D. Pantermuehl  $615,000   $615,000 
Daniel N. Wesson  $450,000   $370,000 

 

As noted above under the heading “2021 Executive Compensation Program Enhancements” on page 39, the compensation committee maintained annual base salaries for 2021 at the same levels as for 2020 for all of our NEOs.

 

Performance-Based Annual Incentive Bonus

 

2020 PERFORMANCE BONUS

 

Performance bonuses to our NEOs for 2020 were granted under our stockholder-approved 2014 Annual Incentive Plan, referred to herein as the Annual Incentive Plan. The Annual Incentive Plan is designed to provide an incentive to executive officers and other selected employees of the Company to contribute to the growth, profitability and increased value of the Company by providing “performance-based” incentive compensation. The Annual Incentive Plan focuses on achievement of certain annual objectives and goals, as determined by the compensation committee at the beginning of each calendar year, and provides that the participants may earn pre-determined target percentages of their respective base salaries for the achievement of such specified goals. Under the Annual Incentive Plan, the payout opportunity is contingent upon meeting the threshold performance levels (with no award payable unless the threshold is reached), and thereafter varies for performance above and below the pre-established target performance levels, subject to a maximum award level of 300% of base salary. Despite the terms of the Annual Incentive Plan, the maximum award level possible under the plan under our current compensation structure would be 200% of target. The target award opportunity is established by the compensation committee for each year in connection with setting the annual performance goals and targets for such year, which cannot exceed a maximum payment limit specified by the compensation committee.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 43
 
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Below is a simple illustration of the design of Diamondback’s 2020 Performance Bonus:

 

 

The Annual Incentive Plan also provides that the awards granted to executive officers and covered employees under the Annual Incentive Plan will be forfeited if their respective employment does not continue through the date that the compensation committee certifies attainment of the applicable performance targets.

 

For 2020, the compensation committee approved increases in annual incentive targets for Mr. Wesson from 60% to 80% in recognition of his promotion to Executive Vice President and enhanced responsibilities within the organization, and related peer benchmarking considerations. The compensation committee did not change the remaining NEO’s annual incentive target percentages from 2019.

 

For 2020, the performance goals and targets listed in the table below were established by the compensation committee in March 2020, based on, among other things, a review of our prior year’s performance, benchmarking considerations relative to our peers’ performance, stockholder feedback, execution challenges ahead, service and commodity markets and capital requirements. Additionally, the compensation committee established its 2020 short-term annual incentive plan performance metrics following the announcement of significant reductions in Diamondback’s activity in response to commodity price deterioration from the combined effects of the COVID-19 pandemic, the actions of OPEC+ and the imbalance in supply and demand for oil and natural gas. As a result, the compensation committee was able to consider updated guidance and a revised capital budget and operating plan when establishing short-term annual incentive targets. Consequently, the performance level targets for the cost and capital efficiency metrics in the scorecard required significant improvement from 2019, and the performance level target for the return on average capital employed metric was revised to reflect the anticipated operating plan for the remainder of 2020. The compensation committee set goals that we believe were rigorous based on our capital budget and business plan, and competitive with the metrics of the best operators in our peer group in each respective category.

 

The seven goals shown below align with how management views our success and how stockholders evaluate our performance, both on a standalone basis and relative to our peers and the broader energy industry.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 44
 
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In February 2021, the compensation committee reviewed the Company’s performance in relation to the pre-established performance goals and targets for 2020, which are set forth below:

 

 

(1) No payouts are made in respect of a performance goal under the Annual Incentive Plan unless applicable threshold performance level for such performance goal is achieved.
(2) Environmental and Safety Metrics include (i) less than 1.0% of net production flared, defined as net BOEs of flared production divided by net BOEs produced, (ii) greater than 10% of water used for completion operations sourced from recycled water, (iii) GHG emission intensity less than 14.0 (calculated one year in arrears to obtain required third party agency confirmation), defined as thousands of tons of CO2e emitted divided by MBOE, (iv) reportable oil spills of less than 0.01% of gross barrels of oil produced, defined as reportable gross oil barrels spilled divided by total gross oil barrels produced and (v) employee TRIR equal to or less than 0.5, defined as recordable incidents per 200,000 man hours recorded.

 

After applying the weighting established by the compensation committee to each category, Diamondback achieved the short-term annual incentive plan performance metrics at 160% of target. However, following consultation with Meridian, its independent compensation consultant, and taking into account all aspects of Diamondback’s performance in 2020, including our stock price performance in light of industry conditions, the compensation committee exercised negative discretion and reduced the annual incentive bonus for all NEOs from 160% of target, which was earned based on performance relative to the metrics established in later March of 2020, to 100% of target.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 45
 
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As a result, the compensation committee authorized the following NEO payouts under the Annual Incentive Plan for 2020:

 

2020 SHORT-TERM INCENTIVE AWARD PAYOUTS TO NAMED EXECUTIVE OFFICERS

 

Named Executive Officer  Base Salary as of
December 31, 2020
   Target Bonus
Percentage as a
% of Base Salary
   Target
Bonus
Amount
   Earned Annual
Incentive
Bonus Based
on Company
Performance
   Actual
Incentive
Bonus Awarded
 
Travis D. Stice  $1,250,000    125%  $1,562,500   $2,500,000   $1,562,500 
Kaes Van’t Hof  $520,000    90%  $468,000   $748,800   $468,000 
Teresa L. Dick  $447,000    80%  $357,600   $576,160   $357,600 
Russell D. Pantermuehl  $615,000    80%  $492,000   $787,200   $492,000 
Daniel N. Wesson  $450,000    80%  $360,000   $576,000   $360,000 

 

Long Term Equity Incentive Compensation

 

We seek to promote a culture underpinned by Company values for our executive officers in an effort to enhance our long-term performance. Further, we believe the use of stock and stock-based awards offers the best approach to achieving our compensation goals and to align the interests of our executive officers with those of our stockholders. To achieve this purpose, our board of directors adopted and our stockholders approved the Equity Incentive Plan. The purpose of the Equity Incentive Plan is to enable us, and our affiliates, to attract and retain the services of the types of executives, employees, consultants and directors who will contribute to our long term success and to provide incentives that will be linked directly to increases in share value that will inure to the benefit of our stockholders. The Equity Incentive Plan provides a means by which eligible recipients of awards may be given an opportunity to benefit from increases in value of our common stock through the granting of equity awards. The terms of the Equity Incentive Plan are described in more detail below. Each of our executives is eligible to participate in the Equity Incentive Plan or such other equity incentive plan or plans then in existence for the benefit of employees, and may in the discretion of the compensation committee receive an equity award in accordance with the terms of such plan or plans. The timing and amount of such equity awards, any target performance goals and the vesting terms of such awards are determined by the compensation committee in its sole discretion. If any of such executive’s employment terminates prior to any scheduled vesting date then, except as expressly provided in any existing or future equity award, the applicable executive shall forfeit all rights and interests in and to such unvested equity awards.

 

2020 PERFORMANCE-BASED AND TIME-BASED AWARDS

 

In March 2020, the compensation committee granted our NEOs three-year performance-based restricted stock units and time-based restricted stock units, in each case under the Equity Incentive Plan, in the amounts shown below. Consistent with the compensation committee’s focus on giving more weight to the performance component of our executive compensation, the 2020 performance-based equity award granted to each NEO represented 60% of the executive’s total 2020 LTI award, with the time-based component of such award representing only 40% of the total LTI award.

 

   Performance-Based
Restricted
Stock Units(1)
  PSU
% of Total
LTI Award
   Time-Based
Restricted
Stock Units(2)
  RSU
% of Total
LTI Award
   Targeted
Value of
Total LTI Award(3)
 
Travis D. Stice  66,714   60%  44,476   40%  $7,500,000 
Kaes Van’t Hof  31,133   60%  20,756   40%  $3,500,000 
Teresa L. Dick  17,790   60%  11,860   40%  $2,000,000 
Russell Pantermuehl  31,333   60%  20,756   40%  $3,500,000 
Daniel N. Wesson  13,343   60%  8,895   40%  $1,500,000 

 

(1) The three-year performance-based restricted stock units are for the performance period from January 1, 2020 through December 31, 2022. Each NEO is also entitled to dividend equivalent rights on such NEO’s unvested performance-based restricted stock units.
   
(2) Time-based restricted stock units of which one-third of the award vested in March 2020, with the remaining restricted stock units vesting in two substantially equal annual installments beginning in March 2021. Each NEO is also entitled to dividend equivalent rights on such NEO’s unvested time-based restricted stock units.
   
(3) The aggregate number of performance-based and time-based restricted stock units for each NEO for 2019 was calculated by dividing the targeted value of the total LTI award for each NEO indicated in the table by $67.45 per share, representing the average closing price per share of our common stock on The Nasdaq Global Select Market for the five trading days immediately preceding the last trading day in February 2020, and allocated 60% to the performance-based restricted stock units and 40% to the time-based restricted stock units.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 46
 
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The performance-based restricted stock units are subject to the satisfaction of the relative total stockholder return performance conditions relative to our peer group set forth in the table below for the applicable performance period. Additionally, the number of performance-based restricted stock units that would otherwise vest is further adjusted by the absolute TSR modifier illustrated below that reduces payouts upon negative performance period absolute TSR, and has a multiplier upon achieving a performance period absolute TSR of greater than 15%. No awards vest if the relative total stockholder return (prior to any adjustment required by application of the absolute TSR modifier) falls below the 25th percentile. The performance-based restricted stock units are also subject to satisfaction of continuous service requirements.

 

Relative Total Stockholder Return Percentile   Target Grant Vesting Percentage
<25th Percentile of Peer Group   0% of Target
Between 25th Percentile of Peer Group and up to but less than 75th Percentile of Peer Group   Straight line interpolation between 50% and 150% of Target
At or above 75th Percentile of Peer Group   200% of Target
     
Company Absolute Total Stockholder
Return Percentage During Performance Period
  Absolute TSR Modifier Applied to Target
Grant Vesting Percentage
Below 0%   75%
Between 0% and 15%   100%
Above 15%   125%

 

Target grant vesting percentage is expressed as a percentage of the target number of performance-based restricted stock units granted and, after being adjusted by the applicable absolute TSR modifier, may result in a settlement up to a maximum grant equal to 250% of the target number of performance-based restricted stock units granted.

 

These awards were designed to incentivize our NEOs to continue to contribute to the Company’s performance at the top of its peer group, similar to the Company’s performance in prior periods. In addition, the time-based awards were designed to promote retention of our NEOs who have been pursued not only by industry competitors but also by private equity groups.

 

SATISFACTION OF PERFORMANCE TARGETS FOR 2018 PERFORMANCE-BASED AWARDS FOR PERFORMANCE PERIOD ENDED DECEMBER 31, 2020 AND EQUITY PAYOUTS MADE ON SUCH AWARDS

 

In February 2021, the compensation committee certified the attainment of the pre-established performance goals with respect to performance-based restricted stock units granted to our NEOs in February 2018, which awards were subject to the satisfaction of certain total stockholder return performance conditions relative to our peer group for the performance period commencing on January 1, 2018 and ending on December 31, 2020, and continuous service requirements. The compensation committee certified that, based on publicly available information, (i) our total stockholder return for the above-referenced performance period was in the 53rd percentile of the peer group total stockholder return, (ii) the total stockholder return percentile equated to a total target grant vesting percent of 111.6% of the target number of restricted stock units granted to the NEOs and (iii) the applicable performance target and other material terms of such performance-based restricted stock unit awards were achieved at such levels for the above-referenced performance period.

 

As in all prior years, we did not exclude acquired companies from the relative comparison or otherwise adjust the total stockholder return of any company that was acquired during the performance period.

 

In connection with reaching these performance goals, the 2018 performance-based restricted stock unit awards received by Messrs. Stice, Van’t Hof, Pantermuehl and Wesson and Ms. Dick vested at 111.6% of the target, resulting in the issuance of the shares of common stock underlying the 2018 performance-based restricted stock units to these NEOs in March 2021 as follows:

 

Named Executive Officer  2018
Performance-Based
Restricted Stock
Unit Award
   Achieved TSR
Relative to
Peer Group
   Actual
Performance-Based
Restricted Stock
Units Granted
   % of Target
Vested
 
Travis D. Stice   30,585    53%   34,133    111.6% 
Kaes Van’t Hof   5,997    53%   6,693    111.6% 
Teresa L. Dick   8,396    53%   9,370    111.6% 
Russell D. Pantermuehl   15,353    53%   17,134    111.6% 
Daniel N. Wesson   3,998    53%   4,462    111.6% 

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 47

 
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PROCESS FOR DETERMINING EXECUTIVE COMPENSATION

 

The Role of the Compensation Committee

 

Our compensation committee oversees and approves our executive compensation program. The compensation committee, with the assistance of its external, independent compensation consultant, determines the mix of compensation, both among short-term and long-term components and cash and equity components, to establish compensation that it believes is appropriate for each of our NEOs. In making compensation decisions with respect to each element of compensation, the compensation committee considers numerous factors, including:

 

aligning the compensation of our executives with the performance of the Company on both a short-term and long-term basis;
achievement of individual and Company performance goals and other expectations relating to the executive’s position;
a comparison of the individual to other executives within the Company having similar levels of expertise and experience;
the individual’s role with us and the compensation paid to similar executives at comparable companies;
the individual’s particular background and circumstances, including training and prior relevant work experience and unique industry skills;
the demand for individuals with the individual’s specific expertise and experience;
recommendation from our CEO (but not with respect to his own compensation).

 

The compensation committee seeks to design a total compensation package for our NEOs that drives performance, rewards contributions in support of our business strategies and attracts, motivates and retains high quality talent with the skills and competencies our industry requires. The compensation committee seeks to balance these goals by designing our compensation policies and programs to encourage and reward prudent business judgment over the long term by offering both time-based and performance-based long-term incentive (LTI) awards, setting meaningful performance criteria and targets for incentive compensation, and offering competitive base salaries. The compensation committee believes that this combination should avoid encouraging executives and management-level employees to engage in excessive risk-taking, while at the same time promoting performance and retention.

 

The Role of our Chief Executive Officer

 

The compensation committee evaluates, in his absence, our Chief Executive Officer’s performance and compensation based on his leadership role, his individual performance and the Company’s performance measured against the metrics described in this compensation discussion and analysis, and his total compensation package is ultimately determined by the compensation committee.

 

Each year, our Chief Executive Officer evaluates executive and Company performance for the prior year and recommends to the compensation committee the annual base salaries, annual incentive compensation plan target award percentages and long-term incentive awards under the Equity Incentive Plan for the executive officers, including the NEOs, other than himself.

 

The Role of the Compensation Consultant

 

Our compensation committee annually retains, at the Company’s expense, an external, independent compensation consultant to assist with executive compensation matters.

 

In connection with its evaluation of executive compensation for 2020, the compensation committee retained Meridian Compensation Partners, LLC, an independent compensation consultant (Meridian).

 

The compensation committee reviewed the independence of Meridian during the applicable engagement period and determined that there were no conflicts of interest as a result of the compensation committee’s engagement of such consultant. The compensation committee continues to evaluate the independence of its compensation consultant on an ongoing basis.

 

The compensation committee has sole authority to hire and terminate its independent compensation consultant, and the independent compensation consultant reports only to the compensation committee.

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 48
 
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COMPETITIVE BENCHMARKING

 

Our 2020 Benchmarking Peer Group

 

In structuring our compensation policies and programs, the compensation committee considers the compensation practices of our peer companies and may also review compensation data from the oil and natural gas industry, any relevant compensation surveys and guidance from the compensation consultant. The compensation committee considers and may make changes to the companies included in our compensation peer group, primarily based on industry segment, and measures of size such as enterprise value, market capitalization, assets and revenues, after discussing such considerations with management and the compensation consultant. Following discussions with Meridian and review of pertinent financial information, the committee proposed replacing Anadarko Petroleum Corporation with EOG Resources, Inc. following the acquisition of Anadarko by Occidental Petroleum. Additionally, the committee also proposed removing SM Energy Company from its peer group due to size.

 

In its review of the peer group for 2020, the compensation committee considered pertinent financial measures for each company, including enterprise value and market capitalization as of November 2019 and assets and revenue as of the quarter ended September 30, 2019, as shown (in millions) in the table below:

 

   Enterprise Value   Market Capitalization   Assets   Revenue 
Peer Group 50th Percentile  $18,297   $9,679   $20,373   $5,071 
Diamondback Energy, Inc.  $18,488   $12,369   $23,553   $3,421 

 

The benchmarking peer group used in Meridian’s study, which served as reference for making compensation decisions for 2020, consisted of the following 13 companies.

 

Apache Corporation Marathon Oil Corporation
Cimarex Energy Co. Noble Energy, Inc.
Concho Resources Inc. Ovintiv Inc.
Continental Resources, Inc. Parsley Energy, Inc.
Devon Energy Corporation Pioneer Natural Resources Company
EOG Resources, Inc. WPX Energy, Inc.
Hess Corporation  

 

Meridian provided competitive data for similarly situated executives at these peer group companies, focusing on salary, annual incentive opportunity and LTI opportunity, and analyzing how these elements of compensation compare to the elements of compensation afforded to our executive officers, including the NEOs.

 

Role of Benchmarking in Determining Executive Compensation for 2020

 

In general, the compensation committee uses competitive market compensation data provided by Meridian and subsequent support and information from the Chief Human Resources Officer and discussions with the Chief Executive Officer to inform its decisions about overall compensation opportunities and specific compensation elements. The compensation committee considers these compensation elements and total compensation benchmarks of peer companies and the broader U.S. market. Next, the compensation committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as Company and individual performance, scope of responsibility, critical needs, skill sets, leadership potential, and succession planning.

 

Further, in considering changes to the 2020 executive compensation packages, the compensation committee evaluated, among other things, aspects of executive compensation in general, market data and competitive analysis provided by Meridian, the Company’s 2019 and multi-year performance, our executives’ individual contributions to such performance, compensation alignment with future performance and stockholder value creation, performance-qualified equity awards, retention considerations, market alternatives for our executives, input obtained from our stockholder outreach efforts and, with respect to our NEOs other than our Chief Executive Officer, our Chief Executive Officer’s recommendations. Our Chief Executive Officer’s recommendations to the compensation committee related to such other executive officers’ annual base salaries for 2020, annual incentive compensation plan target award percentages and long-term incentive awards under the Equity Incentive Plan. The compensation committee also evaluated, in his absence, our Chief Executive Officer’s individual performance and compensation.

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 49
 
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OTHER SIGNIFICANT COMPENSATION POLICIES AND PRACTICES

 

Senior Management Severance Plan

 

Effective February 20, 2020, we adopted the Diamondback Energy, Inc. Senior Management Severance Plan (the severance plan) and have entered into a participation agreement thereunder with each of our NEOs. Pursuant to the participation agreements, the benefits under the severance plan replace the employment agreements with each of our NEOs. The severance plan also covers other eligible executives who are selected to participate and replaces any employment agreement they may have. The plan provides a uniform framework for certain severance and change in control benefits that are consistent with market practices and are described in more detail under the heading “Benefit Plans—Senior Management Severance Plan” beginning on page 52 of this proxy statement.

 

Benefits and Perquisites

 

Consistent with our compensation philosophy, our compensation committee provides benefits to our executives that are substantially the same as those currently being offered to our other employees, including health insurance, life and disability insurance and a 401(k) plan. A description of the 401(k) plan is included under the heading “Benefit Plans—401(k) Plan” beginning on page 53.

 

Clawback Policy

 

The Company has adopted a “clawback” policy to allow the Company to recoup paid incentive based compensation from executive officers in the event the Company is required to restate its reported financial or operating results as a result of a covered executive’s misconduct or gross negligence. The amount of compensation recouped would be that which the executive would not have received if the financial statements had been properly reported at the time of first public release or filing with the SEC. All incentive compensation (cash and equity) is covered by the policy. The compensation committee continues to monitor the actions of the SEC with regard to the proposed regulations implementing the applicable clawback provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and, to the extent regulations are finalized, the compensation committee intends to take will take action to amend the policy to comply with any such regulations.

 

Anti-Hedging and Anti-Pledging Policies

 

We have a policy prohibiting directors, executive officers and certain other designated employees from speculative trading in our securities, including hedging transactions, short selling, and trading in put options, call options, swaps or collars. In addition, we prohibit our directors and executive officers from holding our common stock in a margin account. To our knowledge, all such individuals are in compliance with the policy. Our policy is to also strongly discourage all other employees from engaging in hedging activities in our stock. Any such transaction requires notice and pre-approval, and will only be considered with a valid justification. Since the adoption of our anti-hedging policy in 2012, we are not aware of any hedging activities by our employees. We also have a policy prohibiting our directors, executive officers and certain other designated employees from pledging our securities as collateral for a loan, except in certain limited circumstances upon obtaining prior approval from a compliance officer.

 

Stock Ownership and Retention Guidelines for Non-Employee Directors and Executive Officers

 

The compensation committee has adopted stock ownership and retention guidelines for our non-employee directors and executive officers who are classified as Vice President and above. These guidelines were adopted to encourage our non-employee directors and executives to have a meaningful stake in the Company, which encourages a focus on our long-term success, aligns directors’ and executives’ interests with the interests of our stockholders and further promotes our commitment to sound corporate governance.

 

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Under the stock ownership and retention guidelines, each of our non-employee directors must own an amount of our common stock equal in value to a multiple of the base annual retainer and our executive officers must own an amount of our common stock equal in value to a multiple of his or her annual base salary, as set forth in the table below.

 

Position   Multiple of Base Annual Retainer/Annual
Base Salary Required
Non-Employee Directors   5x
Chief Executive Officer   5x
Executive Vice Presidents   3x
Senior Vice Presidents and Vice Presidents   2x

 

The table below provides the minimum value of stock that each of our NEOs who currently serve as our executive officers must retain under our stock ownership and retention guidelines.

 

   2020
Base Salary
   Multiple of
Annual Base
Salary Required
   Minimum Value
of Stock Required
to Retain
 
Travis D. Stice  $1,250,000    5x   $6,250,000 
Kaes Van’t Hof  $520,000    3x   $1,560,000 
Teresa L. Dick  $447,000    3x   $1,341,000 
Russell D. Pantermuehl  $615,000    3x   $1,845,000 
Daniel N. Wesson  $450,000    3x   $1,350,000 

 

Until the earliest of: (i) 24 months following the applicable exercise date or vesting date of equity awards; (ii) the date such executive officer is determined to be in full compliance with the guidelines; and (iii) the date such executive officer ceases to be a participant subject to the guidelines, for awards granted after the effective date of the guidelines he or she is required to hold at least 50% of the net shares received upon the exercise of stock options and 50% of the net shares received upon vesting of restricted stock or performance shares. Once the ownership requirement is met, the executive officer must continue to maintain the value amount in accordance with these guidelines.

 

Any participant subject to the guidelines who is not in compliance with the applicable guideline (subject to any compliance transition period) may be required to retain up to 100% of the net shares of our common stock acquired via the exercise of options or the vesting of restricted awards granted under our equity incentive programs until the applicable guideline has been met.

 

Participants generally are given a five-year transition period to come into full compliance with the guidelines. Participants are expected to make steady progress towards meeting the ownership levels specified in the guidelines with any stock awards or stock purchases made on or after the effective date of the guidelines. There is an exception to the holding requirements for financial hardship and other unusual situations, subject to approval by the Chief Executive Officer and the compensation committee.

 

For stock options, “net” shares means the number of shares delivered upon exercise of the option, net of shares used to pay the exercise price and applicable taxes. For performance shares and restricted stock, “net” shares means the number of shares held upon vesting, net of shares used to pay applicable taxes.

 

In addition to shares held outright, shares held directly or indirectly in trust, shares held by immediate family members residing in the same household, shares held in qualified plans (e.g., in a 401(k) plan), vested shares held in non-qualified plans, vested stock options (other than options that are underwater at the time of measurement) and unvested restricted stock subject to time-based (but not performance-based) vesting are all counted toward satisfaction of the ownership requirement.

 

As of December 31, 2020, all of our NEOs were in compliance with the guidelines.

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 51
 
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BENEFIT PLANS

 

Senior Management Severance Plan

 

Effective February 20, 2020, we adopted the Diamondback Energy, Inc. Senior Management Severance Plan and have entered into a participation agreement thereunder with each of our named executive officers. Pursuant to the participation agreements, the benefits under the severance plan replace the employment agreements with each of our named executive officers. The severance plan also covers other eligible executives who are selected to participate and replaces any employment agreement they may have.

 

Payments and Benefits Unrelated to a Change in Control

 

In the event that the employment of a participating executive is terminated by us other than for “cause” (and not by reason of death or disability) or if the participant terminates his or her employment for “good reason” (in each case as defined in the severance plan), in addition to any accrued but unpaid base salary or unreimbursed business expenses payable in accordance with the requirements of applicable law, the participant is entitled to receive severance benefits consisting of:

 

(i) an amount, if any, equal to the bonus that would be payable for services attributable to a completed prior year performance period that has not been paid under the terms of the Diamondback Energy, Inc. 2014 Executive Annual Incentive Compensation Plan;
(ii) a multiple of base salary continuation for a specified number of months (2x for 24 months for the Chief Executive Officer, 1x for 18 months for Executive Vice-Presidents, 1x for 15 months for Senior Vice-Presidents and 1x for 12 months for Vice-Presidents);
(iii) a pro-rated target annual cash bonus for the year of termination (based on the number of days employed during the year of termination);
(iv) reimbursements for the cost of up to 18 months of premiums for COBRA group health continuation coverage; and
(v) the vesting or forfeiture, as applicable, of each outstanding unvested equity-based compensation award granted by us or our affiliates in accordance with the terms of the applicable equity award agreement. Mr. Stice’s participation agreement includes terms that are intended to maintain certain benefits under his prior employment agreement and are consistent with prior public disclosure that require each equity award granted to Mr. Stice to become 100% vested upon an eligible termination, and in the case of outstanding performance-based equity awards to vest at the maximum level under the equity award agreement, and be settled within ten business days.

 

Severance Benefits Related to a Change in Control

 

In the event that employment of a participant is terminated by us other than for “cause” (and not by reason of death or disability) or if the participant terminates his or her employment for “good reason,” in either case within the two year period immediately following a change in control (as defined in the severance plan), the participant will be entitled to the benefits described above, except that the salary continuation described in clause (ii) will be replaced by a lump sum cash payment equal to a multiple of the participant’s base salary plus such participant’s average bonus for the preceding three years (3.0x for the Chief Executive Officer, 2.5x for Executive Vice-Presidents, 2.25x for Senior Vice-Presidents and 2.0x for Vice-Presidents).

 

Severance Benefits Related to Death or Disability

 

The severance plan also provides the same benefits described in clauses (i), (ii) and (iii) (but not clause (iv)) in the event that a participant dies or becomes disabled (as defined in the Severance Agreement) while employed by us. Mr. Stice’s participation agreement includes terms that are intended to maintain certain benefits under his prior employment agreement and are consistent with prior public disclosure that require the Company to pay 100 percent of the premiums to continue his, his spouse’s and any of his eligible dependents’ group health plan continuation coverage under COBRA.

 

Release and Restrictive Covenants

 

The payment of any benefits under the severance plan is conditioned on the participant’s (or if applicable, the participant’s personal representative’s or estate’s) execution of a general release of claims. The severance plan also includes certain restrictive covenants that continue beyond the employment period, including non-competition and non-solicitation obligations for a period of one year following termination of employment. If a participating executive terminates employment on a basis that is not eligible for severance benefits, we can elect to apply the restrictive covenants for up to 12 months and receive a release by payment of an amount equal to one-twelfth of the participant’s annualized base salary plus target annual bonus for each month the restrictive covenants will apply.

 

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We believe that these severance benefits provide the same type of income transition protections that were provided to our executives under their prior employment agreements. These arrangements are intended to attract and retain qualified executives that could have job alternatives that may appear to them to be less risky absent these arrangements. We believe that the enhanced severance benefits resulting from terminations related to a change in control transaction are in the interest of our stockholders because they provide an incentive for executives to continue to help successfully execute such a transaction from its early stages through consummation. We also believe that these benefits provide important protection to our named executive officers, are consistent with the prior employment protections and the practices of peer group companies and are appropriate for the attraction and retention of executive talent.

 

401(k) Plan

 

We participate in a 401(k) Plan. Employees may elect to defer a portion of their compensation up to the statutorily prescribed limit. Each pay period we make a matching contribution to each employee’s deferral, not to exceed 10 percent of compensation. An employee’s interests in his or her deferrals and our matching contributions are, in each case, 100% vested when contributed. The 401(k) Plan is intended to qualify under Section 401(a) of the Internal Revenue Code. As such, contributions to the 401(k) Plan and earnings on those contributions are not taxable to the employee until distributed from the 401(k) Plan, and all timely made contributions are deductible by us for the year in which they are allocable.

 

Effect of Our Compensation Policies and Practices on Risk and Risk Management

 

The compensation committee reviews the risks and rewards associated with our compensation policies and programs. We believe that such policies and programs encourage and reward prudent business judgment and avoid encouraging excessive risk-taking over the long term. With respect to specific elements of compensation:

 

We believe that our programs balance short- and long-term incentives for our executive officers providing for an appropriate mix of fixed, discretionary and equity compensation that overall encourages long-term performance.
We believe that annual base salaries for our NEOs do not encourage excessive risk-taking as they are fixed amounts that are subject to discretionary increases by our compensation committee, based, among other factors, on annual performance evaluations. We also believe that such annual base salaries are set at reasonable levels, as compared to the base salaries of similarly situated individuals at our peer group companies. The base salary represents a portion of our NEOs’ overall compensation potential and is balanced by the other elements of their overall compensation potential, which are tied to both performance and long-term service.
Our annual incentive bonuses are designed to award achievement of short-term performance-driven results. The payment and amounts of the 2020 annual incentive bonuses were based, in part, upon meeting of certain performance criteria and targets established by the compensation committee for 2020, as disclosed in more detail above. Despite the compensation committee’s exercise of negative discretion to the annual incentive bonus outcome, we believe the performance criteria and applicable targets were set at meaningful levels and do not encourage excessive risk taking. We also believe that performance criteria and targets established by the compensation committee for 2021 were similarly designed to encourage performance, but not excessive risk taking.
Restricted stock units granted to our NEOs are subject to performance-based and time-based provisions. We award restricted stock units to promote performance and ensure that our executives have a continuing stake in the long-term success of the Company as the value of the award will depend on the stock price at and after the time of vesting. We believe that a mixture of performance-based and time-based equity awards represent a balanced approach to long-term equity compensation and do not encourage excessive risk taking that may be associated with the compensation approach focused solely on equity awards that vest strictly based on achieving certain targets. We also believe that the weight given by our compensation committee to performance-based equity awards, as compared to time-based equity awards, provide incentive to our NEOs to take appropriate amount of risk to drive the Company’s performance and enhance stockholder value.
Our NEOs are entitled to certain benefits that are payable upon the occurrence of their termination without “cause,” resignation for “good reason” or certain change in control transactions. See “Potential Payments upon Termination, Resignation or Change of Control for Fiscal Year 2020” and “Benefit Plans—Senior Management Severance Plan” for more information.

 

Based on the foregoing, the compensation committee believes that the Company does not utilize compensation policies and programs creating risks that are reasonably likely to have a material adverse impact on the Company.

 

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COMPENSATION COMMITTEE REPORT

 

The compensation committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on its review and discussion with management, the compensation committee recommended that the summary of Compensation Discussion and Analysis be included in this proxy statement.

 

Respectfully submitted by the compensation committee:

 

Michael P. Cross, Chairman
David L. Houston
Mark L. Plaumann
Melanie M. Trent
Stephanie K. Mains

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

The compensation committee of our board of directors consists of David L. Houston, Michael P. Cross, Mark L. Plaumann, Melanie M. Trent and Stephanie K. Mains. No current member of our compensation committee has ever been an officer or employee of ours. None of our executive officers serves, or has served during the past fiscal year, as a member of the board of directors or compensation committee of any other company that has or had one or more executive officers serving as member of our board of directors or compensation committee.

 

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COMPENSATION TABLES

 

SUMMARY COMPENSATION TABLE

 

The following table provides information concerning compensation of our principal executive officer, principal financial officer, and our three other highest paid executive officers during 2020, each identified as our NEO, for the fiscal years presented below, as applicable.

 

              Non-Equity         
          Stock Awards ($)(1)   Incentive Plan   All Other     
Name and     Salary   Performance-       Compensation   Compensation   Total 
Principal Position  Year  ($)   based(2)   Time Vested   ($)(11)   ($)(12)   ($)(13)(14) 
Travis D. Stice  2020  $1,250,000   $4,549,228   $2,757,512(3)   $1,562,500   $425,374   $10,544,614 
Chief Executive Officer  2019  $1,178,366   $6,783,608   $5,649,103(4)   $2,265,625   $172,954   $16,049,655 
   2018  $978,333   $5,213,268   $3,458,982(5)   $1,955,250   $101,015   $11,706,848 
Kaes Van’t Hof  2020  $520,000   $2,122,959   $1,286,872(6)   $468,000   $1,292,895   $5,690,726 
Chief Financial Officer  2019  $488,182   $4,912,149   $24,487,162(7)   $678,600   $497,411   $31,063,504 
Teresa L. Dick  2020  $447,000   $1,213,100   $735,320(8)   $357,600   $161,993   $2,915,013 
Chief Accounting Officer  2019  $434,334   $1,808,971   $2,018,821(8)   $518,520   $69,406   $4,850,052 
   2018  $428,333   $1,431,093   $643,859(8)   $543,520   $34,327   $3,081,132 
Russell Pantermuehl  2020  $615,000   $2,122,959   $1,286,872(9)   $492,000   $221,787   $4,738,618 
Executive Vice President - Chief Engineer  2019  $597,299   $3,165,665   $2,709,492(9)   $713,400   $85,762   $7,271,618 
  2018  $587,500   $2,616,856   $1,177,342(9)   $745,760   $36,872   $5,164,330 
Daniel N. Wesson  2020  $434,616   $909,859   $551,490(10)   $360,000   $378,607   $2,634,572 
Executive Vice President - Operations                                 

 

(1) The amounts shown in the above table reflect the grant date fair value of restricted stock units and/or phantom units granted in 2020, 2019 and 2018, respectively, determined in accordance with FASB ASC Topic 718. See Note 13 to our consolidated financial statements for the fiscal year ended December 31, 2020, included in our Annual Report on Form 10-K, filed with the SEC on February 25, 2021, regarding assumptions underlying valuations of equity awards for 2020, 2019 and 2018. Details regarding equity awards that were outstanding at December 31, 2020 can be found in the tables entitled “Outstanding Equity Awards at Fiscal 2020 Year-End under Diamondback’s Equity Incentive Plan,” “Outstanding Equity Awards under the Viper LTIP at Fiscal 2020 Year-End” and “Outstanding Equity Awards under the Rattler LTIP at Fiscal 2020 Year-End.”
(2) Represents (i) the grant date fair value (calculated as discussed in Note 1 above) of the performance-based restricted stock units for each NEO granted under Diamondback’s Equity Incentive Plan for the applicable performance period, subject to the Company’s attainment of certain pre-established performance targets and the NEO’s continuous employment and (ii) in the case of Mr. Van’t Hof, the 2019 value also includes the $1,746,484 grant date fair value attributable to the performance-based restricted stock units that were granted to Mr. Van’t Hof under Diamondback’s Equity Incentive Plan on March 1, 2019 as part of a one-time retention award, subject to the achievement of the relative TSR over the three-year performance period beginning on January 1, 2019 and ending on December 31, 2021 and continuous employment, vesting and settling in five substantially equal annual installments beginning on March 1, 2025.”
(3) The aggregate grant date fair value for 2020 for Mr. Stice is attributable to the time-based restricted stock units granted to Mr. Stice under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant.
(4) Of the aggregate grant date fair value of $5,649,103 for 2019 for Mr. Stice, (i) $3,453,669 is attributable to the time-based restricted stock units granted to Mr. Stice under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $2,195,434 is attributable to the one-time, time-based phantom unit award granted to Mr. Stice under the Rattler LTIP in connection with the Rattler IPO on May 28, 2020, vesting in five annual installments beginning on May 28, 2020.
(5) Of the aggregate grant date fair value of $3,458,982 for Mr. Stice for 2018, (i) $2,345,577 is attributable the time-based restricted stock units granted to Mr. Stice in February 2018 under Diamondback’s Equity Incentive Plan, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $1,113,405 is attributable to the one-time, time-based phantom unit award granted to Mr. Stice in February 2018 under the Viper LTIP.
(6) The aggregate grant date fair value for 2020 for Mr. Van’t Hof is attributable to the time-based restricted stock units granted to Mr. Van’t Hof under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant.

 

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(7) Of the aggregate grant date fair value of $24,487,162 for 2019 for Mr. Van’t Hof, (i) $1,611,775 is attributable to the time-based restricted stock units granted to Mr. Van’t Hof under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant, (ii) $921,104 is attributable to the time-based restricted stock units granted to Mr. Van’t Hof as part of a one-time retention award under Diamondback’s Equity Incentive Plan, vesting in five equal annual installments beginning on March 1, 2025 and (iii) $21,954,283 is attributable to the one-time, time-based phantom unit award granted to Mr. Van’t Hof under the Rattler LTIP in connection with the Rattler IPO on May 28, 2019, vesting in five equal annual installments beginning on May 28, 2020.
(8) The aggregate grant date fair value for 2020 for Ms. Dick is attributable to the time-based restricted stock units granted to Ms. Dick under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. Of the aggregate grant date fair value of $2,018,821 for 2019 for Ms. Dick, (i) $921,104 is attributable to the time-based restricted stock units that were granted to Ms. Dick under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $1,097,717 is attributable to the one-time, time-based phantom unit award granted to Ms. Dick under the Rattler LTIP in connection with the Rattler IPO on May 28, 2019, vesting in five equal annual installments beginning on May 28, 2020. The grant date fair value for Ms. Dick for 2018 is attributable to the time-based restricted stock units that were granted to Ms. Dick under Diamondback’s Equity Incentive Plan in February 2018, vesting in three substantially equal annual installments beginning on the date of grant.
(9) The aggregate grant date fair value for 2020 for Mr. Pantermuehl is attributable to the time-based restricted stock units granted to Mr. Pantermuehl under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. Of the aggregate grant date fair value of $2,709,492 for 2019 for Mr. Pantermuehl, (i) $1,611,775 is attributable to the time-based restricted stock units that were granted to Mr. Pantermuehl under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $1,097,717 is attributable to the one-time, time-based phantom unit award granted to Mr. Pantermuehl under the Rattler LTIP in connection with the Rattler IPO on May 28, 2019, vesting in five equal annual installments beginning on May 28, 2020. The grant date fair value for Mr. Pantermuehl for 2018 is attributable to the time-based restricted stock units that were granted to Mr. Pantermuehl under Diamondback’s Equity Incentive Plan in February 2018, vesting in three substantially equal annual installments beginning on the date of grant.
(10) The aggregate grant date fair value for 2020 for Mr. Wesson is attributable to the time-based restricted stock units granted to Mr. Wesson under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant.
(11) The amounts shown reflect performance-based annual incentive bonuses granted under the Executive Annual Incentive Compensation Plan.
(12) Amounts for 2020 include (i) for Mr. Stice, our 401(k) plan contributions of $28,500, life insurance premium payments of $3,722, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $281,057, distribution equivalent rights on unvested phantom units under the Rattler LTIP of $111,086 and the value of $1,009 required to be imputed to Mr. Stice under applicable law and Company policy in connection with the use of the Company chartered aircraft for business purposes by the accompanying spouse, (ii) for Mr. Van’t Hof, our 401(k) plan contributions of $28,500, life insurance premium payments of $1,832, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $151,706 and distribution equivalent rights on unvested phantom units under the Rattler LTIP of $1,110,857, (iii) for Ms. Dick, our 401(k) plan contributions of $28,500, life insurance premium payments of $2,642, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $75,308 and distribution equivalent rights on unvested phantom units under the Rattler LTIP of $55,543, (iv) for Mr. Pantermuehl, our 401(k) plan contributions of $28,500, life insurance premium payments of $4,964, dividend equivalent rights paid on unvested restricted stock units that were granted in 2020 under Diamondback’s Equity Incentive Plan of $132,780 and distribution equivalent rights on unvested phantom units under the Rattler LTIP of $55,543 and (v) for Mr. Wesson, our 401(k) contributions of $28,500, life insurance premium payments of $1,886, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $70,506 and distribution equivalent rights paid on unvested phantom units under the Rattler LTIP of $277,714. Amounts for 2019 include (i) for Mr. Stice, our 401(k) plan contributions of $28,000, life insurance premium payments of $5,074, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $61,194, distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Viper LTIP of $34,306 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $44,380, (ii) for Mr. Van’t Hof, our 401(k) plan contributions of $28,000, life insurance premium payments of $3,078, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $35,228, distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Viper LTIP of $41,451 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $389,654, (iii) for Ms. Dick, our 401(k) plan contributions of $28,000, life insurance premium payments of $3,977, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $16,484 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $20,945 and (iv) for Mr. Pantermuehl, our 401(k) plan contributions of $28,000, life insurance premium payments of $6,261, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $29,300 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $22,201. Amounts for 2018 include (i) for Mr. Stice, our 401(k) plan contributions of $27,500, life insurance premium payments of $3,791, dividend equivalent rights paid on unvested restricted stock units that were granted in 2018 under Diamondback’s Equity Incentive Plan of $16,567 and distribution equivalent rights paid on unvested phantom units that were granted in 2018 under the Viper LTIP of $53,157, (ii) for Ms. Dick, our 401(k) plan contributions of $27,500, life insurance premium payments of $2,279 and dividend equivalent rights paid on unvested restricted stock units that were granted in 2018 under Diamondback’s Equity Incentive Plan of $4,548 and (iii) for Mr. Pantermuehl, our 401(k) plan contributions of $27,500, life insurance premium payments of $1,056 and dividend equivalent rights paid on unvested restricted stock units that were granted in 2018 under Diamondback’s Equity Incentive Plan of $8,316.
(13) Certain of our NEOs also performed services as executive officers and/or directors of the general partner of Viper, our publicly traded subsidiary, as set forth in more detail in their respective biographies above, and their time was allocated between managing our business and managing the business of Viper. During 2020 and 2019, no specific allocations were made by Viper for our executive officers’ services to Viper. During 2018, Viper reimbursed us approximately $421,650, $141,487 and $129,126 attributable to time allocated to providing services to Viper by Mr. Stice, Ms. Dick and Mr. Pantermuehl, respectively.
(14) During 2020 and 2019, Mr. Stice, Mr. Van’t Hof and Ms. Dick also performed services as executive officers and/or directors of the general partner of Rattler, our publicly traded subsidiary, as set forth in more detail in their respective biographies above, and their time was allocated between managing our business and managing the business of Rattler. In accordance with the terms of Rattler’s limited partnership agreement, in 2020 and 2019, we were reimbursed for compensation related expenses attributable to the portion of the executive’s time allocated to providing services to Rattler.

 

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2020 GRANTS OF PLAN-BASED AWARDS UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN

 

              All Other   Grant Date 
      Estimated Future Payouts Under   Estimated Future Payouts Under   Stock Awards:   Fair Value 
      Non-Equity Incentive Plan Awards(1)   Equity Incentive Plan Awards(2)   Number of   of Stock 
   Grant  Threshold   Target   Maximum   Threshold   Target   Maximum   Shares of   and Option 
Name   Date  ($)    ($)    ($)    (#)    (#)    (#)    Stock or Units(3)    Awards(4) 
Travis D. Stice  3/1/2020  $781,250   $1,562,500   $3,125,000                          
   3/1/2020                  33,357    66,714    166,785    44,476   $7,306,740 
Kaes Van’t Hof  3/1/2020  $234,000   $468,000   $936,000                          
   3/1/2020                  15,567    31,133    77,833    20,756   $3,409,831 
Teresa L. Dick  3/1/2020  $178,800   $357,600   $715,200                          
   3/1/2020                  8,895    17,790    44,475    11,860   $1,948,420 
Russell Pantermuehl  3/1/2020  $246,000   $492,000   $984,000                          
   3/1/2020                  15,567    31,133    77,833    20,756   $3,409,831 
Daniel N. Wesson  3/1/2020  $180,000   $360,000   $720,000                          
   3/1/2020                  6,672    13,343    33,358    8,895   $1,461,349 

 

(1) Reflects performance-based annual incentive cash bonuses granted under the Annual Incentive Plan for 2020. No non-equity incentive plan awards are paid under the Annual Incentive Plan for performance below the pre-determined thresholds.
(2) For each NEO, this amounts represents the performance-based restricted stock units granted under the Equity Incentive Plan, which awards are subject to the satisfaction of certain relative TSR performance conditions compared to the Company’s peer group for the three-year performance period commencing on January 1, 2020 and ending on December 31, 2022, as certified by the compensation committee by not later than March 15, 2022, and continuous service requirements. The number of restricted stock units that will vest is based on the achievement of a pre-established threshold, target or maximum relative TSR goal, as compared to the Company’s peers, as modified by the absolute TSR modifier. The TSR is calculated over the performance period by dividing (1) the sum of (a) the cumulative value of dividends received during the performance period, assuming reinvestment, plus (b) the difference between the stock price at the end and at the beginning of the performance period; by (2) the stock price at the beginning of the performance period. No awards vest if the relative TSR for the applicable performance period is below the threshold percentile. The absolute TSR modifier reduces payouts upon negative performance period TSR, pays at target upon achieving a performance period annual TSR of zero to 15%, and has a multiplier upon achieving a performance period annual TSR of greater than 15%.
(3) Represents the restricted stock units granted to each NEO under the Equity Incentive Plan on March 1, 2020, vesting in three equal annual installments beginning on the date of grant. All of these awards are subject to continuous service requirements.
(4) The amounts shown reflect the grant date fair value of restricted stock units granted, determined in accordance with FASB ASC Topic 718. See Note 13 to our consolidated financial statements for the fiscal year ended December 31, 2020, included in our Annual Report on Form 10-K, filed with the SEC on February 25, 2021, regarding assumptions underlying valuations of equity awards for 2020.

 

2020 GRANTS OF PLAN-BASED AWARDS UNDER THE VIPER LTIP

 

No awards were made to our NEOs by Viper, our publicly traded subsidiary, during the year ended December 31, 2020 under the Viper LTIP. Viper’s common units are listed on the NASDAQ Global Select Market under the symbol “VNOM.” See “Compensation Discussion and Analysis—Executive Compensation Program Elements—Awards under Long-term Incentive Plans of Diamondback’s Publicly Traded Subsidiaries” for more information.

 

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2020 GRANTS OF PLAN-BASED AWARDS UNDER THE RATTLER LTIP

 

No awards were made to our NEOs by Rattler, our publicly traded subsidiary, during the year ended December 31, 2020 under the Rattler LTIP. Rattler’s common units are listed on the NASDAQ Global Select Market under the symbol “RTLR.” See “Compensation Discussion and Analysis—Executive Compensation Program Elements—Awards under Long-term Incentive Plans of Diamondback’s Publicly Traded Subsidiaries” for more information.

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2020 YEAR-END UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN

 

The following table provides information concerning equity awards outstanding for our NEOs at December 31, 2020 under Diamondback’s Equity Incentive Plan:

 

Name  Number of Shares or
Units of Stock That
Have Not Vested
(#)
    Market Value of Shares
or Units of Stock That
Have Not Vested
($)(1)
   Equity Incentive Plan Awards:
Number of Unearned Shares
or Units of Stock That Have
Not Vested
    Equity Incentive Plan Awards:
Market or Payout Value of
Unearned Shares or Units of
Stock That Have Not Vested(1)
 
Travis D. Stice                      
               61,170(3)   $2,960,628 
    10,986(2)   $531,722    98,872(4)   $4,785,405 
    29,650(2)   $1,435,060    168,785(5)   $8,072,394 
Kaes Van’t Hof                      
               11,994(3)   $580,510 
    5,127(6)   $248,147    46,140(4)   $2,233,176 
    13,837(6)   $669,711    77,833(5)   $3,767,117 
    8,790(7)   $425,436    26,366(8)   $1,276,114 
Teresa L. Dick                      
               16,792(3)   $812,733 
    2,930(9)   $141,812    26,366(4)   $1,276,114 
    7,906(9)   $382,650    44,475(5)   $2,152,590 
Russell Pantermuehl                      
               30,706(3)   $1,486,170 
    5,127(10)   $248,147    46,140(4)   $2,233,176 
    13,837(10)   $669,711    77,833(5)   $3,767,117 
Daniel N. Wesson                      
    1,319    $63,840    11,864(3)   $574,218 
    5,930(11)   $287,012    33,358(4)   $1,614,527 
    6,595(12)   $319,198    19,774(5)   $957,062 

 

DIAMONDBACK ENERGY, INC. 2021 PROXY STATEMENT 58
 
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(1) Market value of shares or units that have not vested is based on the closing price of $48.40 per share of our common stock on the Nasdaq Global Select Market on December 31, 2020, the last trading day of 2020.
(2) The 10,986 restricted stock units vested on March 1, 2021 and, of the 29,650 restricted stock units, 14,825 vested on March 1, 2021 and the remaining 14,825 will vest on March 1, 2022.
(3) Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted under the Equity Incentive Plan subject to the satisfaction of certain relative TSR performance conditions as compared to our peer group for the performance period commencing on January 1, 2018 and ending on December 31, 2020. All of these performance-based restricted stock units vested as of December 31, 2020 at 111.6% of target (rather than the maximum 200% reported in this table) upon certification by the compensation committee of attainment of the applicable performance conditions and settlement of these units on February 23, 2021.
(4) Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted under the Equity Incentive Plan subject to the satisfaction of certain relative TSR conditions as compared to our peer group for the performance period commencing on January 1, 2019 and ending on December 31, 2021, as certified by the compensation committee by not later than March 15, 2022, and continuous service requirements.
(5) Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted under the Equity Incentive Plan subject to the satisfaction of certain relative TSR performance conditions as compared to our peer group for the performance period commencing on January 1, 2020 and ending on December 31, 2022, as certified by the compensation committee by not later than March 15, 2022, and continuous service requirements. The number of restricted stock units that will vest is based on the achievement of a pre-established threshold, target or maximum relative TSR goal, as compared to the Company’s peers, as modified by the absolute TSR modifier. The TSR is calculated over the performance period by dividing (1) the sum of (a) the cumulative value of dividends received during the performance period, assuming reinvestment, plus (b) the difference between the stock price at the end and at the beginning of the performance period; by (2) the stock price at the beginning of the performance period. No awards vest if the relative TSR for the applicable performance period is below the threshold percentile. The absolute TSR modifier reduces payouts upon negative performance period TSR, pays at target upon achieving a performance period annual TSR of zero to 15%, and has a multiplier upon achieving a performance period annual TSR of greater than 15%.
(6) The 5,127 restricted stock units vested on March 1, 2021 and, of the 13,837 restricted stock units, 6,919 vested on March 1, 2021 and the remaining 6,918 will vest on March 1, 2022.
(7) These time-based restricted stock units were granted to Mr. Van’t Hof under the Equity Incentive Plan as part of a one-time retention award and will vest in five equal annual instalments beginning on March 1, 2025.
(8) Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted to Mr. Van’t Hof under the Equity Incentive Plan as part of a one-time retention award subject to the satisfaction of certain relative TSR conditions as compared to our peer group for the performance period commencing on January 1, 2019 and ending on December 31, 2021, as certified by the compensation committee by not later than March 15, 2022, and continuous service requirements, vesting and settling in five substantially equal annual installments beginning on March 1, 2025.
(9) The 2,930 restricted stock units vested on March 1, 2021 and, of the 7,906 restricted stock units 3,953 vested on March 1, 2021 and the remaining 3,953 will vest on March 1, 2022.
(10) The 5,127 restricted stock units vested on March 1, 2021 and, of the 13,837 restricted stock units, 6,919 vested on March 1, 2021 and the remaining 6,918 will vest on March 1, 2022.
(11) The 1,319 restricted stock units vested on March 1, 2021 and, of the 5,930 restricted stock units, 2,965 vested on March 1, 2021 and the remaining 2,965 will vest on March 1, 2022.
(12) These time-based restricted stock units were granted to Mr. Wesson under the Equity Incentive Plan as part of a one-time retention award and will vest in five equal annual instalments beginning on March 1, 2025.

 

OUTSTANDING EQUITY AWARDS UNDER THE VIPER LTIP AT FISCAL 2020 YEAR-END

 

No equity awards under the Viper LTIP were outstanding for any of our NEOs at December 31, 2020.

 

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OUTSTANDING EQUITY AWARDS UNDER THE RATTLER LTIP AT FISCAL 2020 YEAR-END

 

The following table provides information concerning equity awards under the Rattler LTIP outstanding for NEOs at December 31, 2020:

 

Name  Number of Shares or
Units of Stock That
Have Not Vested
(#)
   Market Value of Shares
or Units of Stock That
Have Not Vested
($)(1)
 
Travis D. Stice   91,429(2)   $866,747 
Kaes Van’t Hof   914,286(2)   $8,667,431 
Teresa L. Dick   45,715(2)   $433,378 
Russell Pantermuehl   45,715(2)   $433,378 
Daniel N. Wesson   228,572(2)   $2,166,863 

 

(1) Market value of shares or units that have not vested is based on the closing price of $9.48 per share of our common stock on the Nasdaq Global Select Market on December 31, 2020, the last trading day of 2020.
(2) These phantom units will vest in four remaining equal or substantially equal annual installments beginning on May 28, 2021.

 

STOCK VESTED DURING FISCAL YEAR 2020 UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN

 

The following table provides certain information for the NEOs with respect to the number of shares acquired upon the vesting of restricted stock awards under Diamondback’s Equity Incentive Plan during 2020:

 

   Stock Awards
Name  Number of Shares
Acquired on Vesting
(#)
   Value Realized
on Vesting
($)(1)
Travis D. Stice   74,624   $5,431,110
Kaes Van’t Hof   20,750   $1,429,942
Teresa L. Dick   19,807   $1,441,005
Russell Pantermuehl   37,571   $2,750,054
Daniel N. Wesson   5,217   $299,495

 

(1) Value realized on vesting is based on the vesting date closing price per share of our common stock on the Nasdaq Global Select Market. If the Nasdaq Global Select Market was closed on the vesting date, the calculation was made using the opening price on the next day on which the market was open.

 

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PHANTOM UNITS VESTED UNDER THE RATTLER LTIP DURING FISCAL YEAR 2020

 

The following table provides certain information for the NEOs with respect to the number of shares acquired upon the vesting of phantom unit awards under the Rattler LTIP during 2020:

 

   Stock Awards
Name  Number of Shares
Acquired on Vesting
(#)
   Value Realized
on Vesting
($)(1)
Travis D. Stice   22,857   $202,742
Kaes Van’t Hof   228,571   $2,027,425
Teresa L. Dick   11,428   $101,366
Russell Pantermuehl   11,428   $101,366
Daniel N. Wesson   57,142   $506,850

 

(1) Value realized on vesting is based on the closing price per common unit of Rattler on the Nasdaq Global Select Market on the trading day prior to the vesting date.

 

PAY RATIO DISCLOSURE

 

Pursuant to Item 402(u) of Regulation S-K, we are disclosing the pay ratio and supporting information comparing the median of the annual total compensation of our employees (including full-time, part-time, seasonal and temporary employees) other than Mr. Stice, our Chief Executive Officer, and the annual total compensation of our Chief Executive Officer. The pay ratio is calculated in a manner consistent with Item 402(u) of Regulation S-K. For the year ended December 31, 2020, our last completed fiscal year:

 

The median of the annual total compensation of all of our employees, other than our Chief Executive Officer, is $115,307.
The annual total compensation of our Chief Executive Officer is $10,544,614.

 

Based on this information, the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all other employees is 91 to 1. To identify the median employee for 2020 (the 2020 Median Employee), we reviewed our employee population as of December 31, 2020. For 2020, we used wages reported in Box 1 of IRS Form W-2 during the 12-month period ending on December 31, 2020, as a consistently applied compensation measure. We did not annualize the wages for new employees or employees on unpaid leave of absence who were employed for less than the full fiscal year, or make cost of living adjustments. Based on this methodology, we identified an employee whose compensation was at the median of the employee data.

 

Once we identified the 2020 Median Employee, we calculated the annual total compensation using the rules applicable to the Summary Compensation Table. With respect to the annual total compensation of our Chief Executive Officer we used the amount reported in the “Total” column for 2020 in the Summary Compensation Table on page 55.

 

The pay ratio rules provide companies with flexibility to select the methodology and assumptions used to identify the median employee, calculate the median employee’s compensation and estimate the pay ratio. As a result, our methodology may differ from those used by other companies, including those within our industry.

 

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POTENTIAL PAYMENTS UPON TERMINATION, RESIGNATION OR CHANGE OF CONTROL FOR FISCAL YEAR 2020

 

The following tables provide information regarding potential payments to each of our NEOs in connection with certain termination events, including a termination related to a change of control of the Company, as of December 31, 2020 under the terms of the Diamondback Energy, Inc. Senior Management Severance Plan. These severance plan arrangements with our NEOs are described in more detail under “Benefit Plans—Senior Management Severance Plan” above.

 

   Termination Without Cause or Resignation for Good Reason(1)(2)
       Annual Incentive   COBRA   RSUs and Phantom    
Name  Base Salary   Bonus   Reimbursement   Units(3)   Total
Travis D. Stice  $5,000,000(4)   $1,562,500(6)   $20,436(8)   $18,651,956(9)   $25,234,892
Kaes Van’t Hof  $780,000(5)   $468,000(7)   $20,436(8)   $   $1,268,436
Teresa L. Dick  $670,500(5)   $357,600(7)   $20,436(8)   $   $1,048,536
Russell Pantermuehl  $922,500(5)   $492,000(7)   $9,373(8)   $   $1,423,873
Daniel N. Wesson  $675,000(5)   $360,000(7)   $29,986(8)   $   $1,064,986
                         
   Change of Control/No Termination
        Annual Incentive   COBRA   RSUs and Phantom     
Name  Base Salary   Bonus(7)   Reimbursement   Units(3)    Total
Travis D. Stice  $   $1,562,500(6)   $   $18,651,956(9)   $20,214,456
Kaes Van’t Hof  $   $468,000(7)   $   $8,667,431(10)   $9,135,431
Teresa L. Dick  $   $357,600(7)   $   $433,378(10)   $790,978
Russell Pantermuehl  $   $492,000(7)   $   $433,378(10)   $925,378
Daniel N. Wesson  $   $360,000(7)   $   $2,166,863(10)   $2,526,863

 

   Change of Control/Qualifying Termination((1)(11))
   Lump Sum            
   Cash Severance   COBRA   RSUs and Phantom    
Name  Payment   Reimbursement   Units(3)   Total
Travis D. Stice  $11,095,875(12)   $20,436(8)   $18,651,956(9)(14)   $29,768,267
Kaes Van’t Hof  $3,144,833(13)   $20,436(8)   $13,562,472(10)   $16,727,741
Teresa L. Dick  $2,658,133(13)   $20,436(8)   $2,863,300(10)   $5,541,869
Russell Pantermuehl  $3,655,467(13)   $9,373(8)   $4,717,746(10)   $8,382,586
Daniel N. Wesson  $2,254,042(13)   $29,986(8)   $4,248,363(10)   $6,532,391

 

   Termination upon Death or Disability((1)(15))
       Annual Incentive   COBRA   RSUs and Phantom    
Name  Base Salary   Bonus   Reimbursement   Units(3)   Total
Travis D. Stice  $5,000,000(4)   $1,562,500(6)   $20,436(16)   $18,651,956(9)(14)   $25,234,892
Kaes Van’t Hof  $780,000(5)   $468,000(7)   $   $13,596,158(17)   $14,844,158
Teresa L. Dick  $670,500(5)   $357,600(7)   $   $2,910,442(17)   $3,938,542
Russell Pantermuehl  $922,500(5)   $492,000(7)   $   $4,803,947(17)   $6,218,447
Daniel N. Wesson  $675,000(5)   $360,000(7)   $   $4,248,363(17)   $5,283,363

 

(1) The payment of any amounts or provision of any benefits to each NEO under the severance plan is subject to (i) such NEO’s (or, if applicable, his or her representative’s or estate’s) execution, within forty five (45) days following receipt (or such shorter period as set forth in such release), of a waiver and general release of claims, and such waiver and general release of claims becoming effective and irrevocable in accordance with its terms within sixty (60) days following such NEO’s termination date and (ii) certain non-competition and non-solicitation obligations.

 

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(2) Represents the amounts payable to each NEO under the severance plan and the applicable NEO participation agreement, under which, in the event we terminate such NEO’s employment with us other than for “cause” (and not by reason of death or disability), or if such NEO terminates his or her employment with us for “good reason,” he or she will be entitled to receive (i) an amount, if any, equal to the bonus that would be payable for services attributable to a completed prior year performance period that has not been paid under the terms of the Annual Incentive Plan, (ii) a multiple of base salary continuation (2x for 24 months for Mr. Stice and 1x for 18 months for each other NEO), (iii) a target annual cash bonus for the year of termination (pro-rated, if applicable based on the number of days employed during the year of termination), (iv) reimbursement for the cost of up to 18 months of premiums for COBRA group health continuation coverage and (v) the vesting or forfeiture (as applicable) of each outstanding unvested equity-based compensation award granted by us or our affiliates in accordance with the terms of the applicable equity award agreement.
(3) The value of restricted stock units was calculated based on the closing price of our common stock of $48.40 per share on December 31, 2020. The value of phantom units was calculated based on the closing price of Rattler’s common units of $9.48 per unit on December 31, 2020.
(4) Represents an amount equal to the base salary continuation of 2x for 24 months for Mr. Stice.
(5) Represents an amount equal to the base salary continuation of 1x for 18 months for each of Mr. Van’t Hof, Ms. Dick, Mr. Pantermuehl and Mr. Wesson.
(6) Represents an amount equal to the target bonus under the Annual Incentive Plan for Mr. Stice, representing 125% of his annual base salary.
(7) Represents an amount equal to the target bonus under the Annual Incentive Plan for each of these NEOs, representing (i) 90% of the annual base salary for Mr. Van’t Hof and (ii) 80% of the applicable annual base salary for each of Ms. Dick and Messrs. Pantermuehl and Wesson.
(8) Represents reimbursement for the cost of up to 18 months of premiums for COBRA group health continuation coverage.
(9) Mr. Stice’s participation agreement includes terms that are intended to maintain certain benefits under his prior employment agreement and require each equity award granted to Mr. Stice to become 100% vested upon an eligible termination, and in the case of outstanding performance-based equity awards to vest at the maximum level under the equity award agreement and be settled within ten business days.
(10) The restricted stock units granted under Diamondback’s Equity Incentive Plan to each of Mr. Van’t Hof, Ms. Dick, Mr. Pantermuehl and Mr. Wesson that remained unvested as of December 31, 2020 have double-trigger provisions and will vest upon (i) qualifying termination without cause within 24 months of the occurrence of the change in control of the Company or (ii) upon such executive officer’s death or disability. Under the terms of the phantom unit awards granted under the Viper LTIP and the Rattler LTIP prior to 2020, each such phantom unit award will vest immediately upon a change in control of Viper or Rattler, as applicable, or a change in control of Diamondback.
(11) Represents the amounts payable to each NEO under the severance plan and the applicable NEO participation agreement, under which, in the event that the employment of an NEO is terminated by us other than for “cause” (and not by reason of death of disability), or if such NEO terminates his or her employment with us for “good reason,” in each case within the two-year period immediately following a change in control (as defined in the severance plan), he or she will be entitled to receive (i) an amount, if any, equal to the bonus that would be payable for services attributable to a completed prior year performance period that has not been paid under the terms of the Annual Incentive Plan, (ii) a lump sum cash payment equal to a multiple of the participant’s base salary plus such participant’s average bonus for the preceding three years (3x for Mr. Stice and 2.5x for each other NEO), (iii) a target annual cash bonus for the year of termination (pro-rated, if applicable based on the number of days employed during the year of termination), (iv) reimbursements for the cost of up to 18 months of premiums for COBRA group health continuation coverage and (v) the vesting or forfeiture (as applicable) of each outstanding unvested equity-based compensation award granted by us or our affiliates in accordance with the terms of the applicable equity award agreement.
(12) Represents a lump sum cash payment equal to 3x Mr. Stice’s base salary plus Mr. Stice’s average bonus for the preceding three years ended December 31, 2020 and a target annual cash bonus for the year of termination.
(13) For each of Mr. Van’t Hof, Ms. Dick, Mr. Pantermuehl and Mr. Wesson, represents a lump sum cash payment equal to 2.5x such NEO’s base salary plus such NEO’s average bonus for the preceding three years ended December 31, 2020 and a target annual cash bonus for the year of termination.
(14) Under the terms of the applicable award agreement with Mr. Stice, restricted stock units granted under Diamondback’s Equity Incentive Plan prior to 2020 will vest at a maximum level immediately (a) upon the sale, transfer or conveyance of substantially all of our assets, (b) if there is a significant change to the composition of our board of directors, (c) we adopt a plan of dissolution or liquidation, (d) in the event that more than 50% of the combined voting power of our then outstanding stock is controlled by one or more parties that is not us or (e) upon such executive officer’s death or disability. Under the terms of the phantom unit awards granted under the Viper LTIP and the Rattler LTIP prior to 2020, each such phantom unit award will vest upon a change in control of Viper or Rattler, as applicable, or a change in control of Diamondback, or upon such NEO’s death or disability.
(15) In the event that an NEO dies or becomes disabled while employed by us, such NEO will be entitled to (i) an amount, if any, equal to the bonus that would be payable for services attributable to a completed prior year performance period that has not been paid under the terms of the Annual Incentive Plan, (ii) a multiple of base salary continuation (2x for 24 months for Mr. Stice and 1x for 18 months of each other NEO) and (iii) a target annual cash bonus for the year of termination (pro-rated, if applicable based on the number of days employed during the year of termination).
(16) Represents reimbursements for the cost of up to 18 months of premiums for COBRA group health continuation coverage to Mr. Stice’s spouse and any eligible dependents, as provided by the terms of Mr. Stice’s participation agreement under the severance plan.
(17) Under the terms of the applicable award agreement, upon such NEO’s death or disability the number of performance-based restricted stock units the officer is entitled to is not determined until the end of the performance period and is settled at the same time it would have had the officer remained employed. For purposes of calculating the number of performance-based restricted stock units that such NEO would be entitled to upon his or her death or disability, the Company assumed that the performance conditions were satisfied at target.

 

2020 EQUITY COMPENSATION PLAN INFORMATION

 

Certain information with respect to all compensation plans under which equity securities are authorized for issuance, as of December 31, 2020, is set forth in Proposal 4 beginning on page 76.

 

DIAMONDBACK ENERGY, INC.  2021 PROXY STATEMENT 63
 
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2020 DIRECTOR COMPENSATION

 

The following table contains information with respect to 2020 compensation of our directors who served in such capacity during that year, except that the 2020 compensation of those directors who are also our named executive officers is disclosed in the 2020, 2019 and 2018 Summary Compensation Table above.

 

Name  Fees Earned or
Paid in Cash
($)(1)
   Stock Awards
($)(2)
   All Other
Compensation
($)(3)
   Total
($)
 
Steven E. West(4)  $200,000   $141,075   $3,596   $344,671 
Michael P. Cross  $