UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Pioneer Natural Resources Company
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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PIONEER NATURAL RESOURCES COMPANY
5205 North O'Connor Boulevard
Suite 900
Irving, Texas 75039
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Pioneer Natural Resources Company:
Notice is hereby given that the Annual Meeting of Stockholders of Pioneer
Natural Resources Company (the "Company") will be held in the CarrolltonHudson Room at the
Dallas Marriott Las Colinas Hotel, 223 West Las Colinas Blvd., Irving, Texas
75039, on Thursday,Wednesday, May 13, 2004,11, 2005, at 9:00 a.m. Central Time (the "Annual
Meeting"). The Annual Meeting is being held for the following purposes:
1. To elect threefour directors, each for a term of three years.
2. To ratify the selection of Ernst & Young LLP as the auditors of the
Company for the current year.
3. To transact such other business as may properly come before the
Annual Meeting.
These proposals are described in the accompanying proxy materials. You will
be able to vote at the Annual Meeting only if you arewere a stockholder of record
at the close of business on March 17, 2004.15, 2005.
YOUR VOTE IS IMPORTANT
Please date, sign and return the enclosed Proxy promptly so that your
shares may be voted in accordance with your wishes and so we may have a quorum
at the Annual Meeting. Instead of returning the paper proxy, you may vote via
the Internet at www.continentalstock.com,our transfer agent's website. Have
your proxy card in hand when you access this website.
By Order of the Board of Directors,
/s/ Mark L. Withrow
----------------------------------------------S. Berg
-----------------------------------
Mark L. WithrowS. Berg
Secretary
Irving, Texas
April 2, 20045, 2005
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PIONEER NATURAL RESOURCES COMPANY
5205 North O'Connor Boulevard
Suite 900
Irving, Texas 75039
PROXY STATEMENT
20042005 ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors of the Company requests your Proxy for the Annual
Meeting of Stockholders that will be held Thursday,Wednesday, May 13, 2004,11, 2005, at 9:00 a.m.
Central Time, in the CarrolltonHudson Room at the Dallas Marriott Las Colinas Hotel, 223
West Las Colinas Blvd., Irving, Texas 75039. By granting the Proxy, you
authorize the persons named on the Proxy to represent you and vote your shares
at the Annual Meeting. Those persons will also be authorized to vote your shares
to adjourn the Annual Meeting from time to time and to vote your shares at any
adjournments or postponements of the Annual Meeting.
You may grant your Proxy by signing, dating and returning the enclosed
paper proxy card. Instead of returning the paper proxy card, you may complete a
proxy card electronically through the Internet by accessing the website of the
Company's transfer agent at www.continentalstock.com. See "Internet Voting"
below.
If you attend the Annual Meeting, you may vote in person. If you are not
present at the Annual Meeting, your shares may be voted only by a person to whom
you have given a proper proxy, such as the accompanying Proxy or the Internet
Proxy. You may revoke the Proxy in writing at any time before it is exercised at
the Annual Meeting by delivering to the Secretary of the Company a written
notice of the revocation, by signing and delivering to the Secretary of the
Company a Proxy with a later date, or by submitting your vote electronically
through the Internet with a later date. Your attendance at the Annual Meeting
will not revoke the Proxy unless you give written notice of revocation to the
Secretary of the Company before the Proxy is exercised or unless you vote your
shares in person at the Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy are first being sent or given to stockholders of the Company on or about
April 7, 2004.5, 2005.
QUORUM AND VOTING
Voting Stock. The Company has one outstandingCompany's common stock, par value $.01 per share, is the
only class of securities that entitles holders to vote generally at meetings of
the Company's stockholders:
common stock, par value $.01 per share.stockholders. Each share of common stock outstanding on the record
date is entitled to one vote.
Record Date. The record date for stockholders entitled to notice of and to
vote at the Annual Meeting iswas the close of business on March 17, 2004.15, 2005. At the
record date, 120,024,319143,845,045 shares of common stock were outstanding and entitled to
be voted at the Annual Meeting.
Quorum and Adjournments. The presence, in person or by Proxy, of the
holders of a majority of the votes eligible to be cast at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting.
If a quorum is not present, the stockholders entitled to vote who are
present in person or by Proxy at the Annual Meeting have the power to adjourn
the Annual Meeting from time to time, without notice other than an announcement
at the Annual Meeting, until a quorum is present. At any adjourned Annual
Meeting at which a quorum is present, any business may be transacted that might
have been transacted at the Annual Meeting as originally notified.
Vote Required. Directors will be elected by a plurality of the votes
present and entitled to be voted at the Annual Meeting. Ratification of the
selection of the Company's auditors will require the affirmative vote of the
holders of a majority of the shares present and entitled to be voted at the
Annual Meeting. An automated system that the Company's transfer agent
administers will tabulate the votes. Brokers who hold shares in street name for
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customers are required to vote shares in accordance with instructions received
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from the beneficial owners. Brokers are permitted to vote on discretionary items
if they have not received instructions from the beneficial owners, but they are
not permitted to vote (a "broker non-vote") on non-discretionarynon- discretionary items absent
instructions from the beneficial owner. Abstentions and broker non-votes will
count in determining whether a quorum is present at the Annual Meeting. Both
abstentions and broker non-votes will not have any effect on the outcome of
voting on director elections. For purposes of voting on the ratification of the
selection of auditors, abstentions will be included in the number of shares
voting and will have the effect of a vote against the proposal, and broker
non-votes will not be included in the number of shares voting and therefore will
have no effect on the outcome of the voting.
Default Voting. A Proxy that is properly completed and returned will be
voted at the Annual Meeting in accordance with the instructions on the Proxy. If
you properly complete and return a Proxy, but do not indicate any contrary
voting instructions, your shares will be voted as follows:
o FOR the election of the threefour persons named in this Proxy Statement
as the Board of Directors' nominees for election to the Board of
Directors.
o FOR the ratification of the selection of Ernst & Young LLP as the
Company's auditors.
If any other business properly comes before the stockholders for a vote at the
meeting, your shares will be voted in accordance with the discretion of the
holders of the Proxy. The Board of Directors knows of no matters, other than
those previously stated, to be presented for consideration at the Annual
Meeting.
ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated the following individuals for election
as Class III Directors of the Company with their terms to expire in 20072008 when
their successors are elected and qualified:
James R. Hartwell Gardner
James L. Houghton
Linda K. LawsonBaroffio
Edison C. Buchanan
Scott D. Sheffield
Jim A. Watson
Messrs. GardnerBaroffio, Buchanan, Sheffield and Houghton and Mrs. LawsonWatson are currently serving as
Directors of the Company. Their biographical information is contained in the
"Directors and Executive Officers" section below. Dr. Baroffio will be 75 years
of age before 2008. In accordance with the Company's bylaws, he will not
complete the term for which he is nominated.
The Board of Directors has no reason to believe that any of its nominees
will be unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to accept nomination or election, either the number of the Company's
directors will be reduced or the persons acting under the Proxy will vote for
the election of a substitute nominee that the Board of Directors recommends.
The Board of Directors recommends that stockholders vote FOR the election
of each of the nominees.
ITEM TWO
SELECTION OF AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young
LLP as the auditors of the Company for 2004.2005. Ernst & Young LLP have audited the
Company's financial statements since 1998. The 20032004 audit of the Company's
consolidated financial statements and effectiveness of internal control over
financial reporting was completed on January 26, 2004.February 17, 2005.
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The Board of Directors is submitting the selection of Ernst & Young LLP for
ratification at the Annual Meeting. The submission of this matter for approval
by stockholders is not legally required, but the Board of Directors and the
Audit Committee believe the submission provides an opportunity for stockholders
to communicate through their vote with the Board of Directors and the Audit
Committee about an important aspect of corporate governance. If the stockholders
do not ratify the selection of Ernst & Young LLP, the Audit Committee will
reconsider the selection of that firm as the Company's auditors.
The Audit Committee has the sole authority and responsibility to retain,
evaluate and replace the Company's auditors. The stockholders' ratification of
the appointment of Ernst & Young LLP does not limit the authority of the Audit
Committee to change auditors at any time.
Audit Fees. The aggregate fees billed by Ernst & Young LLP for professional
services rendered for the audits of the Company's annual financial statements on
Forms 10-K, audit of the Company's internal control over financial reporting,
reviews of the Company's quarterly financial statements on Forms 10-Q and
reviews of the Company's other filings with the Securities and Exchange
Commission (the "SEC") including comfort letters, consents and other research
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work necessary to comply with generally accepted auditing standards for the
years ended December 31, 2004 and 2003 were $960,629 and 2002 were $505,642, and $535,756, respectively.
Audit-Related Fees. The aggregate fees earned by Ernst & Young LLP for
audit-related services provided to the Company totaled $10,000 and $13,661
during each of
the years ended December 31, 20032004 and 2002, respectively.2003. Audit-related services were
comprised of audits of the Company's benefit plans.
Tax Services Fees. The aggregate fees earned by Ernst & Young LLP for tax
services provided to the Company totaled $68,903$82,140 and $73,116$68,903 during the years
ended December 31, 20032004 and 2002,2003, respectively. Tax services were primarily
comprised of tax return preparation services for expatriates and the Company's
Argentineinternational subsidiaries.
Other Fees. During the year ended December 31, 2003, theThe aggregate fees earned by Ernst & Young LLP for other
professional services provided to the Company totaled $13,335. Other services provided to$13,335 during the Company by Ernst & Young
LLPyear
ended December 31, 2003 and were primarily comprised of employee benefit
advisory services. No other services were provided to the Company by Ernst &
Young LLP during the year ended December 31, 2002.2004.
The Charter of the Company's Audit Committee of the Board of Directors
requires that the Audit Committee review and pre-approve the plan and scope of
Ernst & Young LLP audit, audit-related, tax and other services. The Audit
Committee pre-approved 100 percent of the services provided by Ernst & Young
LLP.
The Company expects that representatives of Ernst & Young LLP will be
present at the Annual Meeting to respond to appropriate questions and to make a
statement if they desire to do so.
The audit report of Ernst & Young LLP on the Company's annual financial
statements for 2004, 2003 and 2002 did not contain an adverse opinion or a
disclaimer of opinion and 2001was not qualified or modified as to uncertainty or
audit scope. The audit report of Ernst & Young LLP on management's assessment
that the Company maintained effective internal control over financial reporting
as of December 31, 2004 did not contain an adverse opinion or a disclaimer of
opinion and was not qualified or modified as to uncertainty or audit scope.
In connection with the audits of the Company's annual financial statements
for 2004, 2003 2002 and 2001,2002, there were no disagreements with Ernst & Young LLP on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to the
satisfaction of such independent accountants, would have caused such independent
accountants to make reference to the matter in their audit report.
The Board of Directors recommends that stockholders vote FOR ratification
of the selection of Ernst & Young LLP.
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DIRECTORS AND EXECUTIVE OFFICERS
After the Annual Meeting, assuming the stockholders elect the nominees of
the Board of Directors as set forth in "Item One - Election of Directors" above,
the Board of Directors and executive officers of the Company will be:
Name Age Position
Scott D. Sheffield...... 51 Chairman of the Board, President and Chief
Executive Officer
A. R. Alameddine........ 57 Executive Vice President - Worldwide Business
Development
Chris J. Cheatwood...... 43 Executive Vice President - Worldwide Exploration
Timothy L. Dove......... 47 Executive Vice President and Chief Financial
Officer
Danny L. Kellum......... 49 Executive Vice President - Domestic Operations
Mark L. Withrow......... 56 Executive Vice President, General Counsel and
Secretary
James R. Baroffio....... 72Name Age Position
- ---- --- --------
Scott D. Sheffield..... 52 Chairman of the Board and Chief Executive Officer
Timothy L. Dove........ 48 President and Chief Operating Officer
A. R. Alameddine....... 58 Executive Vice President - Worldwide Business
Development
Mark S. Berg .......... 46 Executive Vice President, General Counsel and
Secretary
Chris J. Cheatwood..... 44 Executive Vice President - Worldwide Exploration
Richard P. Dealy....... 39 Executive Vice President and Chief Financial
Officer
Danny L. Kellum........ 50 Executive Vice President - Domestic Operations
James R. Baroffio...... 73 Director
Edison C. Buchanan..... 50 Director
R. Hartwell Gardner.... 70 Director
James L. Houghton...... 74 Director
Jerry P. Jones......... 73 Director
Linda K. Lawson........ 59 Director
Andrew D. Lundquist.... 44 Director
Charles E. Ramsey, Jr.. 68 Director
Mark S. Sexton......... 49 Director
Robert A. Solberg...... 59 Director
Jim A. Watson.......... 66 Director
Edison C. Buchanan...... 49 Director
R. Hartwell Gardner..... 69 Director
James L. Houghton....... 73 Director
Jerry P. Jones.......... 72 Director
Linda K. Lawson......... 58 Director
Charles E. Ramsey, Jr... 67 Director
Robert A. Solberg....... 58 Director
The Company has classified its Board of Directors into three classes.
Directors in each class are elected to serve for three-year terms and until
either reelected or their successors are elected and qualified. In addition, the
Company's bylaws terminate the term of a director immediately when that director
reaches 75 years of age, as will occur for Dr. Baroffio on March 27, 2007 if he
is reelected at the Annual Meeting and as will occur for Mr. Houghton on
December 19, 2005 prior to the end of his current term in 2007. Each year, the
directors of one class stand for reelection as their terms of office expire.
Messrs. Gardner, Houghton and HoughtonSexton and Mrs. Lawson are designated as Class I
Directors and their terms of office expire at the Annual Meeting.in 2007. Messrs. Baroffio, Buchanan,
Sheffield and SheffieldWatson are designated as Class II Directors and their terms of
office expire in 2005.at the Annual Meeting. Messrs. Jones, Lundquist, Ramsey and
Solberg are designated as Class III Directors and their terms of office expire
in 2006.
Executive officers serve at the discretion of the Board of Directors.
Set forth below is biographical information about each of the Company's
executive officers and directors named above.
Scott D. Sheffield. Mr. Sheffield, a distinguished graduate of the
University of Texas with a Bachelor of Science degree in Petroleum Engineering,
has beenheld the President andposition of Chief Executive Officer since August 1997. He was
President of the Company sincefrom August 1997 to November 2004, and assumed the
position of Chairman of the Board in August 1999. He was the Chairman of the
Board and Chief Executive Officer of Parker & Parsley Petroleum Company ("Parker
& Parsley") from October 1990 until the formation of the Company in August 1997.
Mr. Sheffield joined Parker & Parsley Development Company ("PPDC"), a
predecessor of Parker & Parsley, as a petroleum engineer in 1979. Mr. Sheffield
served as Vice President - Engineering of PPDC from September 1981 until April
1985, when he was elected President and a Director. In March 1989, Mr. Sheffield
was elected Chairman of the Board and Chief Executive Officer of PPDC. Before
joining PPDC, Mr. Sheffield was employed as a production and reservoir engineer
for Amoco Production Company. Mr. Sheffield also served on the Board of
Directors of Evergreen Resources, Inc. ("Evergreen") from 1996 until Evergreen
merged with the Company, and he was a member of Evergreen's Compensation
Committee.
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Timothy L. Dove. Mr. Dove was elected President and Chief Operating Officer
in November 2004. Prior to that, Mr. Dove held the positions of Executive Vice
President and Chief Financial Officer since February 2000 and Executive Vice
President - Business Development from August 1997 to January 2000. Mr. Dove
joined Parker & Parsley in May 1994 as Vice President - International and was
promoted to Senior Vice President - Business Development in October 1996, in
which position he served until August 1997. Before joining Parker & Parsley, Mr.
Dove was employed with Diamond Shamrock Corp., and its successor, Maxus Energy
Corp., in various capacities in international exploration and production,
marketing, refining, and planning and development. Mr. Dove earned a Bachelor of
Science degree in Mechanical Engineering from Massachusetts Institute of
Technology in 1979 and received his M.B.A. in 1981 from the University of
Chicago.
A. R. Alameddine. Mr. Alameddine, who joined the Company in July of 1997 as
Vice President of Domestic Business Development, has been Executive Vice
President - Worldwide Business Development since November 2003. Prior to joining
the Company, Mr. Alameddine spent 26 years with Mobil Exploration and Production
Company ("Mobil"). At the time of his departure from Mobil, MrMr. Alameddine was
the Acquisition, Trade and Sales Manager, a position he had held since 1990.
Prior to1990, Mr. Alameddine held several managerial positions in the
acquisition and sales group as well as in the reservoir-engineering department.
A native of Lebanon, Mr. Alameddine joined Mobil as an Operations Engineer
following his graduation from Louisiana State University in 1971 with a Bachelor
of Science degree in Petroleum Engineering.
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Mark S. Berg. Mr. Berg joined the Company in April 2005 as Executive Vice
President, General Counsel and Secretary. Mr. Berg served as Executive Vice
President, General Counsel and Secretary of American General Corporation, a
Fortune 200 diversified financial services company from 1997 through 2002.
Subsequent to the sale of American General to American International Group,
Inc., Mr. Berg joined Hanover Compressor Company as Senior Vice President,
General Counsel and Secretary. He served in that capacity from May of 2002
through April of 2004. Mr. Berg began his career in 1983 with the Houston-based
law firm of Vinson & Elkins L.L.P. He was a partner with the firm from 1990
through 1997. Mr. Berg graduated Magna Cum Laude and Phi Beta Kappa with a
Bachelor or Arts degree from Tulane University in 1980. He earned his J.D. with
honors from the University of Texas Law School in 1983.
Chris J. Cheatwood. Mr. Cheatwood was elected Executive Vice President -
Worldwide Exploration in January 2002. Mr. Cheatwood joined the Company in
August 1997 and was promoted to Vice President - Domestic Exploration in July
1998 and Senior Vice President - Exploration in December 2000. Before joining
the Company, Mr. Cheatwood spent ten years with Exxon Corp. where his focus
included exploration in the Deepwater Gulf of Mexico. Mr. Cheatwood is a
graduate of the University of Oklahoma with a Bachelor of Science degree in
Geology and earned his Master of Science degree in Geology from the University
of Tulsa.
Timothy L. Dove.Richard P. Dealy. Mr. DoveDealy was elected Executive Vice President and Chief
Financial Officer in February 2000.November 2004. Prior to that, Mr. DoveDealy held the positionpositions of
Executive
Vice President - Business Developmentand Chief Accounting Officer since February 1998 and Vice
President and Controller from August 1997.1997 to January 1998. Mr. DoveDealy joined
Parker & Parsley in May 1994 as Vice President - InternationalJuly 1992 and was promoted to Senior Vice President - Business Developmentand Controller
in October 1996,1995, in which position he served until August 1997. BeforeHe is a Certified Public
Accountant, and prior to joining Parker & Parsley, Mr.
Dovehe was employed by KPMG Peat
Marwick. Mr. Dealy graduated with Diamond Shamrock Corp., and its successor, Maxus Energy
Corp., in various capacities in international exploration and production,
marketing, refining, and planning and development. Mr. Dove earnedhonors from Eastern New Mexico University with
a Bachelor of ScienceBusiness Administration degree in Mechanical Engineering from Massachusetts Institute of
Technology in 1979Accounting and received his M.B.A. in 1981 from the University of
Chicago.Finance.
Danny L. Kellum. Mr. Kellum, who received a Bachelor of Science degree in
Petroleum Engineering from Texas Tech University in 1979, was elected Executive
Vice President - Domestic Operations in May 2000. From January 2000 until May
2000, Mr. Kellum served as Vice President - Domestic Operations. Mr. Kellum
served as Vice President - Permian Division from August 1997 until December
1999. From 1989 until 1994 he served as Spraberry District Manager and as Vice
President of the Spraberry and Permian Division for Parker & Parsley until
August of 1997. Mr. Kellum joined Parker & Parsley as an operations engineer in
1981 after a brief career with Mobil Oil Corporation.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University
with a Bachelor of Science degree in Accounting and Texas Tech University with a
Juris Doctorate degree, has been the Executive Vice President, General Counsel
and Secretary of the Company since August 1997. He served as Vice President -
General Counsel of Parker & Parsley from February 1991 until January 1995, and
served as Senior Vice President, General Counsel of Parker & Parsley from
January 1995 until August 1997. He was Parker & Parsley's Secretary from August
1992 until August 1997. Mr. Withrow joined Parker & Parsley in January 1991.
Before joining Parker & Parsley, Mr. Withrow was the managing partner of the law
firm of Turpin, Smith, Dyer, Saxe & MacDonald in Midland, Texas.
James R. Baroffio. Dr. Baroffio received a Bachelor of Arts degree in
Geology at the College of Wooster, Ohio, an M.S. in Geology at Ohio State
University, and a Ph.D. in Geology and Civil Engineering at the University of
Illinois. Before becoming a Director of the Company in December 1997, Dr.
Baroffio enjoyed a long career with Chevron Oil Corporation where he served as
President, Chevron Research and Technology Center and V.P. Exploration and
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eventually retired as President of Chevron Canada Resources in 1994. Dr.
Baroffio was Chairman of the U.S. National Committee of the World Petroleum
Congress and is currently a Trustee Associate of the AAPG Foundation. His
community leadership positions included Chairman of the Pacific Symphony of
California and a Director of the Nature Conservancy of Canada, as well as
serving as President of the Alberta Nature Conservancy.
Edison C. Buchanan. Mr. Buchanan received a Bachelor of Science degree in
Civil Engineering from Tulane University in 1977 and an M.B.A. in Finance and
International Business from Columbia University Graduate School of Business in
1981. From 1981 to 1997, Mr. Buchanan was a Managing Director of various groups
in the Investment Banking Division of Dean Witter Reynolds in their New York and
Dallas offices. In 1997, Mr. Buchanan joined Morgan Stanley Dean Witter as a
Managing Director in the Real Estate Investment Banking group. In 2000, Mr.
Buchanan became Managing Director and head of the domestic Real Estate
Investment Banking Group of Credit Suisse First Boston. In 2001, Mr. Buchanan
began working for The Trust for Public Land, a land conservation organization,
in Santa Fe, New Mexico. Mr. Buchanan became a Director of the Company in 2002.
Since 2004, Mr. Buchanan has also served on the Board of Directors of MFA
Mortgage Investments, Inc.
R. Hartwell Gardner. Mr. Gardner became a Director of the Company in August
1997. He served as a Director of Parker & Parsley from November 1995 until
August 1997. Mr. Gardner graduated from Colgate University with a Bachelor of
Arts degree in Economics and then earned an M.B.A. from Harvard University.
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Until October 1, 1995, Mr. Gardner was the Treasurer of Mobil Oil Corporation
and Mobil Corporation from 1974 and 1976, respectively. Mr. Gardner is a member
of Financial Executives International where he served as Chairman in 1986/1987
and is a Director and Chairman of the Investment Committee of Oil Investment
Corporation Ltd. and Oil Casualty Investment Corporation Ltd. in Hamilton,
Bermuda.
James L. Houghton. Mr. Houghton is a Certified Public Accountant and a
graduate of Kansas University with a Bachelor of Science degree in Accounting,
as well as a Bachelor of LawsJ.D. degree. Mr. Houghton has served as a Director of the Company
since August 1997, and as a Director of Parker & Parsley from October 1991 until
August 1997. Until October 1, 1991, Mr. Houghton was the lead oil and gas tax
specialist for the accounting firm of Ernst & Young LLP, was a member of Ernst &
Young LLP's National Energy Group, and had served as its Southwest Regional
Director of Tax. Mr. Houghton is a member of the American Institute of Certified
Public Accountants, a member of the Oklahoma Society of Certified Public
Accountants and a former Chairman of its Federal and Oklahoma Taxation
Committee, and past President of the Oklahoma Institute on Taxation. He has also
served as a Director for the Independent Petroleum Association of America and as
a member of its Tax Committee. Mr. Houghton presently serves as a Trustee of the
J. E. and L. E. Mabee Foundation in Tulsa, Oklahoma.
Jerry P. Jones. Mr. Jones earned a Bachelor of Science degree from West
Texas State College in 1953 and a Bachelor of Laws degree from the University of
Texas School of Law in 1959. Mr. Jones has served as a Director of the Company
since August 1997, and as a Director of Parker & Parsley from May 1991 until
August 1997. Mr. Jones was an attorney with the law firm of Thompson & Knight,
L.L.P. in Dallas, Texas, since September 1959 and was a shareholder in that firm
until January 1998, when he retired and became of counsel to the firm. Mr. Jones
specialized in civil litigation, especially in the area of energy disputes.
Linda K. Lawson. Mrs. Lawson holds a Bachelor of Science degree in
Accounting from the University of Denver. Mrs. Lawson was employed by business
units of The Williams Companies, as well as the parent organization from 1980 to
her retirement in 2001. During her tenure she served in a variety of capacities
including accounting and finance positions of the parent, and Controller of a
FERC regulated energy business unit, Vice President of Investor Relations, Vice
President of Human Resources, and as COO of several telecommunication start-up
businesses. She is a Certified Public AccountantAccountant. She serves on the Strategic
Planning and Funding Committee for the School of Accountancy at the University
of Denver, where she is also an adjunct instructor, and has served the Tulsa
community in a variety of nonprofit organizations. Mrs. Lawson became a Director
of the Company in 2002.
Andrew D. Lundquist. Mr. Lundquist received a Bachelor of Science degree
from the University of Alaska and a J.D. from Catholic University Columbus
School of Law. He joined the Company's Board of Directors in September 2004, in
accordance with the terms of the Company's merger with Evergreen, after having
8
served as an independent director on Evergreen's Board of Directors since
November 2002. During 2001, Mr. Lundquist served as the Director of The White
House National Energy Policy Development Group, which directed the cabinet-level
task force created by the President and headed by the Vice President that
produced the President's National Energy Policy. At that same time, he also
served as Senior Advisor to the President and Vice President on energy issues.
Mr. Lundquist was the Majority Staff Director of the U.S. Senate Energy and
Natural Resources Committee from 1998 to 2001. Since March 2002, Mr. Lundquist
has served as the Managing Partner of Lundquist, Nethercutt & Griles, LLC, a
Washington, D.C.-based consulting firm that provides analytic and resides in Denver, Colorado.strategic
advice to senior executives of corporations.
Charles E. Ramsey, Jr. Mr. Ramsey is a graduate of the Colorado School of
Mines with a Petroleum Engineering degree and a graduate of the Smaller Company
Management program at the Harvard Graduate School of Business Administration.
Mr. Ramsey has served as a Director of the Company since August 1997. Mr. Ramsey
served as a Director of Parker & Parsley from October 1991 until August 1997.
Since October 1991, he has operated an independent management and financial
consulting firm. From June 1958 until June 1986, Mr. Ramsey held various
engineering and management positions in the oil and gas industry and, for six
years before October 1991, was a Senior Vice President in the Corporate Finance
Department of Dean Witter Reynolds Inc. in the Dallas, Texas office. His
industry experience includes 12 years of senior management experience with May
Petroleum Inc. in the positions of President, Chief Executive Officer and
Executive Vice President. Mr. Ramsey is also a former director of MBank Dallas,
the Dallas Petroleum Club and Lear Petroleum Corporation.
Mark S. Sexton. Mr. Sexton graduated from Stanford University in 1978 with
a Bachelor of Science degree in mechanical engineering and is registered as a
professional engineer in Colorado. He joined the Company's Board of Directors in
September 2004, in accordance with the terms of the Company's merger with
Evergreen. Mr. Sexton was employed in various technical, financial and
management positions with Amoco Production Company, Norwest Bank and energy
companies specifically targeting coal bed methane development until he joined
Evergreen in 1989 where he initially managed the daily operating activities of
Evergreen. Until Evergreen merged with the Company in September 2004, Mr. Sexton
served as a director of Evergreen from March 1995, President and Chief Executive
Officer from June 1995 and Chairman of the Board of Directors from 1999.
Subsequent to the Evergreen merger, he became managing director and Chief
Executive Officer of Evergreen Energy Company. Mr. Sexton was a director of KFx
Inc. from 1999 to 2004 and is a past president of the Colorado Oil & Gas
Association, a board member of the Independent Petroleum Association of America,
an executive committee member of the Independent Petroleum Association of
Mountain States and a member of the Society of Petroleum Engineers.
Robert A. Solberg. Mr. Solberg earned a Bachelor of Science in Civil
Engineering from the University of North Dakota in 1969, and is a licensed
Petroleum Engineer. Mr. Solberg spent over three decades working for Texaco Inc.
throughout the world. He served his last ten years as a Corporate Vice President
with several management roles including President of International E&P and
President of Upstream Commercial Development. He elected to retire in 2002 and
joined the Company's Board of Directors the following month. He continues to
live in Houston, Texas with a focus on investment management and business
consultation. Mr. Solberg recently became an outside director and non-executive
Chairman of JDR Cable Systems, Ltd., a privately owned British company. He also
enjoys a history of civic leadership and currently serves on the University of
North Dakota Alumni Association Board with a director role on their investment
committee.
8Jim A. Watson. Mr. Watson became a director of the Company in September
2004. He earned a Bachelor of Arts degree from the University of Texas in 1962
and graduated, with honors, from the University of Texas Law School in 1964. Mr.
Watson has served as Senior Counsel for the law firm of Carrington, Coleman,
Sloman, & Blumenthal, L.L.P. in Dallas, Texas since June 2003. Before then, he
was a partner at the law firm of Vinson & Elkins L.L.P. in Dallas, Texas. From
1987 to 1995, he held the position of Adjunct Professor at the University of
Texas Law School and from 2000 to 2004, Mr. Watson was Chairman of the Advisory
Board of the Clement Center for Southwestern Studies at Southern Methodist
University. Since 1989, Mr. Watson has been included in the corporate mergers
and acquisitions section of The Best Lawyers in America.
9
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors of the Company held fourteen17 regular meetings, of the full
Board of Directors, sixthree
additional telephonic updates and twofour meetings of the independent members of
the Board of Directors during 2003.2004. No director attended fewer than 75 percent
of the total number of meetings of the Board of Directors. NoIn addition, no
director attended fewer than 75 percent of the total number of meetings of all
committees of the Board of Directors on which that director served.
The Board of Directors has three standing committees: the "Audit
Committee",Audit Committee,
the "CompensationCompensation and Management Development Committee"Committee and the "NominatingNominating and
Corporate Governance Committee".Committee.
Information regarding the functions performed by the Audit Committee and
its membership is set forth in the "Audit Committee Report", included herein,
and the "Audit Committee Charter" that is posted on the Company's website at
www.pioneernrc.com. The members of the Audit Committee are Messrs. Houghton
(Chairman), Gardner, Jones, Solberg and SolbergWatson and Mrs. Lawson. The Audit
Committee held eight meetings during 2003.2004.
The Compensation and Management Development Committee periodically reviews
the compensation, employee benefit plans and fringe benefits paid to, or
provided for, executive officers of the Company, and approves the annual
salaries, bonuses, stock option awards and restricted stock awards of the
Company's executive officers. The Compensation and Management Development
Committee also administers the Company's Long-Term Incentive Plan (the "Plan")
and oversees the Company's succession planning. Additional information regarding
the functions performed by the Compensation and Management Development Committee
and its membership is set forth in the "Compensation and Management Development
Committee Report on Executive Compensation", included herein, and the
"Compensation and Management Development Committee Charter" that is posted on
the Company's website at www.pioneernrc.com. The members of the Compensation and
Management Development Committee are Messrs. Buchanan (Chairman), Baroffio,
Lundquist and Ramsey. The Compensation and Management Development Committee held
fourfive meetings during 2003.2004.
The Nominating and Corporate Governance Committee assists the Board of
Directors in evaluating potential new members of the Board of Directors,
recommending committee members and structure, and advising the Board of
Directors about corporate governance practices. Additional information regarding
the functions performed by the Nominating and Corporate Governance Committee is
set forth in "Corporate Governance", included herein, and the "Nominating and
Corporate Governance Committee Charter" that is posted on the Company's website
at www.pioneernrc.com. The members of the Nominating and Corporate Governance
Committee include all non-employee directors; however, any director whose term
is expiring and who would be eligible for election at the Annual Meeting shalldoes
not participate in the meeting(s) called for such nomination. The Nominating and
Corporate Governance Committee was formed in 2003 and held four meetings during
2003.
MANAGEMENT2004.
COMPENSATION
Compensation of Directors
For 2003, eachthe 2004-2005 director year, which runs from the annual meeting of 2004
to the annual meeting of 2005, non-employee directors are being compensated as
follows:
o Each non-employee director receivedreceives an annual base retainer fee of $40,000
and an annual fee of $10,000 for service on one or more committees.
o Audit Committee members received an additional $7,500 annual fee.
Dr. Baroffio
in his role aso The geosciences advisor tospecialist on the Board of Directors receivedreceives an additional
$7,500 annual fee, thefee.
o The lead director and thereceives an additional fee of $15,000.
o The chairman of the Audit Committee each receivedreceives an additional $7,500 annual
fee and other committee chairmen receivedreceive an additional $2,500 annual fee.
Each10
Additionally, each non-employee director is provided information technology
support by the Company and is also reimbursed for travel expenses to attend
meetings of the Board of Directors or its committees.committees, travel and entertainment
expenses for each director's spouse who is invited to accompany directors to
Board meetings, director education, seminars and trade publications. No
additional fees are paid for attendance at Board of Directors or committee
meetings. The Company's Chief Executive Officer does not receive additional
compensation for serving on the Board of Directors.
9
For 2004, the lead director's additional fee will be increased from $7,500
to $15,000 and each director, following their initial three years of service as
a director, in addition to their annual base retainer fee, will receive an
annual equity award of $60,000 equivalent value. For 2004, the annual equity
award will be in the form of restricted stock.
Under the Company's Long-Term Incentive Plan, non-employee directors are eligible to receive their fees
in the form of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units. The Company can use these awards
instead of cash to pay its non-employee directors all or part of their annual
fees. The Board of Directors determines the form (or combination of forms) of
consideration each year, based on the economic and other circumstances at the
time and based on its view of which awards will best align the interests of the
stockholders and the directors. For the 2005-2006 director year, following the 2004 Annual Meeting, the Board of
Directors has determined that non-employee directors can elect to receive their
annual fees 100 percent in cash or restricted stock units or 50 percent cash and
50 percent restricted stock.stock units.
For 2003,the 2004-2005 director year, the non-employee directors were given a
choice to be compensated for their annual directors' fees in either (i) 100
percent cash, (ii) 100 percent stock options, (iii) 100 percent restricted stock or (iv)(iii) a 50/50 combination of
any thereof.
Messrs. Baroffio, Jones, Ramsey, HoughtonThe following table summarizes annual director fees earned by the Company's
non-employee directors during the year ended December 31, 2004 (these fee
elements overlap portions of the 2003-2004 director year and Solberg and Mrs. Lawson elected 100 percent cash compensation; Messrs. Gardner
and Buchanan elected to receive 100 percent of their compensationthe 2004-2005
director year):
Annual Director Fees For the Year Ended December 31, 2004
--------------------------------------------------------------------------
Annual Committee Committee Lead Geosciences Other
Name Retainer Participation Chairman Director Specialist Perquisites (a) Total
- ---- -------- ------------- --------- -------- ----------- --------------- ------------
James R. Baroffio...... $ 40,000 $ 10,000 $ - $ - $ 7,500 $ 4,233 $ 61,733
Edison C. Buchanan..... $ 40,000 $ 10,000 $ 2,500 $ - $ - $ 1,118 $ 53,618 (b)
R. Hartwell Gardner.... $ 40,000 $ 17,500 $ - $ - $ - $ 249 $ 57,749 (b)
James L. Houghton...... $ 40,000 $ 17,500 $ 7,500 $ - $ - $ 943 $ 65,943
Jerry P. Jones......... $ 40,000 $ 17,500 $ - $ - $ - $ 249 $ 57,749
Linda K. Lawson........ $ 40,000 $ 17,500 $ - $ - $ - $ 668 $ 58,168
Charles E. Ramsey, Jr.. $ 40,000 $ 10,000 $ - $ 11,250 $ - $ 1,683 $ 62,933
Robert A. Solberg...... $ 40,000 $ 17,500 $ - $ - $ - $ 249 $ 57,749 (c)
Andrew D. Lundquist.... $ - $ - $ - $ - $ - $ 249 $ 249
Mark S. Sexton......... $ - $ - $ - $ - $ - $ 249 $ 249
Jim A. Watson.......... $ - $ - $ - $ - $ - $ 249 $ 249
- -----------
(a) Other perquisites include travel and entertainment costs of spouses, costs
of attending conferences and seminars and gifts.
(b) Messrs. Buchanan and Gardner chose to receive 100 percent of their annual
fees in restricted stock.
(c) Mr. Solberg chose to receive restricted stock for the equivalent value of
$28,750 of his fees for the year ended December 31, 2004.
Directors who had completed three years of service as a director as of May
2004, in addition to their annual base pay retainer fee, received an annual
equity award of $60,000 in restricted stock. The restricted stock grants vest
after one year. Retirement before the first anniversary of the annual equity
award grant results in pro rata vesting based on the number of quarterly
meetings remaining in the director year. New directors joining the Board of
Directors after May 2004 receive a pro rata portion of the $60,000 annual equity
award in restricted stock based on the number of quarterly meetings remaining in
the director year. The number of shares granted to non-employee directors electing
restricted stock wasis determined by dividing the
director's fees elected to be
paid by restricted stockvalue of the equity award by the closing price of one share of the Company stock on
May 14, 2003 (thethe last closing sale price beforeday preceding the dateday the director joins the Board of the grant). The
restricted stock grants vested 25 percent each quarter with the first vesting
date on August 15, 2003. Mr. Buchanan received a restricted stock grant of 2,112
shares to compensate him for 100 percent of his annual fees and Mr. Gardner
received a restricted stock grant of 2,313 shares to compensate him for 100
percent of his annual fees.Directors.
Each non-employee director, upon commencement of initial service as a
director, receives $125,000 of restricted stock. Directors who served on the
Board of Directors of a company which was acquired or merged into the Company
and joined the Company's Board of Directors as a result of the acquisition or
11
merger are not eligible for this award. The price used to calculate the number
of shares to be granted is based on the closing stock price on the day prior to
the day the director is elected to serve on the Board of Directors. The shares
granted are subject to vesting and transfer restrictions that lapse with respect
to one-third of the shares each year following the grant over a three-year
period. Retirement before the third anniversary of the grant results in pro rata
vesting based on the number of quarterly meetings remaining in the three-year
vesting period.
The vesting of ownership and the lapse of transfer restrictions may beon
restricted stock awards to non- employee directors is accelerated in the event
of the death disability or retirementdisability of the director or a change in control of the
Company.
Each recipient
is required to make an election underThe following table summarizes the Internal Revenue Code to includeequivalent values on the valuedates of thegrant
of restricted stock inawarded to the recipient's income inCompany's non-employee directors during the
year of grant.
The Company agrees to provide a cash award to the non-employee director in an
amount sufficient to pay the federal income taxes due with respect to the grant
and such cash payment.ended December 31, 2004:
Director Restricted Stock Awards During the Year ended December 31, 2004
------------------------------------------------------------------------
Equivalent Award Values on Dates of Grant
-----------------------------------------------------
Noncash Annual Initial Service Shares
Name Annual Fees Award Award Total Awarded
- ---- ----------- --------- --------------- --------- -------
James R. Baroffio.......... $ - $ 60,000 $ - $ 60,000 1,912
Edison C. Buchanan......... $ 52,500 $ - $ - $ 52,500 1,673
R. Hartwell Gardner........ $ 57,500 $ 60,000 $ - $ 117,500 3,744
James L. Houghton.......... $ - $ 60,000 $ - $ 60,000 1,912
Jerry P. Jones............. $ - $ 60,000 $ - $ 60,000 1,912
Linda K. Lawson............ $ - $ - $ - $ - -
Andrew D. Lundquist........ $ - $ 30,000 $ - $ 30,000 882
Charles E. Ramsey, Jr...... $ - $ 60,000 $ - $ 60,000 1,912
Mark S. Sexton............. $ - $ 30,000 $ - $ 30,000 882
Robert A. Solberg (a)...... $ 28,750 $ - $ - $ 28,750 1,832
Jim A. Watson.............. $ - $ 30,000 $125,000 $ 155,000 4,668
- ------------
(a) Mr. Solberg chose to receive 100 percent of his fees for the 2003-2004
director year in cash and 100 percent of his fees for the 2004-2005
director year in restricted stock. Restricted stock grants for the
2004-2005 director year were awarded during 2004 which were only partially
earned and vested as of December 31, 2004.
12
Compensation of Executive Officers
The compensation paid to the Company's executive officers generally
consists of base salaries, annual bonuses, awards under the Long-Term Incentive Plan, contributions
to the Company's 401(k) retirement plan, contributions to the Company's deferred
compensation retirement plan and miscellaneous perquisites. The following table
summarizes the total compensation for 2004, 2003 2002 and 20012002 awarded to, earned by
or paid to the following persons:
10
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation ----------------------
--------------------------------------------------------------------------- Restricted Shares
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus(a) Compensation(b) Awards(c)Bonus(b) Compensation(c) Awards(d) Options Compensation(d)Compensation(e)
- ------------------------------------------------ ---- ------------------- -------- --------------- ---------- ---------- ---------------
Scott D. Sheffield 2004 $775,000(a) $775,000 $ 81,525 $1,522,448 - $127,717
Chief Executive Officer 2003 $700,000 $919,000 $ 19,482 $ 302,400 90,000 $ 93,155
President and 2002 $700,000 $971,250 $ 19,211 $1,766,880 150,000 $ 92,797
Timothy L. Dove 2004 $382,417 $364,000 $ 9,468 $ 518,280 - $ 58,742
President and 2003 $315,000 $302,000 $ 5,004 $ 100,800 30,000 $ 51,500
Chief Operating Officer 2002 $315,000 $349,650 $ 4,954 $ 588,960 50,000 $ 51,531
A.R. Alameddine 2004 $315,000 $189,000 $ 12,955 $ 485,888 - $ 52,000
Executive Officer 2001 $660,000 $617,891 $ 18,279Vice President - 2003 $210,000 $165,375 $ - 138,000 $ 87,774100,800 20,500 $ 41,000
Worldwide Business 2002 $195,000 $175,500 $ - $ 319,020 26,500 $ 38,104
Development
Chris J. Cheatwood 2004 $315,000 $141,750 $ 19,405 $ 485,888 - $ 52,000
Executive Vice President - 2003 $315,000 $283,500 $ 5,651 $ 100,800 30,000 $ 51,500
Executive Vice President -Worldwide Exploration 2002 $260,000 $288,600 $ 5,651 $ 588,960 50,000 $ 46,024
Worldwide Exploration 2001 $205,000 $153,750Danny L. Kellum 2004 $315,000 $283,500 $ 5,6519,636 $ 485,888 - 40,500 $ 37,500
Timothy L. Dove 2003 $315,000 $302,000 $ 5,004 $ 100,800 30,000 $ 51,50052,000
Executive Vice President 2002 $315,000 $349,650 $ 4,954 $ 588,960 50,000 $ 51,531
and Chief Financial Officer 2001 $300,000 $224,688 $ 4,816 $ - 53,000 $ 47,577
Danny L. Kellum 2003 $315,000 $283,500 $ 8,981 $ 100,800 30,000 $ 52,125
Executive Vice President -Domestic Operations 2002 $315,000 $349,650 $ 8,981 $ 588,960 50,000 $ 51,531
Domestic Operations 2001 $270,000 $201,563 $ 8,166 $ - 53,000 $ 46,223
Mark L. Withrow (f) 2004 $315,000 $189,000 $ 15,158 $ 485,888 - $ 52,000
Executive Vice President 2003 $315,000 $142,000 $ 13,258 $ 100,800 30,000 $ 51,500
Executive Vice Presidentand General Counsel 2002 $315,000 $349,650 $ 10,858 $ 588,960 50,000 $ 52,096
and General Counsel 2001 $300,000 $224,688 $ 5,770 $ - 53,000 $ 47,000
- ---------------
(a) Mr. Sheffield received $700,000 of his annual salary in cash and $75,000 in
restricted stock.
(b) Represents the amount awarded under the Company's annual bonus program.
(b) Thisprogram that
was paid during the three months ended March 31, 2005, 2004 and 2003,
respectively.
(c) For 2004, this column represents the following miscellaneous perquisites.
(c) The value of the 2003 restricted stock reported in this column was
determined using the August 19, 2003 grant date closing price of $25.20 per
share for the Company's common stock as reported by the New York Stock
Exchange. The restricted stock grant includes vesting restrictions that
lapse on August 19, 2006. The restricted stock is entitled to receive
dividends, if any, paid on the Company's common stock. Aggregate restricted
Company common stockholdings as of December 31, 2003 and the corresponding
value based on the closing price of the common stock as reported on the New
York Stock Exchange on December 31, 2003 ($31.93 per share) are: Mr.
Sheffield, 84,000 shares, $2,682,120; Messrs. Cheatwood, Dove, Kellum and
Withrow, 28,000 shares each, $894,040 each.
(d) For 2003, this column includes (i) contributions to qualified retirement
plans of $20,000 each to Messrs. Sheffield, Cheatwood, Dove, Kellum and
Withrow; (ii) contributions to the Company's nonqualified deferred
compensation retirement plan for Mr. Sheffield of $70,000; for Messrs.
Cheatwood, Dove, Kellum and Withrow of $31,500 each; (iii) a $2,860 premium
with respect to a term life insurance policy for the benefit of Mr.
Sheffield and (iv) reimbursement for financial counseling services for
Messrs. Sheffield and Kellum of $295 and $625, respectively.perquisites:
Travel and
Country Entertainment Other
Club Vacation Financial Costs of Estimated
Dues Repurchase Counseling Spouses Perquisites
------- ---------- ---------- ------------- -----------
Scott D. Sheffield.......... $ 6,219 $ 13,463 $ 11,740 $ 48,103 $ 2,000
Timothy L. Dove............. $ 5,004 $ - $ - $ 2,799 $ 1,665
A. R. Alameddine............ $ - $ - $ 12,000 $ 155 $ 800
Chris J. Cheatwood.......... $ 5,651 $ - $ 12,000 $ 1,254 $ 500
Danny L. Kellum............. $ 2,923 $ 6,058 $ - $ 155 $ 500
Mark L. Withrow............. $ 7,200 $ 6,058 $ - $ 1,055 $ 845
Other estimated perquisites provided during 2004 included the costs of life
insurance, officer physical exams and miscellaneous personal use of cell
phones, computer and computer-related utilities provided for business use.
13
(d) The value of the 2004 restricted stock reported in this column was
determined using the February 13, 2004 grant date closing price of $30.85
per share for the Company's common stock as reported by the New York Stock
Exchange (the "NYSE"). The restricted stock grant includes vesting
restrictions that lapse on February 16, 2007. The restricted stock is
entitled to receive dividends, if any, paid on the Company's common stock.
Aggregate unvested restricted stock grants as of December 31, 2004 and the
corresponding value based on the closing price of the common stock as
reported on the NYSE on December 31, 2004 ($35.10 per share) are: Mr.
Sheffield, 133,350 shares, $4,680,586; Mr. Dove, 44,800 shares, $1,572,480;
Mr. Alameddine, 32,705 shares, $1,149,525 and Messrs. Cheatwood, Kellum and
Withrow 43,750 shares each, $1,535,625 each.
(e) For 2004, this column includes (i) contributions to qualified retirement
plans of $20,500 each to Messrs. Sheffield, Dove, Alameddine, Cheatwood,
Kellum and Withrow; (ii) contributions to the Company's non-qualified
deferred compensation retirement plan for Mr. Sheffield of $77,500; for Mr.
Dove of $38,242; for Messrs. Alameddine, Cheatwood, Kellum and Withrow of
$31,500 each; a $26,857 distribution to Mr. Sheffield from an affiliated
employee partnership and (iii) a $2,860 premium with respect to a term life
insurance policy for the benefit of Mr. Sheffield.
(f) Effective March 7, 2005, Mr. Withrow was no longer an executive officer of
the Company.
Directors or executive officers may hold working interests in wells in
which the Company or a subsidiary is the operator and such holdings participate
in the costs and revenues attributable to that working interest in accordance
with customary industry terms.
Long-Term Incentive Plan. The Long-Term Incentive Plan (the "Plan") provides for employee and non-employee
director grants in the form of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units. The maximum
number of shares of common stock that may be issued under the Plan is equal to
10 percent of the total number of shares of common stock equivalents outstanding
from time to time minus the total number of shares of stock subject to
outstanding grants on the date of calculation under any other stock-based plan
for employees or directors of the Company. The Plan had 6,305,5918,307,237 shares
available for additional awards at December 31, 2003.2004. The Company also had
557,335 shares available for grant under the Employee Stock Purchase Plan
("ESPP") as of December 31, 2004. The Company's officers are not eligible to
participate in the ESPP.
The Plan provides that awards may be forfeited or vested at termination of
employment depending on the circumstances of termination and whether the
participant had a written employment agreement. Messrs. Sheffield, Withrow and
Paulsen have severance agreements that are written employment agreements under
the Plan. Under the Plan and those agreements, their awards will fully vest and
become exercisable if they resign for any reason (including for good cause) or
without reason so long as the resignation is not in breach of their written
agreements with the Company, or if the Company terminates their employment in
breach of the written agreements. In general, the unvested portion of awards for
other participants in the Plan will become void upon termination of employment.
The Plan provides that the Compensation and Management Development
Committee may determine whether a particular award under the Plan will have
change-of-control provisions. In general, awards under the Plan contain
provisions that provide that options and restricted stock or restricted stock
units will become immediately vested and exercisable in full upon a change in
control and that options will remain exercisable for their full original term
regardless of whether and how the holder's employment is subsequently
terminated.
No performance units orstock options, stock appreciation rights or performance units have been
awarded under the Plan.
11
The following table sets forth information about stock options granted
during 2003 to the named executive officers:
OPTIONS GRANTED DURING THE YEAR ENDED DECEMBER 31, 2003
Individual Grants
-------------------------------------------------
Number of % of Total
Securities Options Granted Exercise or Grant Date
Underlying to Employees Base Price Expiration Present
Name Options Granted During 2003 Per Share (c) Date Value (d)
- ---- --------------- --------------- ------------- --------------- ----------
Scott D. Sheffield........ 60,000 (a) 4.43 $ 24.25 2/18/09-10-11 $ 550,200
30,000 (b) 2.22 $ 25.58 8/19/09-10-11 $ 267,000
Chris J. Cheatwood........ 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
Timothy L. Dove........... 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
Danny L. Kellum........... 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
Mark L. Withrow........... 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
- --------------
(a) These options were granted on February 18, 2003, vest at the rate of
one-third each year, commencing on the first anniversary of the grant date,
and have a term of five years from date of vesting. The Compensation and
Management Development Committee retains discretion, subject to Plan
limits, to modify the terms of the options. In the event of a change in
control of the Company as defined in the Plan, the options will immediately
become fully vested and exercisable in full.
(b) These options were granted on August 19, 2003, vest at the rate of
one-third each year, commencing on the first anniversary of the grant date,
and have a term of five years from date of vesting. The Compensation and
Management Development Committee retains discretion, subject to Plan
limits, to modify the terms of the options. In the event of a change in
control of the Company as defined in the Plan, the options will immediately
become fully vested and exercisable in full.
(c) The exercise price per share is equal to the closing price of the common
stock as reported by the New York Stock Exchange on the day before the date
of grant.
(d) The estimated grant date present value of shares in footnotes (a) and (b)
is determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options included the following:
o An interest rate of 3.10 percent for footnote (a) and 3.08 percent for
footnote (b), which represents the interest rate on a U.S. Treasury
security with a maturity date corresponding to the expected option
term.
o Volatility of 37.6 percent for footnote (a) and 33.6 percent for
footnote (b) calculated using the lesser of (i) daily stock prices for
the 120-day period prior to the grant date or (ii) 50 percent.
No other adjustments were made to the model for nontransferability or risk
of forfeiture. The ultimate values of the options will depend on the future
market price of the Company's common stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will realize
upon exercise of the option will depend on the excess of the market value
of the Company's common stock over the exercise price on the date the
option is exercised.
12Plan in 2004.
14
The following table sets forth, for each named executive officer,
information concerning the exercise of stock options during 2003,2004, and the value
of unexercised stock options as of December 31, 2003:2004:
AGGREGATED OPTIONS EXERCISED DURING THE YEAR ENDED DECEMBER 31, 2004
AND VALUE OF UNEXERCISED OPTIONS AT DECEMBER 31, 2004
AGGREGATED OPTIONS EXERCISED DURING THE YEAR ENDED DECEMBER 31, 2003
AND VALUE OF UNEXERCISED OPTIONS AT DECEMBER 31, 2003
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at December 31, 20032004 Options at December 31, 2003(a)2004(a)
Acquired on Value ---------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
Scott D. Sheffield.... 72,500 $1,114,924 212,000 236,000 $3,377,980 $2,387,14060,000 $1,537,455 305,927 110,000 $ 4,722,152 $ 1,336,000
Timothy L. Dove....... 19,333 $ 386,596 125,167 36,665 $ 2,159,427 $ 445,316
A.R. Alameddine....... 6,666 $ 130,487 75,583 22,499 $ 1,302,209 $ 265,335
Chris J. Cheatwood.... 47,99918,167 $ 705,845 42,501 76,832314,957 64,501 36,665 $ 543,447939,576 $ 634,349
Timothy L. Dove....... 31,000 $ 507,158 100,166 80,999 $1,603,208 $ 827,659445,316
Danny L. Kellum....... 80,866- $ 945,887 6,667 80,999- 51,001 36,665 $ 48,069708,313 $ 827,659445,316
Mark L. Withrow....... 22,16722,499 $ 357,121 116,832 80,999 $2,001,822442,012 138,667 36,665 $ 827,659
2,538,995 $ 445,316
- ---------------
(a) Amounts were calculated by multiplying the number of unexercised options by
$31.93,$35.10, which was the closing price of the Company's common stock on
December 31, 2003,2004, and subtracting the aggregate exercise price, which was
determined by multiplying the unexercised options by their respective
exercise prices and summing the result.
Retirement Plan. The Company provides a 401(k) retirement plan but does not
provideand a
defined benefit retirement plan or a restoration plan. Hewitt
Associates advised the Company that it was not providing competitive retirement
benefits for its officers by offering only a 401(k) plan. To maintain a
competitive position, the Company also provides a nonqualifiednon-qualified deferred compensation retirement plan for executive officers of
the Company. EachCompany but does not provide defined benefit retirement plans or restoration
plans. Hewitt Associates has advised the Company that providing only a 401(k)
retirement plan to its executive officers is not a competitive retirement
benefit.
The non-qualified deferred compensation retirement plan allows each
participant is
allowed to contribute up to 25 percent of base salary and 100 percent of
annual bonus payments. The Company provides a matching contribution of 100
percent of the participant's contribution limited to the first 10ten percent of
the executive officer's base salary. The Company's matching contribution vests
immediately. The non-qualified deferred compensation plan permits officers to
make investment allocation choices for both the executive officer's contribution
and the Company match to designated mutual funds or self-directed brokerage
accounts included in the non-qualified deferred compensation plan. The Company
retains the right to maintain these investment choices as hypothetical
investments or to actually invest in the executive officer's investment choices.
To date, the Company has chosen to actually invest the funds in the investment
options selected by the executive officers so that the investment returns are
funded and do not create unfunded liabilities to the Company.
The following table sets forth, for each named executive officer,
information concerning the fair values of vested benefits in the Company's
non-qualified deferred compensation retirement plan through December 31, 2004:
FAIR VALUES OF VESTED BENEFITS IN NON-QUALIFIED DEFERRED COMPENSATION
RETIREMENT PLAN THROUGH DECEMBER 31, 2004
Investment
Employee Employer Income (Loss) Fair Value of
Name Contribution Match and Distributions Vested Benefits
- ---- ------------ ---------- ----------------- ---------------
Scott D. Sheffield............. $ 398,710 $ 398,710 $ (55,047)(a) $ 742,373
Timothy L. Dove................ $ 182,742 $ 182,742 $ 102,632 $ 468,116
A.R. Alameddine................ $ 266,808 $ 126,734 $ (27,387) $ 366,155
Chris J. Cheatwood............. $ 135,372 $ 135,372 $ 65,091 $ 335,835
Danny L. Kellum................ $ 165,269 $ 165,269 $ 64,398 $ 394,936
Mark L. Withrow................ $ 177,567 $ 177,567 $ (36,725) $ 318,409
- -----------
(a) Includes a $118,344 distribution made during 2001 in accordance with
divorce proceedings.
15
Participants may choose to receive distributions of their vested benefits
from the non-qualified compensation plan as soon as administratively practicable
(i) after the date of separation from service with the Company or (ii) after
January 1 of the year next following the date of separation from service with
the Company. Participants vested benefits may, at the option of the participant,
be distributed in one lump sum, in five annual installments or in ten annual
installments.
Severance Agreements. The Company has entered into severance agreements
with its executive officers. Salaries and bonuses are set by the Compensation
and Management Development Committee independent of these agreements and the
Compensation and Management Development Committee can increase or reduce base
salaries at its discretion.
Either the Company or the executive officer may terminate the officer's
employment under the severance agreement at any time. The Company must pay the
officer an amount equal to one year's base salary if the officer's employment is
terminated because of death, disability or normal retirement. The Company must
pay the officer an amount equal to one year's base salary and continue health
insurance for the executive officer's family for one year if the Company
terminates the officer's employment without cause or if the officer terminates
employment for good reason, which is when reductions in the officer's base
annual salary exceed specified limits or when the executive officer's
responsibilities have been significantly reduced. If within one year after a
change in control of the Company, the Company terminates the executive officer
without cause, or if the executive officer terminates employment for good
reason, the Company must pay the executive officer an amount equal to 2.99 times
the sum of the executive officer's base salary plus the greater of target bonus
for the current year or actual bonus for the previous year and continue health
insurance for one year, or until the officer's familyofficer is eligible for three years.Medicare, for the
officer and their respective family. If the executive officer terminates
employment with the Company without reason between six months and one year after
a change in control, or at any time within one year after a change in control if
the executive officer is required to move, then the Company must pay the
executive officer one year's base salary and continue health insurance for the
executive officer's family for one year. OfficersExecutive officers are also entitled to
additional payments for certain tax liabilities that may apply to severance
payments following a change in control.
Effective March 7, 2005, Mr. Withrow was no longer an executive officer of
the Company. His employment will terminate following a transition period. As
provided in his severance agreement, Mr. Withrow will receive a severance
payment of one year's base salary and in accordance with the Plan conditions,
all stock options will vest and restrictions on all restricted stock will lapse.
Mr. Withrow has not received additional stock options or restricted stock other
than what has already been described in footnote (d) of the Summary Compensation
Table and in the Aggregated Options Exercised during the year ended December 31,
2004 and Value of Unexercised Options at December 31, 2004 table.
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and most of its executive officers,
including the named executive officers. Those agreements require the Company to
indemnify the directors and executive officers to the fullest extent permitted
by the Delaware General Corporation Law and to advance expenses in connection
with certain claims against directors and officers. The Company expects to enter
into similar agreements with persons selected to be directors and executive
officers in the future.
13
Each indemnification agreement also provides that, upon
a potential change in control of the Company and if the indemnified director or
executive officer so requests, the Company will create a trust for the benefit
of the indemnified director or executive officer in an amount sufficient to
satisfy payment of all liabilities and suits against which the Company has
indemnified the director or executive officer.
Directors' and Officers' Insurance. The Company maintains customary
directors' and officers' insurance coverage.
16
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During 2003, no member of theThe Compensation and Management Development Committee is responsible for
approving all compensation awards for all executive officers, including the
named executive officers. The committee also served as an executive officer ofapproves all long-term incentive
awards and perquisites. The committee operates under a written charter adopted
by the Company. During 2003, there
were no Compensation and Management Development Committee interlocks with other
companies.Board.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors submits the following report with respect to the executive
compensation program of the Company.
Compensation Principles and Philosophy
The overriding responsibility of the committee is to maintain the Company's
executive officers' compensation program so that it attracts and retains a
capable and highly motivated senior management team and aligns the compensation
of the Company's executivesexecutive officers with the Company's strategic business plan
to increase stockholder value. During 2003,2004, the committee retained Hewitt
Associates to assist and advise it in its efforts to establish and administer
fair and competitive compensation and incentive policies. These policies
emphasize variable compensation and structure the annual bonus and long-term
incentive awards to be a significant portion of an executive'sexecutive officer's total
compensation so that total compensation is reflective of the executive'sexecutive officer's
individual performance and the Company's performance. Beginning in 2004, the
Committeecommittee elected to change the long-term incentive awards from a combination of
stock options and restricted stock to a performance-based restricted stock
program to further emphasize performance and alignment of stockholderstockholders' and
executive officers' interests. The committee has adopted a policy of not
repricing stock options and incorporated that policy into the Plan. Other
critical elements of the Company's compensation and incentive policies provide
for:
o Base salaries at or slightly above median levels compared to industry
survey information and peer group proxy analysis.
o Annual target bonus levels slightly above median with payouts that
are based on both individual and Company performance.
o Long-term incentive target award levels that are above median.
o Significant stock ownership by directors, and the Chief Executive Officer.Officer
and all executive officers.
To support the commitment to significant stock ownership, the Company's current
common stock ownership guidelines are as follows:
o Non-employee directors' stock value equal to at least threefive times each
director's annual base retainer fee. The non-employee directors have
three years after joining the board of directors to meet the
guideline.
o Chairman of the Board and Chief Executive Officer stock value equal
to at least five times his annual base salary.
o President and other named executive officers stock value equal to at
least three times their annual base salary. The president and other
named executive officers, generally, have two years after becoming an
officer to meet the guideline.
In determining compliance with these guidelines, the committee considers
its expectations of the long-termlong- term value of the Company's common stock and the
current trading levels. All named executive officers, including Mr. Sheffield,
and all directors are in compliance with the ownership guidelines.
1417
The Omnibus Budget Reconciliation Act of 1993 ("OBRA93") placed restrictions on the
deductibility of executive compensation paid by public companies. Under the
restrictions, the Company is not able to deduct compensation paid to any of the
named executive officers in excess of $1,000,000 unless the compensation meets
the definition of "performance-based compensation" as required in Section 162(m)
of the legislation.Internal Revenue Code of 1986, as amended. Nondeductibility could result
in additional tax costs to the Company. While the committee cannot assess with certainty how the Company's
compensation program will ultimately be affected by OBRA93, theThe committee generally tries to
preserve the deductibility of all executive compensation if it can do so without
interfering with the Company's ability to attract and retain capable and highly
motivated senior management. The Company's annual incentive bonus plan does not
meet the definition of performance-based compensation as required in Section
162(m) primarily because the annual incentive bonus plan is not formula driven
and the committee retains the right to make subjective evaluations of
performance including an assessment of how effectively management adapts to
changing industry conditions and opportunities during the Company's bonus year.
Performance-based share restricted stock awards do not qualify as performance-
based compensation under Section 162(m). Accordingly, the portions of
compensation paid to our named executive officers in 2004 that exceeded
$1,000,000 (other than from the exercise of stock options) are generally not
deductible. The committee believes it is in the best interest of shareholders to
continue with a discretionary element in the annual incentive bonus program and
to make performance share awards in the form of restricted stock to the
Company's officers instead of stock options.
Elements of Compensation
The elements of the compensation program the committee administers for
executive officers, including the Chief Executive Officer, consist of base
salaries, annual bonuses, awards made under the Plan, contributions to the
Company's 401(k) retirement plan, contributions to the Company's non-qualified
deferred compensation retirement plan and miscellaneous perquisites. Base
salaries, annual bonuses and long-term incentives are discussed separately
below; however, the committee considers the aggregate remuneration of executives
when evaluating the executive compensation program.
Base Salaries. An executive's base salary is viewed as a fixed component of
total compensation that should be competitive with companies similar in terms of
business strategy to the Company. The committee has targeted base salaries at or
slightly above the median level for companies of similar business strategy to
the Company. The committee evaluates the base salaries of the Company's
executive officers on the basis of competitive base salary survey data provided
by Hewitt Associates and consideration of each officer's duties and
responsibilities. The committee views the executives below the Chief Executive
Officer level as a team with diverse duties but with similar authority and
responsibility. Hewitt Associates historically has provided base salary survey
data on the majority of the Company's peer group companies, a group of
independent exploration and production companies with similar asset, revenue and
capital investment profiles as the Company. While the peer group provided by
Hewitt Associates includes some of the members of the Dow Jones U.S. Oil
Companies, SecondaryExploration
and Production Index (the "DJ Secondary Oil Index")E&P Index," formerly known as the Dow Jones
Exploration and Production Index) reflected in the performance graph set forth
under "Company Performance" below, it does not include all of the companies in
that peer group and includes other companies with which the Company competes.
The committee determines the base salary for all executives,officers, including Mr.
Sheffield, using the same methodology.
For 2004,2005, Mr. Sheffield's annual base salary was increased from $700,000$775,000 to
$775,000. Mr. Sheffield elected to take the equivalence of the amount of the
increase ($75,000) in shares of the Company's stock.$825,000. Hewitt Associates indicated Mr. Sheffield's annual base salary is slightly aboveat
the 50th percentile.percentile level. The base salary of one other named executive officer was increased for 2004 but the other named executive officer's base salaries were not increased.officers
was increased for 2005 to a level which Hewitt Associates advised that their 2004 base salaries,advises, as a group,
continue to be
slightly aboveare also at approximately the median.50th percentile.
18
Annual Bonuses. Each year the committee establishes a target bonus for each
executive officer based on the target bonus median levels of executivesexecutive officers
in similar positions at peer group companies. To maintain internal equity, the
level of responsibility, scope and complexity of the executive'sexecutive officer's
position are considered. The range of awards for the annual incentive bonus plan
can range from 0 to 200 percent of target. The 20042005 target bonus levelslevel for Mr.
Sheffield and one other
named executive increased to reflect competitive market conditions;did not change; however the target bonus levels for the other named
executive officers did not change from
the 2003increased to reflect competitive market conditions. The 2005
target bonus levels. The target bonus levels for the named executive officers were identified by Hewitt
Associates as being slightly above the median level. In awarding 20032004 bonuses,
the Company reviewed the following criteria that are important to the success of
the Company's business plan:
o Net asset value per share
o Return on equity
o Return on capital employed
o Operating cost per BOE
o Debt/Book capitalization
o Investment grade credit ratings
o Reserve replacement
o Finding and development cost per BOE
o Production growth
o General and administrative costs per BOE
o Return on equity
15
o Net asset value per share
o Growth of share value
o Safety and environmental performance
In determining the executive officers' annual bonus awards, the committee
also evaluated the Company's stock performance in relation to its peer group.
The committee did not employ a formula specific targets or predetermined weighting of the above
financial and operational performance criteria.criteria, but does compare actual results
to target goals. The committee evaluates Company performance in light of oil and
gas industry fundamentals and assesses how effectively management adapts to
changing industry conditions and opportunities during the year. The committee
observes and evaluates the individual performance of executive officers
throughout the year and specifically evaluates Mr. Sheffield's performance
relative to the Company's performance in achieving the Company's goals.
For 2003,2004, the committee awarded Mr. Sheffield and all but one of the othernamed executive
officer a cash bonus at target level, two named executives cash bonuses above the target bonus levels. Specific Company
performance which resulted in bonus payouts above target for 2003 included:level
and one named executive below target. The Company successfully completed the
strategic acquisition of Evergreen during 2004 and achieved the following
results:
o Return on equity of 14 percent
o Return on capital employed of 9 percent
o Base operating costs of $3.07$3.85 per BOE
o Improved leverage positionDebt to total capitalization ratio of 46 percent
o Received investment grade credit ratings
o Reserve replacement of 193441 percent
o Finding and development costscost per BOE of $6.64 per BOE$10.48
o Production growth of 3622 percent
o General and administrative cost of $1.07$1.17 per BOE
o Return on equity of 26 percent
o 20032004 stock price increase of 2610 percent
19
Regarding stock performance, the Company's three-year cumulative total
return based on stock price performance has exceeded both the Standard & Poor's 500
Index (the "S&P 500") and is slightly below the DJ Secondary OilE&P Index per the graph
below. In addition, the Company's stock price hit a five-year high of $32.90$37.50 in
December
2003.July 2004.
COMPARISON OF THREE-YEAR CUMULATIVE TOTAL RETURN (a)
AMONG THE COMPANY, THE S&P 500 INDEX
AND THE DJ SECONDARY OILE&P INDEX (a)
Pioneer
DJ
Natural SecondaryDJ
Year ended Resources S&P OilE&P
December 31, Company 500 Index
------------ --------- --------- --------------- -----
20002001 100 100 100
2001 98 88 92
2002 128 69 94131 78 102
2003 162 88 123166 100 134
2004 183 111 190
---------------
(a) Assumes $100 invested on December 31, 20002001 in stock or
index, including reinvestment of dividends.
Long-Term Incentives. The value of the long-term incentive awards granted
to Mr. Sheffield in 20032004 was determined by a comparison of long-term incentive
grants made to the Chief Executive Officers of peer group companies. The other
executive officers were reviewed as a team. The value
of long-term incentives granted to each executive officer was determined by
comparing the value of awards granted to peer company executives holding similar
positions, and their individual award levels were averaged to determine the
actual awards to executivesexecutive officers of the Company. The award levels were not
influenced by the current stock holdings of the executives.executive officers. The
Company's philosophy is to awardtarget long-term incentives with values that are
above market average. For 2003,2004, Mr. Sheffield was awarded 90,000 stock options and 12,00049,350 shares of
restricted stock.stock, excluding the equivalent value of $75,000 of annual salary
received in restricted stock in lieu of cash. Hewitt Associates concluded the
20032004 award levels placed Mr. Sheffield and the other named executivesexecutive officers as
a group betweenat approximately the 60th and 70th percentilelevel for long-term incentive awards among the
peer group. 16
For 2005, Mr. Sheffield was awarded 63,000 shares of restricted
stock.
A significant portion of an executive officer's total compensation
opportunity is comprised of long-term incentive awards, which are intended to
align executive management'sofficer's interests in long-term growth and success more closely
with the interests of the Company's stockholders.
20
Beginning in 2004, to achieve this alignment and to emphasize long-term
performance, the committee adopted a performanceuses performance-based share programawards under the Long-Term Incentive Plan
for executives.executive officers. No stock options will bewere awarded to Mr. Sheffield or the
named executivesother executive officers for 2004. This program establishes restricted stock
award targets for Mr. Sheffield and each named executive officer determined by
comparing the value of awards granted to peer company executives holding similar
positions. The target award levels were not influenced by the current stock
holdings of executives. Restricted stock awarded under this program will have a three-year
cliff vesting requirement.
The number of restricted shares awarded each year as a percentpercentage of target
award levels will beis determined by a three-step process. First, the committee
will conductconducts a subjective evaluation of the internal Company performance against the
following one- and three-year metrics:
One-year metrics Three-year metrics
------------------------------- ------------------
Production growth Reserve replacement
Operating cost per BOE Finding and development cost per BOE
General and administrative costs per BOE Net asset value per share
Debt statistics
Next, to finalize the award level for the executive group, the committee
will considerconsidered the Company's Total Shareholder Returntotal shareholder return results compared to the Total Shareholder Returntotal
shareholder return of the Company's peer group. As its final step,group for each of the last three years.
Finally, the committee will conductconducts an evaluation of each executive's individual
performance. The committee concluded that Mr. Sheffield performed at target
levels in relation to the internal one and three-year metrics for Company
performance. The Company's stock price performance compared to the peer group
was below target expectations; however, Mr. Sheffield's individual performance
was above target levels reflected by the successful expansion of the Company's
proved reserve base, improvement in the Company's balance sheet to achieve
investment grade credit ratings and the expansion of exploration opportunities
during 2004. Overall, the committee's evaluation of Mr. Sheffield's performance
resulted in a long-term incentive award at 100 percent of target level.
Other Compensation. In addition to base salaries, annual bonuses and
long-term incentive awards, the committee reviews all other benefits and
perquisites to determine if the total compensation package for corporate
officers is fair, reasonable and competitive. Hewitt Associates has reviewed the
Company-provided benefits and perquisites and concluded that the Company's total
retirement value provided to executive officers is well below market and the
Company's perquisite offerings are conservative versus the market.
In December 2004, the Company acquired a fractional interest in a private
aircraft. This aircraft will be made available for business use to the executive
officers and other employees of the Company. The Company's policy is to not
permit employees, including executive officers, to use the aircraft for personal
use. The Company expects there will be occasions when a personal guest will
accompany an employee on a business related flight. In such instances, the
Company will follow the Internal Revenue Service rules and, where required,
impute income to the employees based on the Standard Industry Fare Level rates
provided by the Internal Revenue Service.
All compensation arrangements for Mr. Sheffield and the named executive
officers have been tallied up, reviewed with the Company's compensation
consultant and deemed to be fair, competitive and not excessive.
21
Mr. Sheffield's total compensation paid by the Company for 2004 is
summarized below:
Base pay................................. $ 775,000
Annual bonus............................. 775,000
Long-Term Incentive awards (a)........... 1,522,448
Retirement plan contributions (b)........ 98,000
Other perquisites (c) (d)................ 84,385
----------
Total................................ $ 3,254,833
===========
- ----------
(a) Based on grant date closing price of $30.85 of restricted stock awarded
during 2004.
(b) 401(k) plan and non-qualified deferred compensation retirement plan.
(c) Includes the estimated costs of life insurance, country club dues, vacation
repurchase, officer physical, financial consulting service, travel and
entertainment costs of Mr. Sheffield's spouse, and miscellaneous personal
use of a cell phone, computer and computer-related utilities provided for
business use.
(d) Does not include a value for all other broad-based benefits available to
all employees.
In summary, the Company believes a significant portion of executive
compensation should be variable and performance-based so that an executive'sexecutive
officer's total compensation opportunity is linked to the performance of the
individual, the Company and its stock price. The majority of an executive
officer's total compensation is variable and at-risk. This structure allows the
Company to administer overall compensation that rises or falls based on the
Company's performance while maintaining a balance between the Company's
short-term and long-term objectives.
Compensation and Management Development Committee of
The Board of Directors
Edison C. Buchanan, Chairman
James R. Baroffio, Member
Andrew D. Lundquist, Member
Charles E. Ramsey, Jr., Member
1722
AUDIT COMMITTEE REPORT
The Audit Committee's purpose is to assist the Board of Directors in its
oversight of the Company's internal controls, financial statements and the audit
process. The Board of Directors, in its business judgment, has determined that
all members of the committee are independent as required under the listing
standards of the New York Stock Exchange ("NYSE").NYSE. The committee operates pursuant to a charter adopted by
the Board of Directors. A copy of the current charter is posted on the Company's
website at www.pioneernrc.com.
Management is responsible for the preparation, presentation and integrity
of the Company's financial statements, accounting and financial reporting
principles, and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors, Ernst & Young LLP, are responsible for performing an independent audit
of the consolidated financial statements in accordance with generally accepted
auditing standards.
In performing its oversight role, the committee has reviewed and discussed
the audited financial statements with management and the independent auditors.
The committee has also discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The committee has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1, Independent Discussions
with Audit Committees, as currently in effect. The committee has also considered
whether the performance of other non-audit services by the independent auditors
is compatible with maintaining the auditors' independence and has discussed with
the auditors the auditors' independence.
Based on the reports and discussions described in this Report, and subject
to the limitations on the roles and responsibilities of the committee referred
to below and in the charter, the committee recommended to the Board of Directors
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2003,2004, for filing with the SEC. The
committee has also recommended the selection of the Company's independent
auditors.
The members of the committee are not professionally engaged in the practice
of auditing or accounting for the Company and are not experts in auditor
independence standards. Members of the committee rely without independent
verification on the information provided to them and on the representations made
by management and the independent auditors. Accordingly, the committee's
oversight does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the
committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that Ernst & Young LLP is in fact independent.
Audit Committee of
The Board of Directors
James L. Houghton, Chairman
R. Hartwell Gardner, Member
Jerry P. Jones, Member
Linda K. Lawson, Member
Robert A. Solberg, Member
18Jim A. Watson, Member
23
CORPORATE GOVERNANCE
Corporate Governance Principles
The Board of Directors believes that sound governance practices and
policies provide an important framework to assist it in fulfilling its duty to
shareholders. In March 2003, the Board of Directors formally adopted the
Company's Corporate Governance Principles, which cover the following principal
subjects:
o Role and functions of the Board of Directors
o Qualifications and independence of directors
o Size of the Board of Directors and selection process
o Committee functions and independence of committee members
o Meetings of non-employee directors
o Self-evaluation
o Ethics and conflicts of interest (a copy of the current Code of
Business Conduct and Ethics is posted on the Company's website at
www.pioneernrc.com)
o Reporting of concerns to non-employee directors or the Audit
Committee
o Compensation of the Board of Directors and stock ownership
requirements
o Succession planning and annual compensation review of senior
management
o Access to senior management and to independent advisors
o Director orientation and continuing education
o Evaluation of corporate governance principles
The Corporate Governance Principles are posted on the Company's website at
www.pioneernrc.com.www.pioneernrc.com/governance. The Corporate Governance Principles will be
reviewed periodically and as necessary by the Company's Nominating and Corporate
Governance Committee, and any proposed additions to or amendments of the
Corporate Governance Principles will be presented to the Board of Directors for
its approval.
The NYSE has adopted rules that require listed companies to adopt
governance guidelines covering certain matters. The Company believes that the
Corporate Governance Principles comply with the NYSE rules.
Director Independence
The Company's existing standards for determining director independence require the
assessment of directors' independence on an annual basis. In
February 2004,each year. A director cannot be considered
independent unless the Board of Directors again assessed the independence of each
director in accordance with the independence standards for directors set forth
in the Company's Corporate Governance Principles, which generally define an
independent director as one whoaffirmatively determines that he or
she does not have any relationship with management or the Company that may
interfere with the exercise of his or her independent judgment. The Board of Directors has determined, after careful review, that each
memberjudgment, including any of
the Board of Directors isrelationships that would disqualify the director from being independent
withunder the exception of Mr.
Sheffield, who is an employeerules of the Company. Accordingly, eight out of the nine
current members of the Board of Directors are independent directors.
The NYSE has adopted rules that define director independence for listed
companies. The Board of Directors has adopted Corporate Governance Principles to
ensure that the Company's standards for director independence meet or exceed
those in the NYSE rules, and evaluates director independence in accordance with
those standards. Based onNYSE. As contemplated by the NYSE rules, the Board of
Directors believeshas also adopted categorical standards to assist in determining
whether any material relationship with the Company or its management exists.
Directors who have any of the relationships outlined in the categorical
standards are considered to have relationships that require the Board of
Directors' review of the full facts and circumstances in order to determine
whether the relationship impairs the independence of the director. The
categorical standards are set forth under "Independence of Directors" in the
Company's "Corporate Governance Principles" and are:
1. The director has no material relationship with the Company, either directly
or as a partner, shareholder or officer of an organization that has a
relationship with the Company;
2. the director, or any member of the director's family, has not been employed
by the Company in the last five years;
3. the director, or any member of the director's family, has not been employed
by, or affiliated with, the Company's auditor in the last five years;
4. the director, or any member of the director's family, has not been part of
an interlocking directorate in the last five years;
5. the director, or any member of the director's family, does not receive
non-director compensation from the Company;
24
6. the director does not own more than 4.9 percent of the Company's shares;
7. the director does not serve on more than three other public company boards;
and
8. the director does not serve on the board of another E&P company.
In March 2005, the Board of Directors assessed the independence of each
non-employee director under the Company's guidelines. The Board of Directors
affirmatively determined that all eleven non-employee directors (Dr. Baroffio,
Mr. Buchanan, Mr. Gardner, Mr. Houghton, Mr. Jones, Mrs. Lawson, Mr. Lundquist,
Mr. Ramsey, Mr. Sexton, Mr. Solberg and Mr. Watson) are independent.
The Board of Directors reviewed the facts and circumstances of Mr.
Lundquist's and Mr. Sexton's interests in the Company's transaction with
Evergreen, of which Mr. Lundquist was an independent director and Mr. Sexton was
the Chairman of the Board, President and Chief Executive Officer, as well as Mr.
Sexton's payments under his change of control agreement with Evergreen and his
non-competition agreement with the Company. The Board of Directors concluded
that Mr. Lundquist's economic interest in the Evergreen transaction was limited
to his holdings as a security holder and that his prior activities as an
independent director of Evergreen would not impair his independence as a
director of the Company. The Board of Directors similarly concluded that Mr.
Sexton was an independent director because Mr. Sexton ceased to be an employee
of Evergreen at the time of the merger, because his economic interest in that
transaction existed as an employee and stockholder of Evergreen (both of which
ceased at the merger or upon settlement of the dispute relating to the amount of
change of control payments due him because of the merger), and because the
payment for his new non-competition agreement did not constitute payment for
services to the Company since it was not contingent on continuing service.
The Board of Directors also reviewed the facts and circumstances of Mr.
Jones' relationship with a law firm from which he had retired in January 1998
and in which he holds the title "of counsel." Because Mr. Jones has no role in
or economic interest in that firm and receives payments only under a retirement
savings plan, the Board of Directors concluded that Mr. Jones' limited
relationship with that firm was not material and that it would not impair his
independent judgment.
In connection with its assessment of the independence of each non-employee
director, the Board of Directors also determined that each member of the Audit
Committee meets the additional independence standards of the NYSE and SEC
applicable to members of the Audit Committee. Those standards require that the
director not be an affiliate of the Company and that the director not receive
from the Company, directly or indirectly, any consulting, advisory or other
compensatory fees except for fees for services as a director.
Certifications
The Company submitted a Section 12(a) Chief Executive Officer ("CEO")
Certification to the NYSE in 2004 regarding the Company's compliance with the
NYSE corporate governance listing standards. The certification was not
qualified. The Company also filed the CEO and Chief Financial Officer
certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 as
exhibits to its Annual Report on Form 10-K for the year ended December 31, 2004.
Election of Lead Director
In February 2004, the Board of Directors reelected Mr. Ramsey, a
non-employee director, to serve as the Lead Director, meaning he is chairman of
the regular private meetings of the independent directors and as Chairman of the Company's Nominating and
Corporate Governance Committee (the "Lead Director").Committee. Utilizing input from all directors, the Lead
Director will (i) work with the CEO and Chairman of the Board to determine the
appropriate agenda and information package for Board of Director meetings; (ii)
meet with the CEO and Chairman of the Board, senior 19
management and individual
directors, as required, to facilitate effective communications and information
flow; (iii) take a leadership role in CEO succession and senior management
development; (iv) take a leadership role in director evaluation, continuing
education, recruiting and orientationorientation; and (v) serve as the Board of DirectorsDirectors'
contact in the process for direct employee and stockholder communications with the Board of
Directors.
25
Financial Literacy of Audit Committee and Designation of Financial Experts
In March 2003,February 2005, the Board of Directors evaluated the members of the Audit
Committee for financial literacy and the attributes of a financial expert. The
Board of Directors determined that each of the Audit Committee members is
financially literate and that three of the Audit Committee members (Mrs. Lawson
and Messrs. Gardner and Houghton) are financial experts as defined by the SEC.
Procedure for Directly Contacting the Board of Directors
and Whistleblower Policy
A means for stockholders and employees to contact the Board of Directors
directly (including the Lead Director) has been established and is published on
the Company's website at www.pioneernrc.com. Matters for which this contact may
be used include allegations about actions of the Company or its directors,
officers or employees involving (i) questionable accounting, internal controls
and auditing matters; (ii) materially misleading statements or omissions in SEC
reports, press releases, or other public statements or other forms of wire, mail
or securities fraud or (iii) dishonest or unethical conduct, conflicts of
interest, violations of the Company's code of ethics or business conduct, or
violation of laws. Information may be submitted confidentially and anonymously,
although the Company may be obligated by law to disclose the information or
identity of the person providing the information in connection with government
or private legal actions and in some other circumstances. The Company's policy
is not to retaliate against any director, officer or employee who provides
truthful information relating to a violation of law or Company policies.
2026
COMPANY PERFORMANCE
The following graph and chart compare the Company's cumulative total
stockholder return on common stock during the five-year period ended December
31, 2003,2004, with cumulative total stockholder return during the same period for
the S&P 500 and the DJ Secondary OilE&P Index as prescribed by the SEC rules. The following
graph and chart show the value, at December 31 in each of 1999, 2000, 2001, 2002, 2003
and 20032004 of $100 invested at December 31, 1998,1999, and assume the reinvestment of
all dividends:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(a)
AMONG THE COMPANY, THE S&P 500 INDEX
AND THE DJ SECONDARY OILE&P INDEX (a)
Pioneer
DJ
Natural SecondaryDJ
Year ended Resources S&P OilE&P
December 31, Company 500 Index
------------ --------- ---------- -------------- -----
19981999 100 100 100
1999 102 121 115
2000 225 110 184220 91 160
2001 220 97 169215 80 147
2002 289 76 173283 62 150
2003 365 97 227357 80 196
2004 395 89 279
Year ended December 31,
------------------------------------------------
1998--------------------------------------------
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Pioneer Natural Resources Company 100 102 225 220 289 365215 283 357 395
S&P 500 100 121 110 97 76 9791 80 62 80 89
DJ Secondary OilE&P Index 100 115 184 169 173 227160 147 150 196 279
---------------
(a) Assumes $100 invested on December 31, 19981999 in stock or index, including
reinvestment of dividends.
2127
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of common stock as of March 17, 2004,15, 2005, by (i) each person who is known
by the Company to own beneficially more than five percent of the outstanding
shares of common stock, (ii) each director of the Company, (iii) each named
executive officer of the Company and (iv) all directors and executive officers
as a group:
Number of Percentage
Name of Person or Identity of Group Shares Of Class (a)
- ----------------------------------- ---------- ------------
Southeastern Asset Management, Inc. (c)....................... 18,991,100 15.8........................ 13,619,600 9.5
Longleaf Partners Fund
O. Mason Hawkins
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
FMR Corp.Nueberger Berman, Inc. (d)................................................. 8,429,590 7.0
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire..................................... 11,528,291 8.0
Nueberger Berman, LLC
Nueberger Berman Management, Inc.
605 Third Ave.
New York, New York 10158-3698
Highfields Capital Management LP (e)........................... 9,390,211 6.5
Highfields GP LLC
Jonathan S. Jacobson
Richard L. Grubman
Highfields Capital I LP
Highfields Capital II LP
Highfields Capital Ltd
c/o Highfields Capital Management
John Hancock Tower
200 Clarendon Street, 51st Floor
Boston, Massachusetts 0210902116
Scott D. Sheffield (e)(f) (g) (h)................................. 678,233 (b)
Timothy L. Dove (f) (h)................................ 579,926 (i).................................... 241,900 (b)
A.R. Alameddine (f) (h) (i) ................................... 128,785 (b)
Chris J. Cheatwood (e) (g)(f) (h) (i)............................ 117,512 (b)
Timothy L. Dove (e) (h) (i)................................... 188,897 (j)............................. 147,681 (b)
Danny L. Kellum (e)(f) (h) (i)................................... 87,286 (b)
Mark L. Withrow (e) (h) (i)................................... 217,936.................................... 86,954 (b)
James R. Baroffio (e) (j)..................................... 51,211(f) (h) (k).................................. 39,621 (b)
Edison C. Buchanan (h)........................................ 9,225......................................... 10,898 (b)
R. Hartwell Gardner (e)(f) (h)................................... 72,793.................................... 56,353 (b)
James L. Houghton (e) (k)..................................... 30,631(f) (h) (l).................................. 27,943 (b)
Jerry P. Jones (e)............................................ 35,552(f) (h)......................................... 27,464 (b)
Linda K. Lawson (h) (l)....................................... 6,281(m)........................................ 6,781 (b)
Andrew D. Lundquist (f) (h).................................... 22,369 (b)
Charles E. Ramsey, Jr. (e).................................... 37,307(f) (h)................................. 38,265 (b)
Mark S. Sexton (f) (h) (m)..................................... 225,371 (b)
Robert A. Solberg (h) ........................................ 7,581......................................... 9,413 (b)
Jim A. Watson (h).............................................. 6,168 (b)
All directors and executive officers as a group (14(43 persons) (h) (m).......................................... 1,553,672 1.3(n)..... 2,752,867 1.9
- ---------------
(a) Based on 120,024,319143,845,045 shares of common stock outstanding.
(b) Does not exceed one percent of class.
(c) The Schedule 13G/A filed with the SEC on February 10, 2004, which is a
joint statement on Schedule 13G/A filed by Southeastern Asset Management,
Inc. ("Southeastern"), Longleaf Partners Fund and O. Mason Hawkins
("Hawkins"), states that the statement is being filed by Southeastern as a
registered investment adviser, and that all of the securities covered by
the statement are owned legally by Southeastern's investment advisory
clients and none are owned directly or indirectly by Southeastern. The
Schedule 13G/A further states that the statement is also being filed by
Hawkins, Chairman of the Board and CEO of Southeastern, in the event he
could be deemed to be a controlling person of that firm as the result of
his official positions with or ownership of its voting securities. The
existence of such control is expressly disclaimed. Hawkins does not own
directly or indirectly any securities covered by the Schedule 13G/A for his
own account.
22
(d) The Schedule 13G filed with the SEC on February 17, 2004 is a joint
statement on Schedule 13G filed by FMR Corp.; Edward C. Johnson 3d,
Chairman of FMR Corp. and Abigail P. Johnson, Director of FMR Corp. The
Schedule 13G states that FMR Corp., Edward C. Johnson 3d and Abigail P.
Johnson may be deemed as beneficial owners of 8,151,590 shares of the
Company's common stock as a result of the beneficial ownership of shares by
wholly-owned subsidiaries of FMR Corp. and of 278,000 shares of the
Company's common stock as a result of the beneficial ownership of a former
subsidiary of FMR Corp. FMR Corp. and its former subsidiary are of the view
that they are not acting as a group and that they are not required to
attribute to each other the beneficial ownership of securities beneficially
owned by the other.
(e) Includes the following number of shares subject to stock options that were
exercisable at or within 60 days after March 17, 2004: Mr. Sheffield,
272,000; Mr. Cheatwood, 65,001; Mr. Dove, 112,833; Mr. Kellum, 31,000; Mr.
Withrow, 118,666; Dr. Baroffio, 40,458; Mr. Gardner, 57,991; Mr. Houghton,
20,000; Mr. Jones, 20,000 and Mr. Ramsey, 28,307.
(f) Includes 5,000 shares held in Mr. Sheffield's investment retirement account
and 10,280 shares held in Mr. Sheffield's 401(k) account.
(g) Includes 2,000 shares held in Mr. Cheatwood's investment retirement
account.
(h) Includes the following number of unvested restricted shares: Mr. Sheffield,
133,350; Mr. Cheatwood, 43,750; Mr. Dove, 44,800; Mr. Kellum, 43,750; Mr.
Withrow, 43,750; Mr. Buchanan, 3,915; Mr. Gardner, 578; Mrs. Lawson, 3,387;
Mr. Solberg, 3,387; and all directors and executive officers as a group,
353,417.
(i) Includes the following number of shares held in each respective officer's
401(k) account: Mr. Cheatwood, 503; Mr. Dove, 339; Mr. Kellum, 516 and Mr.
Withrow, 11,143.
(j) Includes 10,753 shares held in trust that are shares beneficially owned by
Dr. Baroffio.
(k) Includes 8,631 shares held by two trusts of which Mr. Houghton is a trustee
and over which shares he has sole voting and investment power and 2,000
shares held in Mr. Houghton's investment retirement account.
(l) Includes 1,200 shares held in Mrs. Lawson's investment retirement accounts.
(m) Includes 837,005 shares of common stock subject to stock options that were
exercisable at or within 60 days after March 17, 2004. Including
outstanding option awards to directors and executive officers for an
additional 424,329 shares of common stock which do not become exercisable
within 60 days after March 17, 2004, directors and executive officers as a
group own 1.6 percent of class.
28
(c) The Schedule 13G/A filed with the SEC on February 8, 2005, which is a joint
statement on Schedule 13G/A filed by Southeastern Asset Management, Inc.
("Southeastern"), Longleaf Partners Fund and O. Mason Hawkins ("Hawkins"),
states that the statement is being filed by Southeastern as a registered
investment adviser, and that all of the securities covered by the statement
are owned legally by Southeastern's investment advisory clients and none
are owned directly or indirectly by Southeastern. The Schedule 13G/A
further states that the statement is also being filed by Hawkins, Chairman
of the Board and CEO of Southeastern, in the event he could be deemed to be
a controlling person of that firm as the result of his official positions
with or ownership of its voting securities. The existence of such control
is expressly disclaimed. Hawkins does not own directly or indirectly any
securities covered by the Schedule 13G/A for his own account.
(d) The Schedule 13G filed with the SEC on February 14, 2005, which is a joint
statement on Schedule 13G filed by Neuberger Berman, Inc., Neuberger Berman
LLC and Neuberger Berman Management, Inc., states that Neuberger Berman,
LLC and Neuberger Berman Management, Inc. are deemed to be beneficial
owners since they both have shared power to make decisions whether to
retain or dispose and vote the securities that are actually owned by
clients of Neuberger Berman, LLC. Neuberger Berman, Inc. owns 100 percent
of both Neuberger Berman LLC and Neuberger Berman Management, Inc. and does
not own over one percent of the Company.
(e) The Schedule 13G/A filed with the SEC on February 14, 2005, which is a
joint statement on Schedule 13G/A filed by Highfields Capital I LP,
Highfields Capital II LP and Highfields Capital Ltd. (collectively, the
"Funds"), Highfields Capital Management LP, Highfields GP LLC, Jonathan S.
Jacobson and Richard L. Grubman (collectively, "Highfields"), states that
the shares beneficially owned by Highfields Capital Management LP,
Highfields GP LLC, Jonathan S. Jacobson and Richard L. Grubman are shares
beneficially owned by the Funds and such beneficial owners have the power
to direct the dividends from or the proceeds of the sale of the shares
owned by the Funds. The Funds individually do not own five percent or more
of the Company's outstanding securities. On a March 25, 2005 Schedule
13G/A, Highfields reported an increase in their holdings of 1,820,000
shares on March 16, 2005. Such shares are not reflected in the table above.
(f) Includes the following number of shares subject to stock options that were
exercisable at or within 60 days after March 15, 2005: Mr. Sheffield,
298,000; Mr. Dove, 141,834; Mr. Alameddine, 74,000; Mr. Cheatwood, 81,168;
Mr. Kellum, 16,667; Dr. Baroffio, 23,956 (including 3,956 shares subject to
stock options held in a trust over which Dr. Baroffio is the trustee); Mr.
Gardner, 37,807; Mr. Houghton, 16,000; Mr. Jones, 10,000; Mr. Lundquist,
13,924; Mr. Ramsey, 24,153 and Mr. Sexton, 100,000.
(g) Includes 5,000 shares held in Mr. Sheffield's investment retirement account
and 12,607 shares held in Mr. Sheffield's 401(k) account.
(h) Includes the following number of unvested restricted shares: Mr. Sheffield,
196,350; Mr. Dove, 68,800; Mr. Alameddine, 46,750; Mr. Cheatwood, 57,750;
Mr. Kellum, 57,750; Dr. Baroffio, 1,912; Mr. Buchanan, 2,111; Mr. Gardner,
2,370; Mr. Houghton, 1,912; Mr. Jones, 1,912; Mrs. Lawson, 1,693; Mr.
Lundquist, 441; Mr. Ramsey, 1,912; Mr. Sexton, 441; Mr. Solberg, 2,151; Mr.
Watson, 4,217 and all directors and officers as a group, 977,931.
(i) Includes the following number of shares held in each respective officer's
401(k) account: Mr. Dove, 341; Mr. Alameddine, 7; Mr. Cheatwood, 505 and
Mr. Kellum, 517.
(j) Includes 2,000 shares held in Mr. Cheatwood's investment retirement
account.
(k) Includes 13,753 shares held in trust that are shares beneficially owned by
Dr. Baroffio.
(l) Includes 8,031 shares held by two trusts of which Mr. Houghton is a
co-trustee and over which he has shared voting and investment power and
2,000 shares held in Mr. Houghton's investment retirement account.
(m) Mrs. Lawson's beneficial shares include 1,700 shares held in Mrs. Lawson's
investment retirement accounts. Mr. Sexton's beneficial shares include
7,477 shares held in Mr. Sexton's investment retirement accounts.
(n) Includes 1,202,209 shares of common stock subject to stock options that
were exercisable at or within 60 days after March 15, 2005.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The executive officers and directors of the Company are required to file
reports with the SEC, disclosing the amount and nature of their beneficial
ownership in common stock, as well as changes in that ownership.
Based solely on its review of reports and written representations that the
Company has received, the Company is aware that Thomas C. Halbouty,Larry N. Paulsen, the Company's
Vice President, Administration and Chief Information Officer,Risk Management, and Guimar Vaca Coca,David McManus, the
Company's Vice President of the Company's Argentine subsidiaries,International Operations, did not timely file one
report each on Form 4 covering transactions effected during 2003.2004, Todd
Dillabough, the President of the Company's Canadian subsidiaries, did not timely
file one Form 3 during 2004, and Mark S. Sexton, a director, did not accurately
report all of the Company's securities in which he is deemed to have a pecuniary
interest on his Form 3 filed in 2004. The Company believes that all other
required reports were timely filed during 2003.2004.
29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2003,On May 3, 2004, the Company didand Evergreen entered into an Agreement and
Plan of Merger pursuant to which the Company acquired Evergreen on September 28,
2004. Before the completion of the merger, Mark S. Sexton was Evergreen's
Chairman of the Board, President, and Chief Executive Officer; Andrew D.
Lundquist was an independent director of Evergreen; and Scott D. Sheffield (the
Company's Chairman of the Board, Chief Executive Officer and then President) was
an independent director of Evergreen. As a result of the merger, Messrs. Sexton
and Lundquist were appointed to the Company's Board of Directors as Class I and
Class III directors, respectively. On May 3, 2004, the Company also entered into
a Non-Competition Agreement with Mr. Sexton and Consulting and Non-Competition
Agreements with two other officers of Evergreen. The aggregate number of shares
of Company common stock issued in the merger to Evergreen stockholders was
approximately 25.4 million, and the aggregate amount of cash paid in the merger
to Evergreen stockholders was approximately $863.2 million, including the
consideration for Evergreen's Kansas properties.
Mr. Sheffield owned 6,400 shares of Evergreen common stock, options to
purchase 4,800 shares of Evergreen common stock that were exercisable, options
to purchase 19,200 shares of Evergreen common stock that were not enter into any transactionsfully
exercisable, and a restricted stock award for 9,600 shares of Evergreen common
stock. As a result of the merger, Mr. Sheffield received 9,307 shares of Company
common stock, options to acquire 27,924 shares of Company common stock, and
$319,713 in cash with managementrespect to his equity interests in Evergreen.
Mr. Lundquist owned 3,402 shares of Evergreen common stock, options to
purchase 4,800 shares of Evergreen common stock that were exercisable, options
to purchase 19,200 shares of Evergreen common stock that were not fully
exercisable, and others, nor was it a partyrestricted stock award for 9,600 shares of Evergreen common
stock. As a result of the merger, Mr. Lundquist received 7,563 shares of Company
common stock, options to business relationships oracquire 27,924 shares of Company common stock, and
$259,810 in cash with respect to his equity interests in Evergreen.
Mr. Sexton owned 243,234 shares of Evergreen common stock; options for
507,578 shares of Evergreen common stock, including options for 75,000 shares
that vested in the merger prior to the time they would otherwise have vested;
restricted stock awards for 75,000 shares of Evergreen common stock that vested
prior to the time they would otherwise have vested. As a result of the merger,
Mr. Sexton received 185,130 shares of Company common stock, options to acquire
590,568 shares of Company common stock, and $6,358,368 in cash with respect to
his equity interests in Evergreen. In addition, under the terms of Mr. Sexton's
change in control agreement with Evergreen, the Company is providing Mr. Sexton
continuation of his health care and other arrangements or transactions,insurance benefits for two years
following the merger.
Before completion of the merger in September 2004, a dispute arose
concerning the amounts that would be reportablepayable to the Evergreen executives
pursuant to their change in control agreements upon completion of the merger.
The Company believed the aggregate amount that would be payable was
approximately $7.6 million based on the Company's analysis of the historical
cash salaries and cash bonuses and estimated tax gross-ups for the three
Evergreen executives. The executives asserted that the change in control payment
calculation must also take into account the executives' restricted stock awards
granted when their annual compensation was set and that the aggregate cash
payable to them would be up to $30.0 million, depending on the value attributed
to Evergreen common stock for purposes of the calculation. The Company disagreed
with the methodology and stock valuations the executives used to calculate the
cash amount that would be payable to them. The Company and the three Evergreen
executives had a number of discussions to attempt to resolve the disagreement
before the completion of the merger on September 28, 2004, but their efforts
were unsuccessful.
During October 2004, the Company and the three executives settled their
disputes. Associated therewith, the Company paid to the three executives $6.4
million of aggregate non-competition payments and $7.6 million of change in
control payments determined in accordance with the change in control agreements,
including a $2.6 million change in control payment to Mr. Sexton. On October 29,
2004, the Company entered into a new Non-Competition Agreement with Mr. Sexton.
Mr. Sexton's new Non-Competition Agreement has a two-year term and replaced the
30
Non-Competition Agreement dated May 3, 2004 between the Company and Mr. Sexton.
The Non-Competition Agreement provides that Mr. Sexton will not:
(i) engage in or be involved with a competing activity with the Company
in the Raton Basin of Colorado or New Mexico,
(ii) solicit with respect to hiring any employee of the Company, and
(iii) acquire any oil and gas interests within 20 miles of any oil and
gas interests owned by Evergreen in three areas generally described
as certain relationshipsthe Uinta and related transactions.Piceance Basin in Utah and Colorado and the
Western Sedimentary Basin in Canada without providing the Company
30 days prior written notice and offering the Company the right to
acquire up to 50 percent of the oil and gas interests at cost.
Mr. Sexton was paid $3.1 million as compensation for entering into the new
Non-Competition Agreement.
Tom Sheffield, the brother of Scott D. Sheffield, is employed at a
subsidiary of the Company as the Raton Asset Team Manager. For 2004, Tom
Sheffield was paid $121,658 in base salary and $28,406 in bonus and received
restricted stock awards for 620 shares of Company common stock with a fair
market value on the date of grant of $19,127. Scott D. Sheffield disclaims any
interest in Tom Sheffield's compensation.
Kevin Spratlen, the husband of Susan Spratlen (an officer of the Company
responsible for corporate communications), is employed at a subsidiary of the
Company as Senior Support Analyst. For 2004, Kevin Spratlen was paid $55,800 in
base salary and $8,999 in bonus and received restricted stock awards for 135
shares of Company common stock with a fair market value on the date of grant of
$4,165.
Mr. Jones is of counsel to the firm of Thompson & Knight, L.L.P. since his
retirement from the firm in January 1998. Thompson & Knight, L.L.P. provides
periodic legal services to the Company. Thompson & Knight, L.L.P. customarily
gives the "of counsel" title to retired partners of the firm. Mr. Jones has no
role in, and receives no pay from, Thompson & Knight, L.L.P. except payments
under a retirement savings plan.
Accordingly, the Board
of Directors does not consider this relationship to be relevant to Mr. Jones'
independence.
STOCKHOLDER PROPOSALS
Any stockholder of the Company who desires to submit a proposal for action
at the 20052006 annual meeting of stockholders and wishes to have such proposal (a
"Rule 14a-8 Proposal") included in the Company's proxy materials, must submit
such Rule 14a-8 Proposal to the Company at its principal executive offices no
later than December 9, 2004,13, 2005, unless the Company notifies the stockholders
otherwise. Only those Rule 14a-8 Proposals that are timely received by the
Company and proper for stockholder action (and otherwise proper) will be
included in the Company's proxy materials.
23
Any stockholder of the Company who desires to submit a proposal for action
at the 20052006 annual meeting of stockholders, but does not wish to have such
proposal (a "Non-Rule 14a-8 Proposal") included in the Company's proxy
materials, must submit such Non-Rule 14a-8 Proposal to the Company at its
principal executive offices so that it is received no later than February 21,
2005,19,
2006, unless the Company notifies the stockholders otherwise. If a Non-Rule
14a-8 Proposal is not received by the Company on or before February 21, 2005,19, 2006,
then the Company intends to exercise its discretionary voting authority with
respect to such Non-RuleNon- Rule 14a-8 Proposal.
"Discretionary voting authority" is the ability to vote proxies that
stockholders have executed and returned to the Company, on matters not
specifically reflected in the Company's proxy materials, and on which
stockholders have not had an opportunity to vote by proxy.
It is the responsibility of the Company's Nominating and Corporate Governance
Committee to identify, evaluate and recommend to the Board the Directors
nominees for election at the annual meeting of stockholders, as well as for
filling vacancies or additions on the Board of Directors that may occur between
annual meetings. The Nominating and Corporate Governance Committee endeavors to
recommend only director candidates who possess the highest personal values and
integrity; who have experience and have exhibited achievements in one or more of
31
the key professional, business, financial, legal and other challenges that face
a large global U.S. independent oil and gas company; who exhibit sound judgment,
intelligence, personal character, and the ability to make independent analytical
inquiries; who demonstrate a willingness to devote adequate time to Board of
Director duties; and who are likely to be able to serve on the Board of
Directors for a sustained period. Consideration will also be given to the Board
of Directors' overall balance of diversity of perspectives, backgrounds and
experiences.
The Nominating and Corporate Governance Committee will consider any nominee
recommended by stockholders for election at the annual meeting of stockholders
to be held in 20052006 if that nomination is submitted in writing, not later than
December 9, 2004,13, 2005, to the Corporate Secretary, Pioneer Natural Resources
Company, 5205 North O'Connor Boulevard, Suite 900, Irving, Texas 75039. With
respect to each such nominee, the following information must be provided to the
Company with the written nomination:
a) the nominee's name, address and other personal information;
b) the number of shares of each class and series of stock of the Company
held by such nominee;
c) the nominating stockholder's name, residential address and telephone
number, business address and telephone number; and
d) all other information required to be disclosed pursuant to Regulation
14A of the Securities and Exchange Act of 1934.
Each submission must also include a statement of the qualifications of the
nominee, a notarized consent signed by the nominee evidencing a willingness to
serve as a Director,director, if elected, and a commitment by the nominee to meet
personally with members of the Nominating and Corporate Governance Committee and
the Board of Directors.
Stockholders desiring to propose action at the annual meeting of
stockholders must also comply with Article Nine of the Amended and Restated
Certificate of Incorporation of the Company. Under Article Nine, a stockholder
must submit to the Company, no later than 60 days before the annual meeting or
ten days after the first public notice of the annual meeting is sent to
stockholders, a written notice setting forth (i) the nature of the proposal with
particularity, including the written text of the proposal, (ii) the
stockholder's name, address and other personal information, (iii) any interest
of the stockholder in the proposed business, (iv) the name of any persons
nominated to be elected or reelected as a director by the stockholder and (v)
with respect to each such nominee, the nominee's name, address and other
personal information, the number of shares of each class and series of stock of
the Company held by such nominee, all information required to be disclosed
pursuant to Regulation 14A of the Securities and Exchange Act of 1934, and a
notarized letter containing such nominee's acceptance of the nomination, stating
his or her intention to serve as a director, if elected, and consenting to be
24
named as a nominee in any proxy statement relating to such election. The person
presiding at the annual meeting will determine whether business is properly
brought before the meeting and will not permit the consideration of any business
not properly brought before the meeting.
Written requests for inclusion of any stockholder proposal should be
addressed to Corporate Secretary, Pioneer Natural Resources Company, 5205 North
O'Connor Boulevard, Suite 900, Irving, Texas 75039. The Company suggests that
any such proposal be sent by certified mail, return receipt requested.
32
SOLICITATION OF PROXIES
Solicitation of Proxies may be made by mail, personal interview, telephone
or telegraph by officers, directors and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the common stock that those companies or persons hold of record, and
the Company will reimburse the forwarding expenses. In addition, the Company has
retained D.F. King & Co., Inc. to assist in solicitation for a fee estimated not
to exceed $7,500. The Company will bear all costs of solicitation.
STOCKHOLDER LIST
In accordance with the Delaware General Corporation Law, the Company will
maintain at its corporate offices in Irving, Texas, a list of the stockholders
entitled to vote at the Annual Meeting. The list will be open to the examination
of any stockholder, for purposes germane to the Annual Meeting, during ordinary
business hours for ten days before the Annual Meeting.
ANNUAL REPORT AND OTHER INFORMATION
The Company's Annual Report to Stockholders for the year ended December
31, 2003,2004, is being mailed to stockholders concurrently with this Proxy Statement
and does not form part of the proxy solicitation material.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003,2004, as amended and filed with the SEC, will be sent to any
stockholder without charge upon written request addressed to Investor Relations,
Pioneer Natural Resources Company, 5205 North O'Connor Boulevard, Suite 900,
Irving, Texas 75039. A copy of this Proxy Statement or our Annual Report on Form
10-K will also be sent upon written or oral request to any stockholder of a
shared address to which a single copy of this Proxy Statement or Annual Report
on Form 10-K was delivered. Requests may be made by writing to Investor
Relations, Pioneer Natural Resources Company, 5205 North O'Connor Boulevard,
Suite 900, Irving, Texas 75039 or by calling 972-969-3583. The Annual Report on
Form 10-K is also available at the SEC's website in its EDGAR database at
www.sec.gov.
Stockholders may request copies of the Company's Corporate Governance
Principles and any charter for a committee of the Board of Directors by writing
to Investor Relations at the address set forth in the previous paragraph.
33
INTERNET VOTING
For shares of stock that are registered in your name, you have the
opportunity to vote throughby the Internet using a program provided by the Company's
transfer agent, Continental Stock Transfer & Trust Company ("Continental").
Votes submitted electronically throughby the Internet under this program must be
received by 5:00 p.m., Eastern Time, on Wednesday,Tuesday, May 12, 2004.10, 2005. The giving of
such a proxy will not affect your right to vote in person should you decide to
attend the Annual Meeting. The Company has been advised by counsel that the
Internet voting procedures that have been made available through Continental are
consistent with the requirements of applicable law.
To vote throughby the Internet, please have your proxy card in hand when you
access Continental on the World Wide
WebContinental's website at www.continentalstock.com. Under "ContinentaLink"
on the right side, select "Proxy Voting Log In".In." You will be prompted to
complete an electronic ballot. Follow the prompts to vote your shares.
The Internet voting procedures are designed to authenticate stockholder
identities, to allow stockholders to give their voting instructions and to
confirm that stockholders' instructions have been recorded properly.
Stockholders voting through the Internet should remember that the stockholder
25
must bear costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies.
******
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO VOTE THROUGH THE
INTERNET OR TO COMPLETE, SIGN AND RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID,
ADDRESSED ENVELOPE.
By Order of the Board of Directors,
/s/ Mark L. Withrow
----------------------------------------S. Berg
----------------------------------
Mark L. WithrowS. Berg
Secretary
Irving, Texas
April 2, 2004
265, 2005
34
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
- - You can vote your shares electronically through the Internet.
- - This eliminates the need to return the proxy card.
- - Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.PROXY SOLICITED FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2005
VOTE BY INTERNET * PHONE * MAIL
TO VOTE YOUR PROXY BY INTERNET
- -------------------
www.continentalstock.com
Have this proxy card in hand when you access the above website. At
"ContinentaLink" on the right side, select "Proxy Voting Log In". You will be
prompted to complete an electronic ballot.In." Follow the
promptsinstructions on the screen to vote your shares.
TO VOTE YOUR PROXYBY PHONE
- ----------------
Call toll-free (in the U.S.) 1-866-894-0537.
Have this proxy card in hand when you call and follow the instructions.
Your internet or telephone vote works in the same manner as if you marked,
signed and returned your proxy card by mail. Internet and telephone votes must
be received by 5:00 p.m., Eastern Time, on May 10, 2005.
If you vote via the internet or by telephone,
please do not return the card below.
TO VOTE BY MAIL
- ---------------
Mark, sign and date yourthe proxy card below, detach it and return it in the
postage-paid envelope provided.
PLEASE DO NOT RETURN THE CARD BELOW IF VOTED
ELECTRONICALLY
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
27
PROXY BY MAIL
Please mark your votes like this [ X ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSALS. THIS PROXY IS
SOLICITED ON BEHALF OFBY THE BOARD OF DIRECTORS. TO BE VALID, THIS PROXY MUST BE SIGNED.
The Board of Directors recommends a
vote FOR ItemsTHE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 andAND 2.
ITEM 1 - ELECTION OF DIRECTORS
FOR WITHHELD
ALL FOR ALL
Nominees:
01 R. Hartwell Gardner
02 James L. Houghton [ ] [ ]
03 Linda K. Lawson
[ ] FOR ALL [ ] WITHHELD FOR ALL
Nominees:
01 James R. Baroffio 03 Scott D. Sheffield
02 Edison C. Buchanan 04 Jim A. Watson
WITHHELD FOR: (List below each nominee thatfor whom you do not wish to vote for.vote.)
- ---------------------------------------------------------------------------------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES MAY VOTE ON ANY OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
IF YOU WISH TO VOTE ELECTRONICALLYBY INTERNET OR BY TELEPHONE PLEASE READ THE INSTRUCTIONS
ABOVEABOVE.
Signature Signature Date
------------------- ----------------------- ---------
NOTE:------------------- --------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. 28If a corporation or partnership, sign in full corporate or
partnership name by duly authorized officer and give title.
Access to Pioneer shareholder account information
and other shareholder services are available on the Internet!
Visit Continental Stock Transfer's website at
www.continentalstock.com
for their Internet Shareholder Service -
ContinentaLink
Through this service, shareholders can change addresses, receive
electronic forms, and view account transaction history and dividend
history.
To access this service, visit the website listed above. At
"ContinentaLink" on the right side of the home page, select
"Shareholder Log In".In." From there, you can either "View a Sample
Account" or you can sign-up (choose "First Time Visitor" then
"New Member Sign-Up"). Guidance is provided on the website.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
29
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PIONEER NATURAL RESOURCES COMPANY
The undersigned hereby appoints Scott D. Sheffield and Mark L. WithrowS. Berg, and each of
them, as attorneys in fact and proxies for the undersigned with power to act without the other and withfull power of
substitution and hereby authorizesrevocation as to each of them, to represent the undersigned and
to vote as designated on the other side, all the shares of common stock of Pioneer Natural Resources Company standing in the
name ofthat
the undersigned with all powers which the undersigned would possess if
presentis entitled to vote at the Annual Meeting of Stockholders of the Company to be
held on May 13,
2004 or11, 2005, and any adjournment thereof.or postponement thereof, upon the
matters set forth on the reverse side.
(Continued, and to be marked, dated and signed, on the other side)
30
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
- - You can vote your shares electronically through the Internet.
- - This eliminates the need to return the proxy card.
- - Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.PROXY SOLICITED FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2005
VOTE BY INTERNET * PHONE * MAIL
TO VOTE YOUR PROXY BY INTERNET
- -------------------
www.continentalstock.com
Have this proxy card in hand when you access the above website. At
"ContinentaLink" on the right side, select "Proxy Voting Log In". You will be
prompted to complete an electronic ballot.In." Follow the
promptsinstructions on the screen to vote your shares.
TO VOTE YOUR PROXYBY PHONE
- ----------------
Call toll-free (in the U.S.) 1-866-894-0537.
Have this proxy card in hand when you call and follow the instructions.
Your internet or telephone vote works in the same manner as if you marked,
signed and returned your proxy card by mail.
If you vote via the internet or by telephone,
please do not return the card below.
TO VOTE BY MAIL
- ---------------
Mark, sign and date yourthe proxy card below, detach it and return it in the
postage-paid envelope provided.
PLEASE DO NOT RETURN THE CARD BELOW IF VOTED
ELECTRONICALLY
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
31
PROXY BY MAIL
Please mark your votes like this [ X ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED IN ACCORDANCE WITH THE TERMS OF THE TRUST
AGREEMENT. THIS PROXY IS SOLICITED ON BEHALF OFBY THE BOARD OF DIRECTORS. TO BE VALID, THIS
PROXY MUST BE SIGNED.
The Board of Directors recommends a
vote FOR ItemsTHE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 andAND 2.
ITEM 1 - ELECTION OF DIRECTORS
FOR WITHHELD
ALL FOR ALL
Nominees:
01 R. Hartwell Gardner
02 James L. Houghton [ ] [ ]
03 Linda K. Lawson
[ ] FOR ALL [ ] WITHHELD FOR ALL
Nominees:
01 James R. Baroffio 03 Scott D. Sheffield
02 Edison C. Buchanan 04 Jim A. Watson
WITHHELD FOR: (List below each nominee thatfor whom you do not wish to vote for.vote.)
- --------------------------------------------------------------------------------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES MAY VOTE ON ANY OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
IF YOU WISH TO VOTE ELECTRONICALLYBY INTERNET OR BY TELEPHONE PLEASE READ THE INSTRUCTIONS
ABOVEABOVE.
Signature Signature Date
------------------------ -------------------- --------
NOTE:---------------------- ------------------ ------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. 32If a corporation or partnership, sign in full corporate or
partnership name by duly authorized officer and give title.
The Stockholders' meetingAnnual Meeting of Stockholders will be held on May 13, 2004.11, 2005.
Your voting instruction must be received by 5:00 p.m., New York time, Eastern
Time, on May 10, 20046, 2005 to allow Vanguard to vote according to your
instruction.
FOLD AND DETACH HERE AND READ THE RESERVE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
33
PROXY
PIONEER NATURAL RESOURCES USA, INC. 401(k) PLAN
To:TO: THE VANGUARD FIDUCIARY TRUST COMPANY, TRUSTEE FOR THE EMPLOYER MATCHING
CONTRIBUTION (STOCK ACCOUNT) OF THE PIONEER NATURAL RESOURCES USA, INC. 401(k)
AND MATCHING PLAN
In connection with the proxy materials I received relating to the annual
meetingAnnual Meeting
of shareholdersStockholders of Pioneer Natural Resources Company to be held on Thursday, May 13, 2004,11, 2005,
I direct you to execute a proxy as indicated with respect to all shares of common stock of
Pioneer to which I have the right to give voting directions under the 401(k)
plan.plan upon the matters set forth on the reverse side. I understand you will hold
these directions strictly confidential.
(Continued, and to be marked, dated and signed, on the other side)
34