QEP - Proxy 2015
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

SCHEDULE 14A INFORMATION

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

Filed by the registrant  ý

Filed by a party other than the registrant  ¨

Check the appropriate box:
 
 
 
 
 
 
 
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Preliminary proxy statement
 
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨
 
Definitive proxy statement
 
 
  
¨
  
Definitive additional materials
 
 
  
¨
  
Soliciting material under Rule 14a-12
 
 
  

QEP RESOURCES, INC.

(Name of Registrant as Specified In Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):
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No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:

(2)
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(3)
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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.
(1)
Amount previously paid:


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QEP Resources, Inc.
1050 17th Street, Suite 800
Denver, Colorado 80265

April __, 2015

To Our Shareholders:

The 2015 Annual Meeting of Shareholders of QEP Resources, Inc. (Annual Meeting) will be held on May 12, 2015, at 8:00 a.m. (Mountain Daylight Time), at the Company's offices, 1050 17th Street, Second Floor, Denver, Colorado 80265.

The Corporate Secretary’s formal notice of the meeting and the proxy statement appear on the following pages and provide information concerning the matters to be considered at the Annual Meeting.

Your vote is important. You may attend and vote at the Annual Meeting. However, I urge you to vote whether or not you are able to attend the Annual Meeting. You may vote by Internet or by telephone using the instructions in the Notice of Internet Availability of Proxy Materials, or if you received a paper copy of the proxy card, by signing and returning it in the envelope provided.

All of the public documents, including our 2014 Annual Report on Form 10-K, are available in the Investor Relations section of our website at www.qepres.com. The Annual Report does not form any part of the material for solicitation of proxies. I also encourage you to visit our website during the year for more information about QEP.

I hope you will attend the Annual Meeting; I welcome the opportunity to meet with you. On behalf of the Board of Directors and management, I would like to express our appreciation for your continued support.


Sincerely,

Charles B. Stanley
Chairman of the Board, President
and Chief Executive Officer


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QEP Resources, Inc.
1050 17th Street, Suite 800
Denver, Colorado 80265
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 12, 2015
 
To the Shareholders of QEP Resources, Inc.:

The Annual Meeting of Shareholders of QEP Resources, Inc., a Delaware corporation (QEP or the Company), will be held on May 12, 2015, at 8:00 a.m. (Mountain Daylight Time), at the Company's offices at 1050 17th Street, Second Floor, Denver, Colorado 80265. The purpose of the meeting is to:
 
1.
Elect two directors to serve three-year terms until the 2018 Annual Meeting of Shareholders, and until their successors are duly elected and qualified;
2.
Approve, by non-binding advisory vote, the compensation of the Company’s named executive officers as disclosed in the accompanying proxy statement;
3.
Ratify the appointment of PricewaterhouseCoopers LLP (PwC) as the Company’s independent auditor;
4.
Vote on a Company proposal to amend the Company’s Certificate of Incorporation to declassify the Board of Directors and provide for the annual election of directors;
5.
Vote on an advisory shareholder proposal to amend the Company’s Certificate of Incorporation to eliminate all supermajority voting provisions;
6.
Vote on an advisory shareholder proposal regarding quantitative risk management reporting for hydraulic fracturing operations; and
7.
Transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only holders of common stock at the close of business on March 16, 2015, the record date, may vote at the Annual Meeting or any adjournment or postponement thereof. You may revoke your proxy at any time before it is voted. If you have shares registered in the name of a broker, bank or other nominee and plan to attend the meeting, please obtain a letter, account statement or other evidence of your beneficial ownership of shares to facilitate your admittance to the meeting, and, if you plan to vote at the meeting, you will need to present a valid proxy from the nominee that holds your shares. This proxy statement is being provided to shareholders on or about April __, 2015.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote over the Internet as well as by telephone or by mailing a proxy card. Voting via the Internet, by phone or by written proxy will ensure your representation at the Annual Meeting if you do not attend in person. Please review the instructions you received regarding each of these voting options. Voting over the Internet or by telephone is fast and convenient, and your vote is immediately tabulated. By using the Internet or telephone, you help reduce the Company’s cost of postage and proxy tabulations.
 
By Order of the
 
Board of Directors
 
 
Abigail L. Jones
 
Corporate Secretary

Denver, Colorado
April __, 2015

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 12, 2015. The proxy statement and annual report are available online at www.proxyvote.com.


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TABLE OF CONTENTS 

 
 
 
     Proxy Materials
 
 
     Voting Items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Nominees
 
 
 
 
 
 
 
 
     General Governance Information     
 
 
 
 
     Audit Committee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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ITEM NO. 5 - SHAREHOLDER PROPOSAL
ITEM NO. 6 - SHAREHOLDER PROPOSAL
 
 
 
 
 
 
 
 
 
 
 




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QEP RESOURCES, INC.

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 12, 2015

GENERAL INFORMATION

The Board of Directors (the Board) of QEP Resources, Inc. (the Company or QEP) is soliciting proxies for use at the Annual Meeting of Shareholders (the Annual Meeting) to be held on May 12, 2015, beginning at 8:00 a.m. (Mountain Daylight Time), at the QEP offices, 1050 17th Street, Second Floor, Denver, Colorado 80265, and any postponement or adjournment thereof. This proxy statement and the accompanying Notice of Annual Meeting include information related to the Annual Meeting. Distribution of these proxy solicitation materials is scheduled to begin on or about April __, 2015. The following information will help you to understand the voting process.

Proxy Materials
In accordance with rules promulgated by the Securities and Exchange Commission (SEC), we may furnish proxy materials, including this proxy statement and our Annual Report to Shareholders, by providing access to these documents on the Internet instead of mailing a printed copy of those materials to shareholders. Most shareholders have received a Notice of Internet Availability of Proxy Materials (the Notice), which provides instructions for accessing our proxy materials on a website or for requesting copies of the proxy materials by mail or email. If you would like to receive an email or paper copy of the proxy materials for the Annual Meeting and for all future meetings, you should follow the instructions for requesting such materials included in the Notice.

Entitlement to Vote
Shareholders who owned shares as of the close of business on March 16, 2015, the record date, may vote at the Annual Meeting. Each shareholder is entitled to one vote for each share of QEP common stock held on that date.

Voting Items
In accordance with our Bylaws, the Board has determined that the Board of Directors (the Board) should consist of seven directors. This year, Phillips S. Baker, Jr., and Charles B. Stanley will run for election to three-year terms. You will also vote on compensation of the Company’s named executive officers (on an advisory basis), the ratification of the appointment of PricewaterhouseCoopers (PwC) as the Company’s independent registered public accounting firm, a Company proposal regarding declassification of the Board, an advisory shareholder proposal to eliminate supermajority voting and an advisory shareholder proposal regarding quantitative risk management reporting for hydraulic fracturing operations.

Board Voting Recommendations
The Board recommends that shareholders vote as follows on the proposals:

1.
FOR the approval of the nominees for director named in this proxy statement;
2.
FOR the approval, by non-binding advisory vote, of the compensation of the Company’s named executive officers;
3.
FOR the ratification of PwC as the Company’s independent registered public accounting firm;
4.
FOR the approval of the Company proposal to amend the Company’s Certificate of Incorporation to declassify the Board and provide for annual election of directors;
5.
AGAINST an advisory shareholder proposal to amend the Company’s Certificate of Incorporation to eliminate all supermajority voting provisions; and
6.
AGAINST an advisory shareholder proposal regarding quantitative risk management reporting for hydraulic fracturing operations.

 




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Voting Instructions

You may vote via the Internet. You may vote by proxy over the Internet by following the instructions provided in the Notice or on the proxy card.

You may vote via telephone. You may vote by proxy over the telephone by following the instructions provided in the Notice or on the proxy card.

You may vote by mail. If you received a printed set of the proxy materials, you may vote by completing and returning the separate proxy card in the prepaid, addressed envelope.

You may vote in person at the meeting. All shareholders of record may vote in person by ballot at the Annual Meeting. Written ballots will be passed out to anyone who wants to vote at the meeting.

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Shares Held by a Broker, Bank or Other Nominee
If your shares are held by a broker, bank or other nominee (i.e., in street name), please refer to the instructions provided by that broker, bank or nominee regarding how to vote your shares. If you wish to vote in person at the Annual Meeting, you must obtain a valid proxy from the nominee that holds your shares.

New York Stock Exchange (NYSE) rules determine whether proposals presented at shareholder meetings are routine or not. If a proposal is routine, a broker or other entity holding shares for an owner in street name may vote on the proposal without receiving voting instructions from the owner. If a proposal is not routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. A broker non-vote occurs when the broker or other entity is unable to vote because the proposal is not routine and the owner does not provide instructions. Pursuant to NYSE rules, if you are the street name holder and you do not provide instructions to your broker on Item No. 3, your broker may vote your shares at its discretion on this matter. If you are the street name holder and do not provide instructions to your broker on the remaining items, your broker may not vote your shares on these matters.

Shares Held in the QEP Resources, Inc. Employee Investment Plan
If you are a participant in the QEP Resources, Inc. Employee Investment Plan (the 401(k) Plan), the enclosed proxy card may also be used to direct Fidelity Management Trust Company (Fidelity), the trustee of the 401(k) Plan, on how you wish to vote the Company’s shares that are credited to your account under the 401(k) Plan. If you do not provide your voting instructions to Fidelity by 11:59 p.m. Eastern Daylight Time on May 11, 2015, Fidelity will not vote the Company shares credited to your 401(k) Plan account.

Proxy Solicitation
The Company is soliciting your proxy and paying for the solicitation of proxies, and will reimburse banks, brokers and other nominees for reasonable charges to forward materials to beneficial holders. The Company has hired Georgeson Inc. (Georgeson) to assist in the distribution of proxy materials and the solicitation of votes. The Company will pay Georgeson a base fee of $20,000, plus customary costs and expenses, for these services and has agreed to indemnify Georgeson against certain liabilities in connection with its engagement.

Quorum Requirements
On March 16, 2015, the record date, the Company had _______________ shares of common stock issued and outstanding. A majority of the shares, or ______________ shares, constitutes a quorum. Abstentions, withheld votes and broker non-votes are counted for determining whether a quorum is present.

Voting Standards
Election of Directors. Election of the director nominees named in Item No. 1 requires that each director be elected by a majority of the votes cast, meaning that the number of shares voted “for” a director must exceed the number of votes cast “against” and/or “withheld” with respect to that director. The Company has adopted a director resignation policy whereby any director who fails to receive a majority of the votes cast during an uncontested election must submit his or her resignation to the Board. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the outcome of this vote. Shareholders may not cumulate votes in the election of directors.

Approval, by Non-Binding Advisory Vote, of the Compensation of the Company’s Named Executive Officers. The vote to approve, on an advisory basis, the Company’s executive compensation in Item No. 2 requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote on the matter. Although non-binding, our Board and Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. For purposes of determining whether the proposal has received a majority vote, abstentions will be included in the vote totals, and, therefore, an abstention has the same effect as a negative vote. Broker non-votes are not included in the vote totals, and, therefore, broker non-votes will not have an effect on the outcome of Item No. 2.


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Ratification of the Company’s Independent Auditor. Ratification of the selection of PwC as the Company’s independent auditor for fiscal year 2015 in Item No. 3 requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote on the matter. If this selection is not ratified by shareholders, the Audit Committee may reconsider its decision to engage PwC. For purposes of determining whether this proposal has received a majority vote, abstentions will be included in the vote totals; therefore, an abstention has the same effect as a negative vote.

Company Proposal to Amend the Company’s Certificate of Incorporation to Declassify the Board of Directors and Provide for Annual Election of Directors. Pursuant to Article X of the Company’s Certificate of Incorporation, approval of the Board declassification in Proposal No. 4 requires the affirmative vote of holders of 80% of the outstanding voting power entitled to vote generally in the election of directors. Broker non-votes will not be included in the vote totals and, therefore, will have no effect on the vote. Abstentions will be included in the vote totals, and, therefore, an abstention has the same effect as a negative vote.

Shareholder Proposals. Approval of the advisory shareholder proposals requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote on the matter. For purposes of determining whether a proposal has received a majority vote, abstentions will be included in the vote totals therefore an abstention has the same effect as a negative vote. Broker non-votes will not be included in the vote totals and, therefore, will have no effect on the vote.

Other than the items of business described in this proxy statement, we do not expect any other matter to come before the Annual Meeting. If any other matter is presented at the Annual Meeting, your signed proxy gives the named proxies authority to vote your shares at their discretion.


The Annual Meeting
Any shareholder of record as of March 16, 2015, may attend the Annual Meeting. If you own shares through a broker, bank or other nominee and you wish to attend the meeting, please obtain a letter, account statement or other evidence of your ownership of shares as of such date and bring it with you so that you may attend the meeting. Directions to the Annual Meeting from the Denver International Airport are as follows: Follow Pena Boulevard to I-70 West; take the I-25 South exit and follow I-25 to Park Avenue; follow Park Avenue West, which becomes 22nd Street; turn right onto Larimer Street; turn left onto 17th Street; 1050 17th Street is on the right.

Revoking a Proxy
You may revoke your proxy by submitting a new proxy with a later date, including a proxy submitted via the Internet or telephone, or by notifying the Corporate Secretary before the meeting by mail at the address shown on the Notice of Annual Meeting of Shareholders. If you attend the Annual Meeting in person and vote by ballot, any previously submitted proxy will be revoked.

ITEM NO. 1 - ELECTION OF DIRECTORS

Board Size and Elections
Our directors possess considerable experience and unique knowledge of the Company’s challenges and opportunities. We seek a balance of director skill sets, plan carefully for board succession and seek constant improvement through effective board evaluations. We empower independent directors through frequent board and committee executive sessions. The Board, which consists entirely of independent directors other than Mr. Stanley, exercises a strong, independent oversight function. This oversight function is enhanced by our Audit, Compensation and Governance committees, which are made up entirely of independent directors.

When evaluating potential director nominees, the Governance Committee considers each individual’s
professional experience, areas of expertise and educational background in addition to general qualifications. The Governance Committee works with the Board to determine the appropriate mix of experiences, areas of
expertise and educational backgrounds in order to establish and maintain a Board that is strong in its collective knowledge and that can fulfill its responsibilities, perpetuate our long-term success and represent the interests of our shareholders. The Governance Committee regularly communicates with the Board to identify professional experiences, areas of expertise, educational backgrounds and other qualifications that affect our business that are particularly desirable for our directors to possess in order to help meet specific Board needs, including:


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Exploration and Production (E&P) experience as current or former executives, which gives directors specific insight into, and expertise that fosters active participation in, the development and implementation of our operating plan and business strategy;

Executive leadership experience, which gives directors who have served in significant leadership positions strong
abilities to motivate and manage others and to identify and develop leadership qualities in others;

Accounting and financial expertise, which enables directors to analyze our financial statements, capital structure and complex financial transactions, and oversee our accounting and financial reporting processes;

Enterprise risk management experience, which contributes to oversight of management’s risk monitoring and risk
management programs, and establishment of risk tolerance aligned with our strategy; and

Public company board and corporate governance experience, which provides directors with a solid understanding of their extensive and complex oversight responsibilities and furthers our goals of greater transparency, accountability for management and the Board, and protection of our shareholders’ interests.

The Company’s Certificate of Incorporation provides for a Board consisting of between seven and 11 directors, with the precise number to be determined by the full Board. The Board has set the size at seven directors. Our Certificate of Incorporation and Bylaws provide for the Board to be divided into three classes of directors, as nearly equal in number as possible, serving staggered three-year terms. Directors must receive a majority of the votes cast for the election of directors, and any director who fails to receive a majority of the votes cast during an uncontested election must submit his or her resignation to the Board.

Two directors, L. Richard Flury and Robert E. McKee, III, have decided to retire from the Board. Their terms will end at the time of the Annual Meeting.

The terms of two directors, Phillips S. Baker, Jr., and Charles B. Stanley, expire at the Annual Meeting. Messrs. Baker and Stanley have been nominated for election to new three-year terms. These individuals have consented to being named in this proxy statement and to serve as directors, if elected. However, in the event that any nominee is unwilling or unable to serve as a director, those named in the proxy may vote, at their discretion, for any other person.

Director Qualification Table

The following table highlights each director's specific skills, knowledge and experience. A particular nominee may possess other valuable skills, knowledge or experience even though they are not indicated below.

Name
Financial/
Accounting
Exploration & Production
Executive Leadership
Enterprise Risk Management
Public Company Governance
Phillips S. Baker, Jr.
X
 
X
X
X
Julie A. Dill
X
 
X
X
X
Robert F. Heinemann
X
X
X
X
X
M.W. Scoggins
X
X
X
X
X
Charles B. Stanley
X
X
X
X
X
William L. Thacker, III
X
 
X
X
X
David A. Trice
X
X
X
X
X

Biographical information concerning the nominees and the current directors of the Company whose terms will continue after the Annual Meeting, appears below. Unless otherwise indicated, such individuals have been engaged in the same principal occupation for the past five years. Ages are correct as of the date of the proxy statement.




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Nominees (Terms to Expire in 2018)
Mr. Phillips S. Baker, Jr., age 55, has served as a director of QEP since the Spin-off of the Company from Questar Corporation (Questar) in 2010 (the Spin-Off). He served as a director of Questar from 2004 to 2010. Mr. Baker is the President, CEO and a director of Hecla Mining Company (Hecla), a gold and silver mining company. He served as Chief Financial Officer (CFO) of Hecla from May 2001 to June 2003, and as Chief Operating Officer of Hecla from November 2001 to May 2003, before being named as CEO in May 2003. Mr. Baker has 27 years of business experience, including 18 years of financial management, seven years as CEO of an NYSE-listed company, and 17 years of directorships of public companies. In concluding that Mr. Baker is qualified to serve as a director, the Board considered, among other things, his financial knowledge and his extensive executive management and financial experience.
Mr. Charles B. Stanley, age 56, has served as President, CEO and a director of QEP since June 2010 and Chairman of the Board since May 2012. He also served in the same roles for QEP Midstream Partners, GP, LLC, the general partner of QEP Midstream Partners, LP (QEPM) from 2013 until December 2, 2014. Mr. Stanley served as Executive Vice President of Questar from 2002 to 2008 and as Executive Vice President and Chief Operating Officer from 2008 until the Spin-off. He also served as a director of Questar from 2002 until the Spin-off. Prior to joining Questar, he served as President, CEO and a director of El Paso Oil and Gas Canada from 2000 to 2002, and as President and CEO of Coastal Gas International Company from 1995 to 2000. He is a director of Hecla Mining Company and serves on the boards of various natural gas industry trade organizations, including the American Exploration and Production Council. He currently serves as Chairman of America’s Natural Gas Alliance, an industry association representing large independent natural gas producers. In concluding that Mr. Stanley is qualified to serve as a director, the Board considered, among other things, his more than 29 years of experience in the oil and gas industry.

The Board recommends that you vote FOR each of the nominees listed above.


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Continuing Directors (Terms to Expire in 2016)
Ms. Julie A. Dill, age 55, has been a director of the Company since May of 2013. She is the Chief Communications Officer for Spectra Energy Corp. and also serves on the board of Spectra Energy Partners. Ms. Dill has a wealth of experience in the energy sector, having served in a number of executive capacities in the natural gas and power industries. She served as the Group Vice President of Strategy for Spectra Energy and the President and CEO of Spectra Energy Partners, LP from 2012 until 2013. Previously, she served in various financial and operational roles with Duke Energy and Shell Oil Company. She also serves on the board of directors of the American Gas Association. In concluding that Ms. Dill is qualified to serve as a director, the Board considered, among other things, her experience as the President and CEO of a public company, her strong financial background and her more than 30 years of experience in the energy industry.
Dr. M. W. Scoggins, age 67, serves as our Lead Director. He has been a QEP director since 2010. He served as a director of Questar from 2005 until the Spin-off. He has served as President of the Colorado School of Mines since 2006. Dr. Scoggins retired in 2004 after a 34-year career with Mobil Corp. and Exxon Mobil Corp. From 1999 to 2004, he served as Executive Vice President of Exxon Mobil Production Co. Prior to the merger of Mobil and Exxon in late 1999, Dr. Scoggins was President, International Exploration & Production and Global Exploration, and an officer and member of the executive committee of Mobil Oil Corp. Dr. Scoggins currently serves as a director of Cobalt International Energy and Laredo Petroleum, Inc. He served on the board of Trico Marine Services from 2005 until 2011, and Venoco, Inc. from 2007 until 2012. In addition, he is a member of the National External Advisory Council of the U.S. Department of Energy’s National Renewable Energy Laboratory. In concluding that Dr. Scoggins is qualified to serve as a director, the Board considered, among other things, his extensive industry experience and his experience serving in senior executive positions in the upstream oil and gas business.
William L. Thacker, III, age 69, has been a QEP director since February 2014. Mr. Thacker served as non-executive Chairman of the Board of Copano Energy LLC from 2009 through 2013 (he served on the Copano board beginning in 2004). Previously, he served as Chairman and CEO of TEPPCO Partners. Mr. Thacker also served on the board of Pacific Energy Management prior to the sale of Pacific Energy Partners to Plains All American Pipeline in 2006. He served on the board of GenOn Energy Inc. from January 2006 until November 2012 when GenOn merged with NRG Energy. He also serves on the boards of the Kayne Anderson Midstream Energy Fund and the Kayne Anderson Energy Development Company. In concluding that Mr. Thacker is qualified to serve as a director, the Board considered, among other things, his significant midstream energy expertise through his experience as a director on multiple public midstream company boards. Pursuant to the Cooperation Agreement entered into with JANA Partners, LLC in February 2014 (the JANA Agreement), the Company agreed to appoint Mr. Thacker to the Board as a Class III director to serve until the consummation of a transaction effecting a separation of the Company’s midstream business. That transaction was consummated on December 2, 2014, however, on October 28, 2014, the Board asked Mr. Thacker, and he agreed, to remain on the Board until the end of his term in 2016.


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Continuing Directors (Terms to Expire in 2017)

Dr. Robert F. Heinemann, age 62, has served as a QEP director since January 2014. He brings significant exploration and production expertise to QEP’s Board through his experience as President, CEO and a director of Berry Petroleum Company, where he developed and executed that company’s growth and capital allocation strategies. He served as a director of Berry from 2002 until 2013, and as President and CEO from 2004 through 2013. Previously, Dr. Heinemann worked for Halliburton Company, Mobil Exploration and Producing as well as other Mobil entities, in positions of increasing responsibility. Dr. Heinemann serves on the board of directors of Crescent Point Energy Corp. and he is the chairman of the board of Great Western Oil and Gas Company, LLC as well as C12 Energy, LLC. He has more than 30 years of experience in the oil and gas industry in a number of technical, operational, technology, management and executive roles. In concluding that Dr. Heinemann is qualified to serve as a director, the Board considered, among other things, his extensive operational background and executive experience in the oil and gas industry.
Mr. David A. Trice, age 67, has been a QEP director since 2011. He was CEO of Newfield Exploration Company (Newfield), an oil and natural gas exploration and production company from 2000 until his retirement in 2009. He also served as Chairman of the Board of Newfield from 2004 until 2010. Mr. Trice has served as a director of New Jersey Resources Corporation since 2004, and McDermott International, Inc. since 2009. Mr. Trice previously served as a director of Grant Prideco, Inc. from 2003 to 2008, as a director of Hornbeck Offshore Services, Inc. from 2002 until February 2011, and as a director of privately held Crazy Mountain Brewery, LLC from 2011 until January 2015. He is also a director of Rockwater Energy Solutions, Inc., a privately held company. He served as the Chairman of the American Exploration and Production Council from 2008 to 2009, and as Chairman of America’s Natural Gas Alliance from 2009 to 2010. In concluding that Mr. Trice is qualified to serve as a director, the Board considered, among other things, his experience as the CEO of a publicly traded independent exploration and production company.


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GOVERNANCE INFORMATION

Governance Update
There have been a number of governance developments during the last year, including:

In October 2014, the Board voted to amend the Bylaws to implement majority voting in uncontested
director elections;
We added new directors during 2014, refreshing the Board's membership, increasing the level of
independence and experience, and decreasing the average director tenure;
With the addition of new directors and several director retirements, the average tenure of our
directors is 3.2 years;
The directors elected in 2014 received the support of approximately 97% of voted shares;
In the 2014 Say-on-Pay vote, 93% of voting shareholders supported the Company's compensation
program; and
We are running a Company proposal in this proxy statement to declassify our Board and provide for the
annual election of directors.

General Governance Information
We seek to implement best practices in corporate governance, including state-of-the-art Code of Conduct, Corporate Governance Guidelines and committee charters. Our committee charters, all as amended from time to time, are available on the Company’s website at http://ir.qepres.com/investors/corporate-governance/governance-documents/default.aspx. These documents provide the framework for our corporate governance. Any of these documents will be furnished in print free of charge to any interested party who requests them.

Director Independence
During 2014 and the first three months of 2015, the Board evaluated all business, family and charitable relationships between the Company and the independent directors. Our Board has affirmatively determined that, with the exception of Mr. Stanley, each of the Company’s directors serving on the Board during 2014 (including Keith O. Rattie, who resigned effective February 12, 2014, and Thomas C. O’Connor, who resigned effective January 6, 2015) is independent under all applicable rules and regulations, including listing requirements of the NYSE as set forth in Section 303A.02 of the Listed Company Manual, and the Company’s Corporate Governance Guidelines. The Board also determined that no independent director has a material relationship with the Company that could impair the director’s independence. The criteria applied by our Board in determining independence are available on the Company’s website at http://ir.qepres.com/files/doc_downloads/docgov/Corporate-Governance-Guidelines-v4(3)_v001_d35ok8.pdf. The Board evaluates independence on an ongoing basis.

Board Leadership Structure
Based on its experience, considerable engagement with shareholders and an assessment of research on this issue, the Board understands that there are a variety of viewpoints concerning a board’s optimal leadership structure; that available empirical data concerning the impact of board leadership on shareholder value is inconclusive; and, accordingly, that there is no single, generally-accepted approach to board leadership in the U.S. Given the dynamic and competitive environment in which we operate, the Board believes that the right leadership structure may vary as circumstances change. Currently, our Board believes that a strong Lead Director and a combined Chair and CEO allow our Lead Director to provide independent Board leadership, and permit our Chair and CEO to use his knowledge of the Company to focus Board discussions. The combined role of Chair and CEO also ensures that the Company presents its strategy to shareholders, employees and other stakeholders with a single voice. Moreover, in 2013, our shareholders voted on a proposal to separate the roles of chair and CEO, and the majority of votes cast opposed the proposal.
The Lead Director is selected annually. Dr. M. W. Scoggins, one of the Company’s independent directors, was elected by the other independent directors to serve as the Lead Director. In this role, he:
Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Serves as liaison between the Chairman and the independent directors;
Approves information sent to the Board;
Approves meeting agendas for the Board;
Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;

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Has the authority to call meetings of the independent directors; and
If requested by major shareholders, ensures that he is available for consultation and direct communication.

Our Certificate of Incorporation and Bylaws currently provide for the staggered election of directors, with the Board divided into three classes of directors, each elected for three-year terms (a classified board). However, the Board has included a proposal in this proxy statement to provide for the annual election of all directors (to declassify the Board). If that proposal receives the requisite number of votes, the Company will begin the process of rolling declassification in 2016.

Board Committees
Our Board has an Audit Committee, Compensation Committee and Governance Committee, each of which is composed solely of independent directors. As noted above, each committee has a charter that can be found on the Company’s website (http://ir.qepres.com/investors/corporate-governance/governance-documents/default.aspx)
and will be provided in print without charge at the request of any interested party. The following section includes information about our Board committees. The members of our Board and the Board committees on which they currently serve are identified below.
 
Director
 Audit Committee
Compensation
Committee
Governance
Committee
Phillips S. Baker, Jr.
Chair
 
X
Julie A. Dill
X
X
 
L. Richard Flury1
 
X
X
Robert F. Heinemann
X
X
 
Robert E. McKee, III1
X
 
X
M.W. Scoggins
 
X
Chair
Charles B. Stanley
 
 
 
William L. Thacker, III
X
 
 
David A. Trice
 
Chair
X

1Messrs. Flury and McKee are retiring from the Board as of the Annual Meeting.

Audit Committee
The Audit Committee reviews auditing, accounting, financial reporting, and internal control functions, and oversees risk assessment and compliance activities. The Audit Committee has the sole authority to hire, compensate, retain, oversee and terminate the Company’s independent auditor. The Audit Committee also has sole authority to pre-approve all terms and fees for audit services, audit-related services and other services to be performed by the Company’s independent auditor. The Audit Committee also reviews any related-person transactions brought to its attention that could reasonably be expected to have a material impact on the Company’s financial statements and determines whether any action is necessary.

The Audit Committee meets all the requirements set forth in Sections 303A.06 and 303A.07 of the NYSE Listed Company Manual. The Board has determined that all members of the Audit Committee satisfy the standards for independence as they relate to audit committees as set forth in Section 303A.02 of the NYSE Listed Company Manual and as set forth in Rule 10A-3 of the Securities Exchange Act of 1934, as amended (Exchange Act). The Audit Committee frequently meets in executive sessions, and meets with the internal auditors and independent auditors outside the presence of management. All Audit Committee members qualify as audit committee financial experts.

Compensation Committee
The Compensation Committee oversees our executive compensation program and benefit plans and policies; administers our short- and long-term incentive plans, including equity-based programs; oversees and annually reviews short- and long-term as well as emergency succession planning; approves compensation decisions for officers; recommends CEO total compensation to the full Board; and annually reviews the performance of the CEO. The Compensation Committee oversees the risk assessment of our executive and non-executive compensation programs.


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The Compensation Committee also considers and makes recommendations to the full Board regarding compensation for independent directors. During 2014, our Compensation Committee made recommendations to the Board of Directors of QEP Midstream Partners GP, LLC (QEPM's General Partner), the general partner of QEP Midstream Partners, L.P. (QEPM), regarding grants of QEPM units to certain QEP employees providing services to QEPM. The Compensation Committee frequently meets in executive sessions to discuss and approve compensation for officers. The Board has determined that each member of the Compensation Committee meets the independence requirements set forth in Section 303A.02 of the NYSE Listed Company Manual, and that each qualifies as an independent director under Rule 16b-3 of the Exchange Act and as an outside director under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code).

The Compensation Committee has authority to retain and dismiss compensation consultants and other advisors that provide objective advice, information and analysis regarding executive and director compensation. These consultants report directly to, and may meet separately with, the Compensation Committee, and may consult with the Compensation Committee Chairman between meetings. The Compensation Committee retained Meridian Compensation Partners, LLC (the Consultant) to advise it as to executive and director compensation in fiscal year 2014. The Compensation Committee considered the factors outlined by the NYSE and determined that the Consultant is independent under those factors, and that the Consultant’s work in 2014 did not create any conflict of interest with respect to its representation of the Compensation Committee. See "Role of Compensation Consultant" in the Compensation Discussion and Analysis section for a description of Consultant’s duties.

The Compensation Committee has authorized Mr. Stanley, our CEO, and Margo Fiala, the Vice President of Human Resources, to grant restricted stock to newly hired employees and for employee retention up to a limit of $250,000 per grant. This authority is subject to certain limitations and does not extend to grants to officers or directors. The full Compensation Committee will review each grant made by Mr. Stanley or Ms. Fiala at its next meeting following any such grant. The Compensation Committee has also delegated to its Chair, currently Mr. Trice, authority to replenish the pool of shares to be granted by Mr. Stanley or Ms. Fiala. The full Compensation Committee will review any such replenishment at its next meeting following the replenishment.

Governance Committee
The Governance Committee, which also functions as the Company’s nominating committee, is responsible for committee assignments; new director searches; drafting and revising the Corporate Governance Guidelines; conducting annual evaluations of the Board and its committees and individual directors; and making recommendations to the full Board on various governance issues. The Board has determined that all members of the Governance Committee meet the independence requirements set forth in Section 303A.02 of the NYSE Listed Company Manual.

The Governance Committee’s Charter defines the criteria for director nominees, including nominees recommended by shareholders and self-nominees. These criteria provide a framework for evaluating all nominees as well as incumbent directors. The key criteria are personal and professional integrity and ethics; experience in the Company’s lines of business; experience as a CEO officer, president, CFO or senior officer of a public company or extensive experience in finance or accounting; currently active in business at least part time or recently retired, with skills and experience needed to serve as a member of the Board; experience as a board member of another publicly-held company; willingness to commit time and resources to serve as a director; and good business judgment, including the ability to make independent analytical inquiries. The Board of Directors considers candidates who will contribute a broad range of knowledge, talents, skills and expertise, particularly in the areas of the oil and natural gas industry, strategic planning, accounting and finance, corporate governance, management and diversity of the Board in terms of race, gender, ethnicity or professional background, sufficient to provide prudent guidance about the Company’s operations and interests.

Nominees must be less than 72 years of age. The Company has paid fees to search firms to assist in locating qualified independent director candidates. The Governance Committee will consider director nominations made by shareholders entitled to vote at the Annual Meeting. To make a nomination for election at the 2016 Annual Meeting of Shareholders, a shareholder must provide written notice, along with supporting information (as described below) regarding such nominee, to our Corporate Secretary between January 12 and February 11, 2016. The Governance Committee evaluates nominees recommended by the shareholders using the same criteria it uses for other nominees.


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The notice to our Corporate Secretary must be accompanied by the following information (among other information) about the shareholder seeking to nominate a director (Proposing Person): (1) the name and address of the Proposing Person; (2) the number of shares of the Company's stock beneficially owned and of record by such Proposing Person; (3) any option, warrant or other derivative security owned beneficially by such Proposing Person; (4) any proxy, contract, arrangement, understanding or relationship pursuant to which such Proposing Person has a right to vote any shares of any security of the Company; (5) any short interest in any security of the Company; (6) any performance-related fees to which such Proposing Person is entitled based on any increase or decrease in the value of shares of the Company; (7) any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the Company and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting; (8) any significant equity interests or any derivative instruments or short interests in any principal competitor of the Company held by such Proposing Person; (9) any pending or threatened litigation in which such Proposing Person is a party or material participant involving the Company or any of its officers or directors, or any affiliate of the Company; (10) any material transaction occurring during the prior 12 months between such Proposing Person, on the one hand, and the Company, any affiliate of the Company or any principal competitor of the Company, on the other hand; and (11) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies pursuant to Section 14 of the Exchange Act.

The notice must also provide (1) the name of each nominee; (2) the number of shares of our common stock owned by each nominee; (3) a description of all arrangements and understandings between the shareholder and nominee pursuant to which the nomination is made; (4) a questionnaire (provided by the our Corporate Secretary upon request) completed by the nominee regarding the background and qualifications of the nominee and any person on whose behalf the nomination is being made; (5) a written representation and agreement (in the form provided by our Corporate Secretary upon request) that the nominee (i) is not and will not be a party to any voting commitment that has not been disclosed to the Company or that would interfere with the person’s fiduciary duties under applicable law if elected; (ii) is not and will not be a party to any compensation, reimbursement or indemnification agreement in connection with services as a director that has not been disclosed to the Company; and (iii) agrees to comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership, and trading policies and guidelines of the Company; (6) a signed consent of the nominee to serve as a director if elected; and (7) such other information concerning the nominee as would be required, under SEC rules, in a proxy statement soliciting proxies for the election of the nominee.

Board Risk Oversight
Our Board, as a whole and through its committees, is responsible for overseeing risk management. The Company’s executive officers are responsible for day-to-day management of the material risks the Company faces. In its oversight role, our Board has the responsibility to satisfy itself that the risk management processes designed by management are adequate and functioning as designed. Our Board and its committees regularly discuss material risk exposures, the disclosure of these risks, the potential impact of risks on the Company and the efforts of management to address the identified risks.

A number of Board processes support our risk management program. The full Board regularly reviews operational, regulatory and environmental risks and discusses the Company’s enterprise risk management program. The Board reviews and approves the capital budget and certain capital projects, the hedging policy, significant acquisitions and divestitures, equity and debt offerings, and other significant activities.

The Audit Committee plays an important role in risk management by assisting the Board in fulfilling its responsibility to oversee the integrity of the financial statements and our compliance with legal and regulatory requirements. The Audit Committee retains and interacts regularly with our independent auditors and also meets regularly with our internal auditors. Additionally, the Audit Committee reviews financial and accounting risk exposure, the Company’s proved oil and gas reserves estimation reporting process and disclosure, issues related to cybersecurity and the Company’s internal controls. The Audit Committee also oversees ethics and compliance procedures and reporting.

The Compensation Committee reviews the compensation program to ensure it is aligned with our compensation objectives and to address any potential risks it may create. The Compensation Committee has designed our short- and long-term compensation plans with features that reduce the likelihood of excessive risk-taking, including a balanced mix of cash and equity and short- and long-term incentives, an appropriate balance of operating and

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financial performance measures, a proper balance of fixed and at-risk compensation components, significant stock ownership requirements for officers, extended vesting schedules on equity grants, and caps on incentive awards.

Our Governance Committee’s role in risk management includes regularly reviewing developments in corporate governance, and reviewing our Corporate Governance Guidelines to recommend appropriate action to the full Board. The Governance Committee also establishes criteria for and determines director independence, provides input for Board membership and committee assignments, and makes adjustments to ensure that we have appropriate director expertise to oversee the Company’s evolving business operations.

Stock Ownership Guidelines for Non-Employee Directors
Our Board adopted stock ownership guidelines for independent directors to align the interests of our directors with the interests of our shareholders and to promote our commitment to best practices in corporate governance. Within five years of beginning their service, independent directors are required to hold QEP shares with a value equal to five times the amount of their annual cash compensation. Shares that count towards satisfaction of the guidelines include common stock owned by the director and phantom stock attributable to deferred compensation. All of the independent directors who have served for five years or longer hold a sufficient number of shares to satisfy these guidelines. The Board reviewed these guidelines again in 2014 and determined they were appropriate.

Limits on Board Service
Our directors may not serve on the board of directors of more than six public companies. Our CEO may not serve on more than two boards in addition to our Board. A member of our Audit Committee may not simultaneously serve on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service would not impair the director's ability to serve effectively on our Audit Committee.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during 2014 were Drs. Heinemann and Scoggins, Messrs. Flury and Trice, and Ms. Dill. No member of our Compensation Committee was at any time prior to or during 2014 or the first three months of 2015 an officer or employee of the Company. Additionally, no member of the Compensation Committee had any relationship with our Company requiring disclosure as a related-party transaction. During the 2014 fiscal year, no executive officer of our Company served on the compensation committee of any other entity that had one or more of its executive officers serving as a member of our Compensation Committee. Furthermore, no executive officer of our Company served on the Compensation Committee of another company that had one of its executive officers serve as a member of our Board of Directors.

Communications with Directors
Interested parties may communicate with the full Board, non-management directors as a group or individual directors by sending a letter in care of the Corporate Secretary at QEP Resources, Inc., 1050 17th Street, Suite 800, Denver, Colorado 80265. Our Corporate Secretary has the authority to discard any solicitations, advertisements or other inappropriate communications, but will forward any other mail to the named director or group of directors.

Attendance at Meetings
The QEP Board and committees of the Board held the following number of meetings in 2014:
 
Board
Audit Committee
Compensation
Committee
Governance
Committee
Number of 2014 Meetings
8
9
5
5

All directors attended at least 75% of the aggregate meetings they were required to attend. Our directors are expected to attend the Annual Meeting. All of the directors attended the 2014 Annual Meeting of Shareholders.

Family Relationships
None of the current directors or executive officers is related to any other director or executive officer.




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Director Retirement Policy
Our Board has adopted a retirement policy that permits an independent director to continue serving until the annual meeting following his or her 72nd birthday, provided that the director remains actively engaged in business, financial, or community affairs. The Board may waive these requirements in certain situations. The Board does not believe that directors who retire, resign or otherwise materially change their position with their employers should necessarily leave the Board, however, they are required to submit a notice of any such retirement, resignation or change to the Chairman of the Board and Chairman of the Governance Committee. The Board will then review the continued appropriateness of Board membership under the changed circumstances.

CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PERSONS

Transactions with related persons are those that involve our directors, executive officers, director nominees, greater than 5% shareholders, immediate family members of these persons or entities in which one of these persons has a direct or indirect material interest. Pursuant to the procedures described below, we review all transactions that would involve amounts exceeding $120,000 (the current threshold required to be disclosed in the proxy statement under SEC regulations) and certain other similar transactions.


Review and Approval of Transactions with Related Persons
Pursuant to the terms of our Corporate Governance Guidelines, we require that all executive officers and directors report to our Vice President, Compliance, any event or anticipated event that might qualify as a related-person transaction. The Vice President, Compliance, would then report those transactions to the Audit Committee. We also collect information from questionnaires sent to officers and directors early each year that are designed to reveal related-person transactions. If a report or questionnaire shows a potential related-person transaction, our Audit Committee will review the transaction in accordance with our Code of Conduct. The Audit Committee will review pending and ongoing transactions to determine whether they conflict with the best interests of the Company, impact a director’s independence or conflict with our Code of Conduct. If the transaction is completed, the Audit Committee will determine whether rescission of the transaction, disciplinary action or re-evaluation of independence is required. If a waiver to the Code of Conduct is granted to an executive officer or director, the nature of the waiver will be disclosed on our website (www.qepres.com), in a press release or on a current report on Form 8-K.

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Relationship and Transactions with QEP Midstream Partners, LP
From January 2014 until the sale of QEP's interest in QEP Midstream Partners, LP (QEPM) on December 2, 2014, to Tesoro Logistics LP (Tesoro) (the Midstream Sale), QEP owned 100% of QEPM’s General Partner. As of December 1, 2014, QEP owned 3,701,750 common units and 26,705,000 subordinated units representing a 55.8% limited partner interest in QEPM. In addition, at that time QEP, through subsidiaries, owned 1,090,495 general partner units representing a 2.0% general partner interest in QEPM as well as incentive distribution rights. Transactions with QEPM and its affiliates during most of 2014 were considered to be related-party transactions because Messrs. Stanley and Richard J. Doleshek served as executive officers of both the Company and QEPM’s General Partner.

Distributions of Available Cash to the QEPM’s General Partner and its Affiliates
During 2014, QEPM made cash distributions to the unitholders pro rata, including QEP, as holder of the aggregate of 3,701,750 common units and 26,705,000 subordinated units, and 2.0% to the QEPM’s General Partner. During 2014, QEPM declared distributions totaling $63.5 million, or $1.16 per unit.
Under QEPM’s Partnership Agreement, QEPM was required to reimburse QEPM’s General Partner and its affiliates for all costs and expenses that QEPM’s General Partner and its affiliates incurred on behalf of QEPM for managing and controlling QEPM’s business and operations. Except to the extent specified under the Omnibus Agreement (described below), QEPM’s General Partner determined the amount of these expenses and such determinations were made in good faith in accordance with the terms of the QEPM Partnership Agreement.
Agreements between QEP and QEPM
Until December 2, 2014, when the sale to Tesoro closed, QEP and QEPM were related parties, and the following agreements existed between them:

Gathering Agreements

QEP is party to gathering agreements for natural gas, oil, water and condensate with QEPM. Our gathering agreements with QEPM generally fall into three categories: (i) “life-of-reserves” agreements; (ii) long-term agreements, with remaining primary terms ranging from approximately 1 to 13 years, and month-to-month thereafter; and (iii) month-to-month or year-to-year evergreen agreements. Our gathering agreements are fee-based agreements, pursuant to which QEPM provides gathering and, as applicable, compression services on a specified per MMBtu or per barrel basis. The gathering fee varies. During 2014, QEP paid QEPM $71.4 million under these gathering agreements.
Several of our gathering agreements with QEPM include acreage dedications. Pursuant to the terms of these agreements, QEP dedicates to QEPM all of the oil and natural gas production QEP owns or controls from (i) wells that are currently connected to QEPM’s gathering systems and located within the acreage dedication and (ii) future wells that are drilled during the term of the applicable gathering agreement and located within the dedicated acreage as our gathering systems currently exist and as they are expanded to connect to additional wells. Three of the gathering agreements with QEPM contain minimum volume commitments pursuant to which QEP guarantees to ship a minimum volume of natural gas or oil on QEPM’s gathering systems. The original terms of the minimum volume commitments ranged from 10 to 15 years.

Processing Agreement

QEP is party to one agreement with QEPM to process natural gas and to recover natural gas liquids at QEPM’s Blacks Fork Processing Complex located in Uinta and Sweetwater Counties, Wyoming. The primary term expires August 1, 2026, and year-to-year thereafter. QEP pays QEPM a fee for the processing services, and QEPM pays QEP a portion of the revenue it receives for marketing and selling QEP’s natural gas liquids extracted from the processed gas. During 2014, QEP paid QEPM $30.0 million in processing fees and QEP received $127.5 million in revenue from QEPM for its portion of sales of natural gas liquids. In addition, the agreement contains a minimum volume commitment that varies in amount over a 15-year period under which QEP pays QEPM a deficiency payment if volumes fall below the minimum annual quantity.

Omnibus Agreement


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During 2014 until the Midstream Sale, the Company was a party to an Omnibus Agreement with QEPM’s General Partner, QEP Field Services Company and certain of their affiliates. The parties amended the Omnibus Agreement at the time the Midstream Sale closed. After the Midstream Sale, any transactions conducted pursuant to the Omnibus Agreement were no longer related-person transactions. The Omnibus Agreement addressed the following matters:
QEPM’s payment of an annual amount to QEP, initially in the amount of $13.8 million, for the provision of certain general and administrative services by QEP to QEPM, including a fixed annual fee of approximately $1.4 million for executive management services provided by certain officers of QEPM’s General Partner, who were also executives of QEP. The remaining portion of this annual amount reflects an estimate of the costs QEP incurred in providing the services;
QEPM’s obligation to reimburse QEP for any out-of-pocket costs and expenses incurred by QEP in providing general and administrative services (which reimbursement was in addition to certain expenses of QEPM’s General Partner and its affiliates that were reimbursed under QEPM’s Partnership Agreement) as well as any other out-of-pocket expenses incurred by QEP on QEPM’s behalf; and
The Company's provision of indemnity for certain environmental and other liabilities, and QEPM’s obligation to indemnify the Company and its subsidiaries for events and conditions associated with the operation of QEPM’s assets that occurred after the closing of the initial public offering of QEPM (QEPM IPO).
During the relevant time in 2014, QEP charged QEPM $12.7 million under the Omnibus Agreement.
Condensate Sales Agreements

In connection with the QEPM IPO, QEP, through a subsidiary, entered into a fixed price condensate purchase agreement with QEPM, which requires QEPM to sell and QEP to purchase all of the condensate volumes collected on QEPM’s gathering systems at a fixed price of $85.25 per barrel of product over a primary term of five years. During 2014, QEP purchased approximately $4.7 million of condensate from QEPM under this agreement. That agreement was assigned to Tesoro on December 2, 2014.
Agreements with JANA Partners LLC and William L. Thacker, III
On February 23, 2014, QEP entered into the JANA Agreement with JANA. Under the terms of the JANA Agreement, QEP agreed to appoint Mr. Thacker to the Board as a Class III director, to serve until the consummation of a transaction effecting a separation of QEP’s midstream business. That separation was consummated on December 2, 2014, however, on October 28, 2014, the Board asked Mr. Thacker, and Mr. Thacker agreed, to remain on the Board until the end of his term in 2016. At that time he, along with the other directors whose terms end in 2016, will be considered for nomination to another term.
SECURITY OWNERSHIP

The information provided below summarizes the beneficial ownership of our common stock by our named executive officers, each of our directors, all of our executive officers and directors as a group, and persons owning more than 5% of our common stock. “Beneficial ownership” generally includes those shares of common stock held by someone who has investment and/or voting authority of such shares or has the right to acquire such common stock within 60 days. The ownership includes common stock that is held directly and also stock held indirectly through a relationship, a position as a trustee, or under a contract or understanding.

Directors and Executive Officers
The following table lists the shares of our common stock beneficially owned by each director, named executive officer, and all directors and executive officers as a group as of March 10, 2015. Shares not outstanding but deemed beneficially owned by virtue of the right of a person to acquire shares within 60 days of March 10, 2015, are included as outstanding and beneficially owned for that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as noted in the footnotes below, the holders have sole voting and dispositive power over the shares. The Company has no knowledge of any arrangement that would, at a subsequent date, result in a change in control of the Company.*
*Due to a vesting on March 5, 2015, and a grant on March 6, 2015, the Company set March 10, 2015, as the most recent practicable date to determine ownership. Therefore, ownership information is not included in this preliminary filing.

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Amount and Nature of Beneficial Ownership
Name
Common Stock
Beneficially
Owned
 2, 3
Common Stock Acquirable Within 60 Days
Total Beneficially Owned
Percent of
Class (%)
1
Charles B. Stanley
TBD
5,6,8 
TBD
TBD
TBD
Richard J. Doleshek
TBD
8 
TBD
TBD
TBD
Jim E. Torgerson
TBD
 
TBD
TBD
TBD
Christopher K. Woosley
TBD
 
TBD
TBD
TBD
Austin S. Murr
TBD
 
TBD
TBD
TBD
Phillips S. Baker, Jr.
TBD
 
TBD
TBD
TBD
Julie A. Dill
TBD
 
TBD
TBD
TBD
L. Richard Flury
TBD
 
TBD
TBD
TBD
Robert F. Heinemann
TBD
 
TBD
TBD
TBD
Robert E. McKee III
TBD
6 
TBD
TBD
TBD
M. W. Scoggins
TBD
6 
TBD
TBD
TBD
William L. Thacker III
TBD
 
TBD
TBD
TBD
David A. Trice
TBD
 
TBD
TBD
TBD
Other Executive Officers
TBD
 
TBD
TBD
TBD
All directors and executive officers
(19 individuals)
TBD
 
TBD
TBD
TBD
1.    
2.
    
NAME
UNVESTED RESTRICTED SHARES
Charles B. Stanley
TBD
Richard J. Doleshek
TBD
Jim E. Torgerson
TBD
Christopher K. Woosley
TBD
Austin S. Murr
TBD

3.    

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Name
 
Phantom Stock on March 10, 2015
Charles B. Stanley
 
TBD
Richard J. Doleshek
 
TBD
Jim E. Torgerson
 
TBD
Austin S. Murr
 
TBD
Christopher K. Woosley
 
TBD
Phillips S. Baker, Jr.
 
TBD
Julie A. Dill
 
TBD
L. Richard Flury
 
TBD
Robert F. Heinemann
 
TBD
Robert E. McKee, III
 
TBD
Thomas C. O'Connor
 
TBD
Keith O. Rattie
 
TBD
M. W. Scoggins
 
TBD
William L. Thacker III
 
TBD
David A. Trice
 
TBD

4.    
Name
Performance Share Units on March 10, 2015
Charles B. Stanley
TBD
Richard J. Doleshek
TBD
Jim E. Torgerson
TBD
Christopher K. Woosley
TBD

5.
6.    
7.    
8.    
9.    

Certain Beneficial Owners
The following table sets forth information with respect to each person known by the Company to beneficially own more than five percent of our common stock.
Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Percent of Class
Boston Partners One Beacon Street Boston, MA 02108
14,597,9931
8.10
%
Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355
13,573,3252
7.53
%
Wellington Management Group, LLP 280 Congress St Boston, MA 02210
11,726,4523
6.51
%
Blackrock, Inc. 55 E. 52nd Street New York, NY 10022
9,914,6874
5.50
%
Invesco Ltd. 1555 Peachtree St NE Atlanta, GA 30309
9,801,2245
5.4
%

1.
Based upon its Schedule 13G filed with the SEC on February 11, 2015, Boston Partners has sole dispositive power of all of the shares.
2.
Based upon its Schedule 13G filed with the SEC on February 12, 2015, Vanguard has shared dispositive power of 13,299,158 shares and shared dispositive power of 274,167 shares.
3.
Based upon its Schedule 13G filed with the SEC on February 12, 2015, Wellington has shared dispositive power of all of the shares.
4.
Based on its Schedule 13G filed with the SEC on February 9, 2015, Blackrock has sole dispositive power 9,848,991 shares and shared dispositive power of 65,696 shares.
5.
Based upon its Schedule 13G filed with the SEC on February 11, 2015, Invesco has sole dispositive power of all of the shares.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Exchange Act and regulations promulgated by the SEC, the Company’s directors, executive officers and persons who own more than 10% of the Company’s stock are required to file reports of ownership and changes in ownership with the SEC and to furnish the Company with copies of all such reports they file. The Company’s Corporate Secretary prepares reports for directors and executive officers based on information known and otherwise supplied, including information provided in response to director and officer questionnaires. Based on this information, the Company believes that all filing requirements under Section 16(a) of the Exchange Act were satisfied in 2014.



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AUDIT COMMITTEE REPORT

The Audit Committee adopted its Charter in 2010 upon formation of the Company and has amended it from time to time. Audit Committee members are appointed each year by the Board to review the Company’s financial matters. The Board has determined that each member of our Audit Committee meets the independence requirements set by the NYSE. The Board has also determined that all members of the Audit Committee are audit committee financial experts as defined by the SEC. No member of the Audit Committee serves as a member of the audit committee of more than three public companies.

We reviewed and discussed with the Company’s management the audited financial statements for the year ended December 31, 2014. We discussed with representatives of PwC, the Company’s independent auditor, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA Professional Standards, Vol. 1, AU§ 380), Communication with Audit Committees. We have also received the written disclosures and the letter from PwC, which are required by applicable provisions of the Public Company Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence, and we have discussed with representatives of PwC its independence from the Company. We have also discussed with the Company’s officers and PwC such other matters and received such assurances from them as we deemed appropriate.

Based on our review and discussions, we have recommended to the Company’s Board of Directors the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

By the Audit Committee:

Phillips S. Baker, Jr., Chair
Julie A. Dill
Robert F. Heinemann
Robert E. McKee, III
William L. Thacker, III

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.

COMPENSATION COMMITTEE REPORT

We have reviewed and discussed the Compensation Discussion and Analysis with management and, based on our review and discussions, have recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

By the Compensation Committee:

David A. Trice, Chair
Julie A. Dill
L. Richard Flury
Robert F. Heinemann
M.W. Scoggins

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.


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NAMED EXECUTIVE OFFICERS

The Company’s Named Executive Officers (NEOs) include its principal executive officer, its principal financial officer, its three most highly compensated executive officers (other than the principal executive officer and the principal financial officer) as well as one additional executive officer, Perry Richards, who would have been one of the three most highly compensated executive officers except for his departure from QEP on December 2, 2014, in connection with the Midstream Sale.

Name and Title
  
Background
Charles B. Stanley
Chairman, President and (CEO)
  
Charles B. Stanley, age 56, has served as President and CEO of QEP since the Spin-off in 2010 and as Chairman of the Board since May 2012. He served as Executive Vice President and Chief Operating Officer of Questar and as a director of Questar from 2002 until the Spin-off. Mr. Stanley served as President, CEO and a director of El Paso Oil and Gas Canada from 2000 to 2002 and as President and CEO of Coastal Gas International Company from 1995 to 2000.
Richard J. Doleshek
Executive Vice President, Chief Financial Officer
  
Richard J. Doleshek, age 56, has been the Executive Vice President and CFO of QEP since 2010. Previously, Mr. Doleshek served as Executive Vice President and CFO of Questar from 2009 to 2010. Prior to joining Questar, Mr. Doleshek was Executive Vice President and CFO of Hilcorp Energy Company from 2001 to 2009.
Jim E. Torgerson
Executive Vice President,
QEP Energy
  
Jim E. Torgerson, age 51, has been the Executive Vice President of QEP Energy since September 2013. Previously, Mr. Torgerson was the Senior Vice President, Operations from January 2012 to August 2013 and the Senior Vice President of Drilling and Completions (2010). Prior to 2010, Mr. Torgerson held the following titles with Questar: Vice President, Drilling and Completions (2009); and Vice President, Rockies Drilling and Completions (2005 to 2008).
Christopher K. Woosley
Vice President and General Counsel
 
Christopher K. Woosley, age 45, was named Vice President and General Counsel in 2012. He served as a Senior Attorney from 2010 until 2012. Prior to joining QEP, Mr. Woosley served as outside counsel to Questar as a partner in the law firm Cooper Newsome & Woosley PLLP from 2003 until 2010.
Austin S. Murr
Senior Vice President, Business Development
 
Austin S. Murr, age 61, was named Senior Vice President of Business Development in 2011. He served as Vice President of Land and Business Development from 2006 to 2011 and Director of Business Development from 2004 to 2006. Prior to joining QEP, Mr. Murr worked in the oil and gas industry for over 20 years as a landman, lawyer, commercial manager, business developer and senior level executive in the United States, Africa and Latin America.
Perry H. Richards
Former Senior Vice President, Field Services
 
Perry H. Richards, age 54, served as QEP's Senior Vice President of Field Services from 2010 until his departure in December 2014 as a result of the Midstream Sale. Mr. Richards previously served as Vice President of Questar Gas Management from 2005 to 2010 and in various other roles in his 32 years of service with QEP and Questar.



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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our Business

QEP Resources, Inc. (QEP or the Company) is a holding company with two subsidiaries, QEP Energy Company and QEP Marketing Company, which are engaged in two primary lines of business:

Oil and gas exploration and production (QEP Energy)
Oil and gas marketing, operation of the Haynesville Gathering System and an underground gas storage facility (QEP Marketing and Other)

Our operations are focused in two regions of the United States: the Northern Region (primarily in Wyoming, North Dakota and Utah) and the Southern Region (primarily in Texas and Louisiana). Our corporate headquarters are located in Denver, Colorado.


2014 Business Results

2014 was a monumental year for QEP, where we delivered record Adjusted EBITDA1, reported record crude oil production of 17.1 MMBbl and continued the transformation of our upstream business into a more focused and balanced asset base to position us for future growth. We fundamentally transformed the company through the acquisition of significant crude oil development properties in the Permian Basin, divestitures of non-core E&P properties for $787.8 million, and the closing of the Midstream Sale for $2.5 billion, including our ownership interest in QEPM (see "Evaluate Performance: 2014 Company Performance" section later in this Compensation Discussion and Analysis). As a result, QEP has emerged as a more competitive and financially strong independent E&P company focused on some of the most prolific resource plays in the continental United States - including two of North America’s most abundant crude oil provinces - the Williston Basin and Permian Basin; two prominent liquids-rich gas plays - the Pinedale Anticline and Uinta Basin; and a premier dry gas asset - the Haynesville Shale.

We have also made tremendous progress on our multi-year strategy of growing crude oil production and proved reserves to build a more balanced portfolio of both crude oil and natural gas. In 2014, crude oil production revenue comprised 58% of total field-level production revenue compared to 14% in 2010. Crude oil production was 32% of total company production compared to just 8% in 2010. From 2010 to 2014 QEP more than tripled crude oil proved reserves from 52.3 MMBbl to 172.5 MMBbl. The graph below shows the growth in crude oil as a percentage of total production and total proved reserves since 2010.

In 2014, our industry began to face a difficult commodity price environment. Significant price decreases in both oil and natural gas in the second half of the year contributed to stock price decreases across our industry, including us. However, we believe we are well positioned within our industry to weather the current price environment and be successful over the long-term. Using the proceeds from non-core asset divestitures and the Midstream Sale, we reduced our net debt from approximately $3.0 billion at December 31, 2013 to approximately $1.1 billion at December 31, 2014. As a result, QEP has one of the lowest debt to total capitalization ratios in its peer group and $3.0 billion in liquidity at a time when balance sheet strength is critical.

Our 2014 efforts produced a focused and balanced portfolio of premier crude oil and natural gas assets, on a healthy and flexible balance sheet. We expect these outcomes will strengthen our competitive positioning and deliver value for our stakeholders over the long term.


1 Adjusted EBITDA is a non-GAAP financial measure. We believe Adjusted EBITDA is an important measure of our financial performance relative to other oil and gas producing companies. We define Adjusted EBITDA as earnings before interest, income taxes, depreciation, depletion and amortization (EBITDA), adjusted to exclude changes in fair value of derivative contracts, exploration expenses, gains and losses from asset sales, impairment, and certain other non-cash and/or non-recurring items. A reconciliation of Adjusted EBITDA to our net income determined pursuant to generally accepted accounting principles (GAAP) for the year ended December 31, 2014, is included in Appendix A to this proxy statement.

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Highlights of 2014 Compensation Actions


In 2014, our shareholders’ advisory vote on executive compensation, or “Say on Pay,” received approximately 93% approval from our shareholders. As a result of this strong support for our compensation programs and ongoing deliberations by our Compensation Committee (with input from the Consultant as described below), we made minimal changes to our executive compensation program in 2014. The table below summarizes key actions taken by our Compensation Committee in 2014.

 
Element
Action
 
 
Base Salary
After assessing the individual performance of our NEOs, their respective roles in our organization, data on peer compensation levels and other factors, the Committee awarded them annual base salary increases of approximately 4.1% on average in early 2014. Most QEP employees received a similar average base salary adjustment in 2014. In February 2015 the Compensation Committee did not award any base salary increases for our NEOs for 2015.
 
 
 
 
Annual Incentive Program (AIP)
•  A comprehensive Health, Safety and Environmental (HSE) component was added to the AIP in 2014 to drive additional focus on this critical aspect of our business. This HSE multiplier can increase or decrease the percentage achievement of the financial and production metrics.
•  Based on the achievement of pre-set company performance goals designed to measure annual company performance and drive long-term shareholder value, and the assessment of individual performance, the Compensation Committee awarded each of our NEOs a payout at 168% of target. Other QEP employees also received an incentive payout averaging 168% based on company performance and individual performance.
 
 
 
 
Long-Term Incentives (LTI)
•  Long-term incentives comprise the majority of our NEOs' total compensation. In February 2014, the Compensation Committee increased the percentage of long-term incentive awards consisting of performance share units (PSUs) to 40%. The remainder of the long-term incentive awards for NEOs consists of stock options (20%) and restricted stock (40%).
•  In early 2015 our Compensation Committee determined our relative total shareholder return (TSR) for the PSUs issued in 2012 (covering the 2012 to 2014 performance period) ranked at the 46th percentile of our peers, resulting in a payout of 90% of the targeted number of PSUs.  
 
Actions specific to 2014 transactions
The following programs were created or modified to lessen the impact of the Midstream Sale and the Midcontinent asset divestitures on effected employees. Mr. Richards was the only NEO that participated in these programs.
•  A retention bonus was paid to employees impacted by the Midstream Sale to ensure their continued employment for the period from the announcement of our intent to separate the midstream business in December 2013 to the close of the sale in December 2014.
•  Long-term incentive award agreements of employees whose employment was terminated due to one of the transactions were amended to provide for accelerated vesting of unvested awards, including restricted stock, stock options and PSUs as applicable.
•  Our qualified Pension Plan was amended for participants ages 50-54 whose employment was terminated due to one of the transactions to allow for modified benefit reduction factors.


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Pay and Performance Alignment

Our pay programs are designed to align pay outcomes with both short-term and long-term company performance.

To provide our management team with appropriate incentives to meet short-term objectives, our Compensation Committee has approved our Annual Incentive Plan to pay out only if the Company meets key short-term operational, financial and strategic goals. The Compensation Committee expects achievement of these goals to result in strong positioning within our industry and greater shareholder value over time.

To provide our management team with the appropriate incentives to pursue strategies that promote long-term shareholder value, our Compensation Committee has approved an executive compensation program that ties a substantial portion of total compensation to long-term equity incentives that provide value based on share price and total shareholder return. As a result, changes in TSR over time significantly impact our management team's actual realizable compensation. Thus, the amounts realizable through long-term incentive compensation by our CEO and other NEOs may be a better reflection of their pay than the values reflected in the Summary Compensation Table.


QEP CEO Realizable Compensation
The following graph illustrates the realizable (in-the-money) value as of December 31, 2014 of our CEO's compensation over the three-year period ended December 31, 2014 as compared to the baseline target contemplated by the Compensation Committee at the time of grant.

"Realizable Pay" values include the annual incentives earned for the corresponding year's performance against important financial, operating and strategic objectives. They also include the current value of outstanding equity-based long-term incentives, which have decreased in value commensurately with stock prices primarily due to the prevailing commodity price environment.

Target Pay reflects salary and annual incentive target determined during the noted year by the Compensation Committee based on benchmark data provided by the Compensation Consultant as well as the grant date value of long-term incentives disclosed in the Summary Compensation Table for the designated year.
Realizable Pay represents salary as determined by the Compensation Committee in the designated year, actual annual cash incentive paid for the designated year's performance, in-the-money value of stock options granted in the designated year (the number of options granted multiplied by the difference between QEP stock price as of December 31, 2014 and the option exercise price), the number of restricted shares granted in the designated year multiplied by the QEP stock price as of December 31, 2014, the number of PSUs granted during the designated year multiplied by the QEP stock price as of December 31, 2014 and reflecting the payout level based on QEP's relative TSR performance to date calculated as of December 31, 2014 (90% payout for the 2012 grant, 0% payout for the 2013 grant and 64% payout for the 2014 grant).



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Key Features of Our Executive Compensation Program 


Our Executive Compensation Practices
(What We Do)
ü     Pay for Performance – Our executives’ total compensation is heavily weighted toward performance-based pay. Our annual incentive program is based on performance against key strategic, financial and operational metrics. The ultimate value delivered by our long-term incentive program is tied to performance based on absolute and relative shareholder return.
ü     Executive Ownership Guidelines – We have adopted stock ownership guidelines for our executives and directors that are consistent with good corporate governance practices. The requirements are 6x base salary for our CEO, 3x for our CFO, 2x for other officers, and 5x annual cash compensation for independent directors.
ü     External Benchmarking – Our Compensation Committee reviews competitive compensation data based on an appropriate group of E&P peer companies prior to making annual compensation decisions.
ü     Double-Trigger Severance – Upon a change in control, our Executive Severance Plan (the CIC Plan) confers cash severance benefits only if the employee is actually or constructively terminated by the Company within three years following a change in control.
ü      Independent Compensation Consultant – The Compensation Committee has engaged an independent executive compensation advisor who reports directly to the Compensation Committee and provides no other services to the Company.
ü      Tally Sheets – Our Compensation Committee reviews tally sheets prior to making annual executive compensation decisions.
ü      Annual Risk Assessment of Compensation Practices – The Compensation Committee conducts an annual risk assessment to carefully consider the degree to which compensation plans and decisions affect risk taking. We do not believe that any of the compensation arrangements in place encourage unnecessary risk taking.
Executive Compensation Practices We Have Not Implemented
(What We Don't Do)
X      No Golden Parachute Excise Tax Gross-Ups – We do not provide golden parachute excise tax gross-ups in our Executive Severance Plan or elsewhere.
X      No Repricing – Our stock incentive plan does not permit the repricing of underwater stock options without shareholder approval.
X      No Hedging, Pledging or Derivatives Trading of QEP Stock – These practices are strictly prohibited for all officers, directors and employees of the Company.
X      No Excessive Perquisites or Benefits – We offer limited perquisites to our NEOs, consistent with the perquisites offered by our peer companies, to offset the cost of tax preparation, financial planning and related expenses. Our supplemental retirement programs are limited to restoring the benefits lost under our qualified retirement plans and eligibility is not limited to executives.
X      No Employment Agreements – We have no employment agreements with any executive officers.

Compensation Philosophy
The principal tenets of our compensation philosophy are as follows:

Our executive compensation programs should be competitive with our peers to attract, retain and reward effective leaders. We evaluate the range of current industry compensation practices to provide external benchmarks that help to guide our executive compensation structure. Our Compensation Committee determines individual total compensation targets within this framework to provide compensation that correlates with the Company’s relative performance to its peers. We do not, however, target a specific percentile of the peer market data. This approach provides the flexibility needed to manage our executive compensation programs to meet our current business needs.

Our executive compensation programs should be designed to support a performance-based culture. The majority of each executive’s compensation is at risk and based on attainment of short-term goals, long-term performance relative to our peers, and total shareholder return for QEP.


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Our executive compensation programs should be designed to align our executives’ interest with those of our stockholders. A substantial portion of our compensation is provided in the form of long-term equity incentives that tie executive pay to stock performance. In addition, we require each of our NEOs to meet rigorous stock ownership guidelines.

Our executive compensation programs should encourage appropriate risk management. The Compensation Committee believes that effective leadership in the oil and gas business requires taking prudent business risks while discouraging excessive risk-taking. To encourage this balance, the Compensation Committee has structured our compensation to include extended three-year vesting schedules on all long-term incentive awards, and to base at least a portion of annual incentive awards on meeting strategic objectives regarding safety, legal and regulatory compliance. Annually, the Consultant conducts a risk assessment review of our compensation programs to ensure that our programs do not encourage executives to take inappropriate or excessive risks. In addition, we strictly prohibit hedging, pledging or derivatives trading of QEP stock.


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Role of Compensation Consultant
Our Compensation Committee engaged Meridian Compensation Partners, LLC, as its compensation consultant to help ensure that our executive compensation programs are competitive and consistent with our compensation philosophy. In making this decision, the Compensation Committee considered the following:
 
The Consultant’s historical performance in supporting the Compensation Committee and its familiarity with our executive compensation programs;
Its extensive experience and familiarity with the compensation programs of our peer companies and sector;
The range of compensation services offered by the Consultant; and
The independence of the Consultant, considering the independence factors outlined by the NYSE.

Our Compensation Committee determined the scope of the engagement, which included:

Providing benchmarking data on executive and outside director compensation for the Compensation Committee to use in its decision-making process;
Providing input into plan design discussions and individual compensation actions, as needed;
Conducting an executive compensation program risk assessment;
Periodic plan design review and recommendations;
Reviewing and providing feedback on the compensation-related disclosures in our proxy statement; and
Informing the Compensation Committee about recent trends, best practices and other developments affecting executive compensation.

Except as set forth above, the Consultant does not provide any other services to the Company. The Consultant attended all Compensation Committee meetings, including executive sessions as requested. The Consultant met with members of management, including the CEO and Vice President, Human Resources, in carrying out these duties, but reported exclusively to our Compensation Committee. The Compensation Committee determined that the Consultant’s work in 2014 did not create any conflicts of interest.


Compensation Mix
Our pay-for-performance philosophy is demonstrated in the mix of compensation that we provide for our NEOs. A significant portion of our executive officers’ compensation is in the form of annual and long-term incentives. Each of these incentives plays a role in aligning pay with performance and the long-term financial interests of our executives with those of our shareholders.

The graph below identifies the mix of at-risk pay (including AIP, PSUs, stock options and restricted stock) as a percentage of target total compensation (excluding health, welfare and termination benefits) for the 2014 compensation period for our CEO and other NEOs.


Compensation Elements
Our compensation program for NEOs aligns with our compensation philosophy and is comprised of elements designed to address a variety of objectives. The incentive programs that make up the variable elements of total

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compensation fall under two primary compensation plans: the QEP Resources, Inc. 2010 Long-Term Stock Incentive Plan (LTSIP) and the QEP Resources, Inc. Cash Incentive Plan (CIP). Additionally, certain of our executives received benefits under the QEP Midstream Partners, LP 2013 Long-Term Incentive Plan (QEPM LTIP).

The table below highlights each element of our compensation program and the primary role of such element in achieving our compensation objectives. Refer to each specific section for more details on each program.
         Compensation Element
  
Role in Total Compensation
Base Salary
 
•  Provides fixed compensation based on an individual’s skills, experience and proficiency, market competitive data, and the relative value of the individual’s role within the Company.
Annual Incentive Program (AIP)
  
• Rewards annual Company performance;
• Aligns participants' compensation with short-term financial and operational objectives specific to each calendar year;
• Motivates participants to meet or exceed internal and external performance expectations;
• Communicates the Compensation Committee’s evaluation of annual Company performance; and
• Recognizes individual contributions to the organization’s results.
• Metrics for 2014 included AIP-Adjusted EBITDA2, oil and total production goals as well as the Compensation Committee's evaluation of performance on Health, Safety and Environmental goals and key strategic objectives.
Long-Term Incentive Program
ü Performance Share Units
ü Restricted Stock
ü Stock Options
ü QEPM Phantom Units
  
• Rewards long-term performance, directly aligned with shareholder interests;
• Provides a strong performance-based equity component;
• Recognizes and rewards share performance relative to industry peers through PSUs based on relative TSR;
• Aligns compensation with sustained long-term value creation;
• Allows executives to acquire a meaningful and sustained ownership stake; and
• Fosters executive retention by vesting awards over multiple years.
Benefits
ü Health & Welfare
ü Retirement
ü Deferred Compensation ü Benefits
ü Other
  
• Helps QEP attract and retain executive talent and remain competitive in our industry by offering a comprehensive employee benefits package;
• Provides health and welfare benefits comparable to those provided to all other employees;
• Provides financial security in the event of various individual risks and maximizes the efficiency of tax-advantaged compensation vehicles; and
• Provides limited perquisites consistent with those offered by our peer companies.
Termination Benefits
ü Executive Severance Plan (CIC)
ü Basic Severance Plan
 
• Attracts and retains executives in a competitive and changing industry; and
• Ensures executives act in the best interests of stockholders in times of heightened uncertainty.

2 For purposes of determining targets and awards under our AIP, our Compensation Committee makes adjustments to Adjusted EBITDA to eliminate the impact (both positive and negative) of changes in crude oil, NGL and natural gas prices and to exclude other extraordinary, unusual, non-recurring or non-comparable items, as determined by our Compensation Committee (AIP-Adjusted EBITDA). AIP-Adjusted EBITDA is a non-GAAP financial measure. See “‑ Compensation Process - Step 3: Determining Compensation - 2014 Company Performance” for a discussion of the adjustments made in 2014 by our Compensation Committee to determine AIP-Adjusted EBITDA.

Annual Incentive Program (AIP)

Our AIP is based on key one-year financial and operational metrics, the achievement of strategic goals that drive long-term shareholder value and individual performance. For 2014, the Compensation Committee introduced a comprehensive Health, Safety and Environmental (HSE) metric to the plan to drive additional focus on this critical aspect of our business. The HSE metric acts as a multiplier on AIP-Adjusted EBITDA and production goals, which together comprise 65% of the total company score. The multiplier can increase or decrease payout results depending on HSE performance. Strategic goals, weighted at 35%, provide the Compensation Committee with discretion to assess the overall performance of the Company, as well as progress on identified key strategic objectives.


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The following chart shows the designated goals for each metric. Payout on each of the quantitative metrics ranges from 0% to 200%, with results interpolated between the 50% of target and 200% of target goals. The HSE multiplier can range from 90-110% based on the Compensation Committee's assessment of HSE performance. Achievement of strategic objectives is determined at the discretion of our Compensation Committee and can range from 0% to 200%. For a discussion of 2014 results, adjustments made to determine AIP-Adjusted EBITDA, and payouts under the AIP, see “‑ Compensation Process - Step 3: Determining Compensation - 2014 Company Performance” for."

2014 Metric
 
Weight
 
50% of
Target
 
100% of
Target
 
150% of
Target
 
200% of
Target
AIP-Adjusted EBITDA (in millions)
 
30%
 
$1,499
 
$1,530
 
$1,600
 
$1,767
Williston Basin Oil Production MMBbls
 
15%
 
9.56
 
10.89
 
11.63
 
13.24
Permian Basin Oil Production MMBbls

15%

1.45

1.65

1.76

2.00
QEP Energy Total Production Bcfe
 
5%
 
286.00
 
299.00
 
305.00
 
318.00
Total Financial and Production Goals
 
65%
 
 
 
 
 
 
 
 
X HSE Multiplier1
 
(90 - 110%)
 
 
 
 
 
 
 
 
Achievement of Strategic Objectives
 
35%
 
Qualitative Assessment:
• Complete announced strategic initiatives (midstream separation, divestiture of non-core E&P assets, debt reduction, etc.)
• Optimize new oil properties and continue to grow crude oil reserves and production at reasonable and profitable finding and development costs
• Build probable reserves/oil inventory through new ventures
• Improve teamwork, collaboration and communications to drive business results
• Replace corporate planning systems to enable timely, accurate and robust financial reporting
Total
 
100%
 
 
 
 
 
 
 
 

1The HSE Multiplier can increase or decrease the EBITDA and Production results based on performance on the following metrics:
HSE Multiplier
 
Description
Near Miss Reporting Rate
 
Near Miss Reporting Rate indicates the number of unplanned events where there is no actual loss (injury, spill or property damage), but where one could have occurred. The Company encourages reporting of near misses to raise awareness and increase prevention of actual incidents.
Total Recordable Injury Rate
 
Recordable injuries are those that require treatment beyond first aid. This is an industry standard metric for safety performance.
Environmental Release Rate
 
Environmental Release Rate indicates the number of spills or releases per 1 MM bbls of product produced and is an industry standard metric for environmental performance.
HSE Systems & Processes
 
HSE Systems & Processes encompasses the continual process improvement of our HSE management system, workforce training and hazard prevention programs.



Long-Term Incentive Program

Our LTI program is designed to align executive compensation with long-term stock price and TSR performance, both on an absolute basis and relative to industry peers. In 2014 our Compensation Committee approved a change to the weighting of the LTI vehicles for our NEOs to align with current market practices and increase the portion tied to TSR performance. Our Compensation Committee determines the total LTI value for the NEOs and that value for 2014 was allocated as follows: 40% PSUs, 20% stock options and 40% restricted stock.

PSUs. PSUs are phantom shares of stock that track the value of QEP shares but are settled in cash. PSUs align our executive compensation with QEP’s TSR performance relative to our peers in the industry. The value realized for PSUs is dependent on both stock price and our relative TSR performance over a three-year period. The chart below summarizes the features of the PSU grants to our NEOs.

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Plan
Cash Incentive Plan (CIP)
Participants
Employees selected by the Compensation Committee, including our NEOs.
Performance Measure-
Relative TSR
The payout is based on the Company’s TSR over the performance period compared to the TSR of a group of peer companies over the same period. TSR combines share price appreciation and dividends paid to determine the total return to the shareholder. TSR is calculated using the quarter average share prices at the beginning and end of the performance period, and dividends paid during that period.
Vesting
PSUs vest at the end of a three year performance period and are payable in cash upon Board certification in the first quarter of the following year.
Number of PSUs
The number of PSUs is determined by dividing the target dollar amount of LTI to be issued as PSUs by the closing price per share of QEP common stock on the grant date.
Peer Group
For awards with a 2014-2016 performance period, granted in February 2014, the peer group used was consistent with that used for compensation benchmarking except that the Compensation Committee added Kodiak Oil & Gas Corp., Laredo Petroleum, Inc., Oasis Petroleum, Inc. and Sandridge Energy, Inc. and removed Forest Oil Corp., Noble Energy, Inc., Pioneer Natural Resources, Inc. and Quicksilver Resources, Inc. See the "Establish Peer Group" section of this proxy statement for more information.
Payout Scale
The payout scale is based on QEP’s percentile rank in the peer group, with interpolation between each point:
   90th percentile or above: 200% payout
• 70th percentile: 150% payout
• 50th percentile: 100% payout
• 30th percentile: 50% payout
• Below 30th percentile: 0% payout
Payout Calculation
The actual cash payout under the program at the end of the performance period is calculated using the following formula:
 
# PSUs X Payout % X Average Q4 stock price of the final year of the performance period

Results and payouts of the 2012-2014 performance cycle are discussed in the section "Step 3: Evaluate Performance."
Termination Rules
In the event of a termination following a change in control, all unvested PSUs vest immediately based on performance through the change in control. The shares do not automatically vest upon any other termination circumstance. In the event of retirement, death, disability, or a qualifying termination under the Basic Severance Plan, the number of PSUs is prorated based on termination date and paid based on actual performance at the end of the applicable performance period.

Stock Options. Stock options align our executive compensation directly with the Company’s market value (or stock price) as the stock price must increase for any value to be realized. The chart below summarizes the features of the stock options granted to our NEOs. 

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Plan
LTSIP
Participants
Officers of the Company, including our NEOs.
Strike Price
The strike price is the price at which the holder of the stock option may purchase a share of common stock and is equal to the closing price per share of QEP common stock on the date of grant.
Vesting
The vesting schedule of the grants extends over a three-year period, with one-third of the shares vesting each year, a feature that encourages retention.
Term
Stock options expire seven years from the date of grant if not earlier exercised or forfeited.
Number of Options
The number of options is determined by dividing the target dollar amount of LTI to be issued as options by the value of a stock option, determined using the Black-Scholes-Merton method.
Termination Rules
In the event of a change in control, death or disability or a qualifying termination under the Basic Severance Plan, all unvested options vest immediately. Unvested options are forfeited upon any other termination circumstance.
Other
The LTSIP does not permit backdating, discounting or repricing of stock options without shareholder approval.

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Restricted Stock. Restricted stock aligns our executive compensation directly with the Company’s market value (or stock price), encourages retention and increases employee ownership in the Company. The chart below summarizes the features of the restricted stock granted to our NEOs. 
Plan
LTSIP
Participants
Employees selected by the Compensation Committee, including our NEOs.
Vesting
The vesting schedule of the grants extends over a three-year period, with one-third of the shares vesting each year, a feature that encourages retention.
Number of Shares
The number of shares is determined by dividing the target dollar amount of LTI to be issued as restricted stock by the closing price per share of QEP common stock on the grant date.
Dividends
Dividends are paid on unvested (restricted) shares.
Termination Rules
In the event of a change in control, death or disability or a qualifying termination under our Basic Severance plan, all unvested shares vest immediately. Unvested shares are forfeited upon any other termination circumstance.

QEPM Phantom Units. To reward certain executives for their work related to QEPM and to align the interests of these executives with the interests of QEPM unit holders, the Compensation Committee recommended, and the Board of Directors of QEPM's General Partner approved, awards of QEPM phantom units. The terms and conditions of those awards were similar to QEP restricted stock. Upon the Midstream Sale (including the sale of our interest in QEPM) in December 2014, unvested awards granted in August 2013 for executives no longer providing services to QEPM as a result of the sale, including Messrs. Stanley and Doleshek, were forfeited. In February 2015, our Compensation Committee provided replacement grants of QEP restricted stock with the same vesting terms as the forfeited QEPM phantom units to retain the compensation value of the forfeited awards.

The chart below summarizes the features of the QEPM phantom unit grants. As of December 2, 2014, the QEPM LTIP is not applicable to our active NEOs due to the Midstream Sale.
Plan
QEPM Long Term Incentive Plan (LTIP)
Participants
In 2014, after the announcement of our intent to separate the midstream business, awards were limited to employees who directly supported our midstream business, as selected by the Compensation Committee and approved by the Board of Directors of QEPM's General Partner. Perry Richards was the only NEO that received awards in 2014.
Vesting
The vesting schedule of the grants extends over a three-year period, with one-third of the units vesting each year, a feature that encourages retention.
Number of Shares
The number of units is determined by dividing the target dollar amount of LTI to be issued as phantom units by the closing price per share of QEPM common units on the grant date.
Distributions
QEPM distributions are paid on unvested phantom units.
Termination Rules
In the event of a change in control of QEPM or QEP, death or disability, all unvested units vest immediately. Generally, unvested units are forfeited upon any other termination circumstance.

Compensation Process
Our Compensation Committee is guided by the compensation philosophy described above and utilizes the expertise and objectivity of the Consultant and competitive benchmarking. The key steps in determining compensation for our NEOs are as follows:
 

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Step 1: Establish Peer Group

Our Compensation Committee maintains a compensation peer group of companies, which consists of similarly sized, publicly traded oil and natural gas E&P companies that have similar operating and financial characteristics to us, as they represent QEP’s competition for executive talent. With the assistance of our CEO and the Consultant, our Compensation Committee reviews the composition of the peer group annually to ensure that companies remain relevant for comparative purposes.

In determining our peer group, consideration is given to a variety of operating and financial criteria. QEP's asset value, enterprise value and market capitalization are near the middle of those numbers for QEP's peer group.

The Compensation Committee referenced compensation data gathered from industry peers in 2013 in connection with its executive compensation decisions made in early 2014, including grants of equity-based compensation to and base salary increases for our NEOs. The compensation peer group referenced in that 2014 analysis included the following:
 
Company Name
Assets1
($000)
 
Enterprise
Value
1,2
($000)
 
Market
Cap
1,3
($000)
Cabot Oil & Gas Corporation
$4,981
 
$17,489
 
$16,355
Cimarex Energy Company
$7,253
 
$10,006
 
$9,111
Concho Resources Inc.
$9,591
 
$15,005
 
$11,347
Denbury Resources Inc.
$11,789
 
$9,273
 
$6,025
Forest Oil Corporation
$1,118
 
$2,045
 
$432
Newfield Exploration Company
$9,321
 
$6,749
 
$3,353
Noble Energy Inc.
$19,642
 
$28,135
 
$24,470
Pioneer Natural Resources Company
$12,293
 
$29,160
 
$27,053
Quicksilver Resources Inc.
$1,370
 
$2,284
 
$544
Range Resources Corporation
$7,299
 
$16,845
 
$13,778
SM Energy Company
$4,705
 
$7,195
 
$5,567
Southwestern Energy Company
$8,048
 
$15,728
 
$13,834
Ultra Petroleum Corporation
$2,785
 
$5,167
 
$3,312
Whiting Petroleum Corporation
$8,833
 
$9,220
 
$7,341
WPX Energy Inc.
$8,429
 
$5,760
 
$4,092
25th Percentile
$4,843
 
$6,255
 
$3,723
50th Percentile
$8,048
 
$9,273
 
$7,341
75th Percentile
$9,456
 
$16,286
 
$13,806
QEP Resources Inc.
$9,377
 
$8,256
 
$5,495
QEP Percentile Rank
73%
 
40%
 
33%

1Amounts are as of December 31, 2013.
2Enterprise value is market value plus total debt and current preferred stock, minus cash and equivalents. Source: Standard and Poor's Research Insight
3Market capitalization is the number of the applicable company's outstanding shares multiplied by monthly closing price per share. Source: Standard and Poor's Research Insight

In February 2014, our Compensation Committee modified the peer group by adding oil-based companies and companies with similar operating areas such as the Williston Basin in North Dakota and the Permian Basin in West Texas (Oasis Petroleum, Inc., Kodiak Oil & Gas Corp., Laredo Petroleum, Inc., and Sandridge Energy, Inc.) and removing companies that were no longer similar to us in size and operations (Forest Oil Corp., Noble Energy, Inc., Pioneer Natural Resources, Inc. and Quicksilver Resources, Inc.).





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Step 2: Determine Total Compensation Targets


At the request of our Compensation Committee, in October 2013, the Consultant conducted a benchmarking analysis to use as a reference point for assessing the competitiveness of QEP’s executive compensation programs. The peer group benchmarking analysis included the 25th, 50th, and 75th percentiles for each component of compensation (base salary, AIP target, and LTIs) and total compensation for the roles of each of our executive officers, including the NEOs. Our Compensation Committee does not target a specific percentile from this analysis, but uses all the data points as guidance to inform decisions. This approach provides flexibility to the Compensation Committee to address several different factors such as proficiency in role, scope of role, succession potential and internal equity.

In addition to the competitive analysis and other support provided by the Consultant, the Vice President, Human Resources and her team also provide information to our Compensation Committee to aid the decision-making process, including executives’ current compensation information, succession potential, organizational considerations, alignment with internal employee programs and Company performance. To support specific compensation decisions, the Compensation Committee also reviews information provided by tally sheets, including but not limited to, stock ownership levels and calculations of potential payments upon various termination events.

From this analysis, and with the input and recommendations from Mr. Stanley for NEOs other than himself, in February 2014 the Compensation Committee established target total compensation levels for each NEO, including base salary, AIP target and LTIP award. With the support of the Consultant, the Compensation Committee recommends total compensation for Mr. Stanley, which is approved by all of the independent directors except Mr. Baker. The base salary changes were effective March 1, 2014. The LTIP grants were made on February 13, 2014, and consisted of 40% PSUs, 20% stock options and 40% restricted stock.

2014 Total Compensation Targets by NEO
Below is a summary of our current NEOs’ roles, 2014 accomplishments and target total compensation levels.
Charles B. Stanley - Chairman, President & CEO. Mr. Stanley provides executive leadership to QEP. For most of 2014, this also included our midstream business. Mr. Stanley’s primary responsibility is to create long-term shareholder value by providing strategic direction, organizational leadership and oversight of financial and operational performance. Critical components of his role also include effective management of communications with the investment community and the Board of Directors.
In 2014, Mr. Stanley led the Company's execution of our long-term strategy of growing crude oil production and reserves to develop a more balanced portfolio of both crude oil and natural gas. In 2014, QEP achieved a number of all-time company records, including record oil production, and most importantly, record Adjusted EBITDA. As of the fourth quarter 2014, crude oil production revenue comprised 58% of total field-level production revenue and 32% of total company production. Crude oil production was 8% of total company production in 2010.
During 2014, Mr. Stanley provided strategic direction to several key initiatives that fundamentally transformed the company. These include the acquisition of properties in the Permian Basin of West Texas, the sale of non-core E&P properties in the Midcontinent, the implementation of our new enterprise resource planning system (ERP System), and the closing of the $2.5 billion Midstream Sale, including the Company’s ownership interest in QEPM. As a result of these achievements, QEP is well-positioned for future growth as a highly competitive E&P company focused on some of the most prolific resource plays in the continental United States.

The increase in Mr. Stanley's target compensation for 2014 reflected his continued growth as a CEO and his performance during 2013, and moved him closer to the median of our peer group CEO compensation. The following table outlines Mr. Stanley’s total compensation target change from 2013 to 2014

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2013


2014


% Change

Annual Base Salary
$825,000

$850,000

3
%
Annual Incentive Target
(% of base salary)
100
%

100
%

0
%
Annual Incentive Target
$825,000

$850,000

3
%
Long-Term Incentive Target
$4,600,000

$4,800,000

4
%
Total Compensation Target
$6,250,000

$6,500,000

4
%

Richard J. Doleshek - Executive Vice President and CFO. Mr. Doleshek provides executive leadership to several key corporate functions that support QEP Resources and, for most of 2014, QEPM. These functions include finance, treasury, accounting, risk management, tax, information technology, communications, internal audit and investor relations.
In 2014, Mr. Doleshek led a cross-functional team in a year-long effort (which included research, marketing, valuation and negotiation) which culminated in the Midstream Sale on December 2, 2014, including our ownership interest in QEPM. The Midstream Sale, an all cash transaction valued at $2.5 billion, generated a pre-tax gain of $1.8 billion for QEP. Mr. Doleshek's actions to improve the Company's financial position (with an industry-leading balance sheet) have positioned QEP well to compete throughout commodity price market cycles.
Mr. Doleshek also provided executive leadership to the implementation of our new ERP System, which successfully went live on May 1, 2014, and a company-wide rebranding effort, which included a new company website to improve communications with key stakeholders.

The increase in Mr. Doleshek's target compensation for 2014 reflected his performance during 2013 and his continued strong contributions as both our CFO and a key member of our executive team. The following table outlines Mr. Doleshek’s total compensation target change from 2013 to 2014:

2013


2014


% Change

Annual Base Salary
$541,000

$563,000

4
%
Annual Incentive Target
(% of base salary)
90
%

90
%

0
%
Annual Incentive Target
$486,900

$506,700

4
%
Long-Term Incentive Target
$2,250,000

$2,360,000

5
%
Total Compensation Target
$3,277,900

$3,429,700

5
%
Jim Torgerson - Executive Vice President, QEP Energy. Mr. Torgerson provides both strategic direction and operational leadership to maximize the long-term shareholder value of our E&P business, QEP Energy Company.
In 2014, his first full year in the role, Mr. Torgerson led company efforts to grow crude oil production through the successful integration of our new crude oil properties in the Permian Basin and ongoing development of our crude oil properties in the Williston Basin, while enhancing returns from our liquids-rich assets, the Pinedale Anticline and Uinta Basin, and our dry gas asset, the Haynesville Shale. Throughout the year, Mr. Torgerson restructured key areas of the business for greater effectiveness and managed the E&P capital program to optimize financial returns across the Company’s asset portfolio by evaluating commodity prices, resource availability and market conditions.
In addition, Mr. Torgerson improved company-wide operational results, including record drill times in the Williston Basin and Pinedale Anticline, while maintaining an industry-leading low-cost structure. These efforts culminated in record 2014 crude oil production and Adjusted EBITDA for the Company.

Mr. Torgerson's increase in total compensation for 2014 reflects his performance during 2013 and the critical nature of his role overseeing our E&P business. The following table outlines Mr. Torgerson’s total compensation target change from 2013 to 2014

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2013


2014


% Change

Annual Base Salary
$475,000

$499,000

5
%
Annual Incentive Target
(% of base salary)
85
%

90
%

6
%
Annual Incentive Target
$403,750

$449,100

11
%
Long-Term Incentive Target
$1,500,000

$1,600,000

7
%
Total Compensation Target
$2,378,750

$2,548,100

7
%

Christopher K. Woosley - Vice President and General Counsel. Mr. Woosley manages all legal matters for the Company, including litigation, acquisition and divestiture transactions, direction of outside counsel activities and the provision of general legal guidance for QEP and its subsidiaries.

Mr. Woosley played a vital role in the Company’s important transactions during 2014 and was instrumental in the negotiation and execution of the sale of our midstream business, the divestiture of non-core E&P assets and the sale of assets to QEPM. Mr. Woosley regularly advises executive management and the Board on the legal aspects of various strategic initiatives and played a key role in critical company decisions. In addition, Mr. Woosley has expanded his scope beyond purely legal matters to a broader executive leadership role, providing strategic input on Company-wide matters in 2014.

Mr. Woosley's increase in target compensation for 2014 reflects his performance during 2013 and the expanded scope of his responsibilities. The following table outlines the components of Mr. Woosley's total compensation target change from 2013 to 2014:  
  
2013


2014


% Change

Annual Base Salary
$330,000

$347,000

5
%
Annual Incentive Target
(% of base salary)
70
%

70
%

0
%
Annual Incentive Target
$231,000

$242,900

5
%
Long-Term Incentive Target
$650,000

$690,000

6
%
Total Compensation Target
$1,211,000

$1,279,900

6
%

Austin Murr - Senior Vice President, Business Development. Mr. Murr leads the Company's business development efforts to acquire new, and expand existing, resource plays to provide impactful future growth and create long-term shareholder value.
Throughout 2014, Mr. Murr continued to build QEP’s New Ventures team of highly specialized professionals, who analyzed active and emerging oil and gas plays across the United States. Under Mr. Murr's leadership, QEP has divested non-core E&P assets in the Midcontinent and Rockies regions, and completed producing property acquisitions, including our Permian Basin acquisition in February 2014 for approximately $942 million. These transactions have allowed QEP to focus its E&P asset portfolio on high-margin, high-return production and reserve growth.
Mr. Murr and his team evaluated these transactions by quantifying the geologic and engineering merit of each transaction through risk-weighted analyses of the financial and commercial benefits, culminating in the successful negotiation and execution of the transaction documents to capture the resulting value for the company.
Target compensation for Mr. Murr reflects his performance during 2013 and his continued success in executing important strategic transactions. The following table outlines the components of Mr. Murr's total compensation in 2014, his first year as a NEO:  

2014

Annual Base Salary
$298,000
Annual Incentive Target
(% of base salary)
55
%
Annual Incentive Target
$163,900
Long-Term Incentive Target
$550,000
Total Compensation Target
$1,011,900

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Perry Richards, Former Senior Vice President, Field Services
Mr. Richards' employment with QEP ended on December 2, 2014, as a result of the Midstream Sale. Target compensation for 2014 for Mr. Richards was determined pursuant to the same methods used for our other NEOs. In addition, he received a retention bonus and other payments and benefits provided generally to employees terminated as part of the Midstream Sale, as described in "Highlights of 2014 Compensation Actions."

Step 3: Evaluate Performance

A critical step in our compensation process is aligning pay to performance. Our Compensation Committee considers both long-term and short-term factors when assessing the overall performance of the Company. The Compensation Committee discusses strategic matters and long-term priorities, as well as progress against the AIP metrics and under the PSU program (based on relative TSR) at each quarterly meeting.

CEO Evaluation
Our Board of Directors conducts an evaluation of the CEO’s performance at the end of each year. This process begins with Mr. Stanley providing a written self-evaluation to the independent directors. The February Board meeting agenda includes a discussion of the feedback between Mr. Stanley and the independent directors. From this assessment, and with data supplied by the Consultant, the Compensation Committee recommends total compensation for Mr. Stanley, which is approved by all of the independent directors except Mr. Baker.

When assessing the individual performance of our other NEOs, our Compensation Committee considers input from the CEO as well as progress on important Company initiatives and overall performance of the areas within each NEO's accountability.

2014 Company Performance
Our executive compensation programs are designed to reward performance on near-term metrics and successes in our Annual Incentive Plan and to reflect stock price performance in the long-term incentive plans. Our 2014 results demonstrate solid execution of operational, financial and strategic goals set at the beginning of the year.

In assessing our performance against AIP metrics, the Compensation Committee recognized the fundamental transformation of our company, starting with the acquisition of properties in the Permian Basin of West Texas, the sale of Midcontinent properties in the summer, the successful implementation of our new ERP System, and culminating in the closing of the $2.5 billion Midstream Sale (see "Performance Highlights: Strategic Objectives" below for more detail). Additionally, the Compensation Committee noted the significant progress in near miss reporting and the decrease in recordable incidents under our new HSE metrics.

The following chart shows our 2014 AIP results.

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2014 Incentive Plan Metric
Weighting
Company Performance
Score
Payout Calculation
AIP-Adjusted EBITDA1
(in millions)
30%
Achieved AIP-Adjusted EBITDA of $1,665.8 million1
170%
 
Williston Basin Oil Production MMBbls
15%
Produced 13.131 MMbbls
197%
 
Permian Basin Oil Production MMBbls
15%
Produced 1.582 MMbbls
83%
 
QEP Energy Total Production Bcfe
5%
Produced 322.67 Bcfe
200%
 
 
65%
Weighted Score
 
103%
HSE Multiplier
90-110%
Slightly below target achievement; see Performance Highlights below
95%
x 95%
 
 
 
 
98%
Strategic objectives
35%
Above target achievement; see Performance Highlights below
200%
+70%
Overall Company Score
100%
 
 
168%

1.
For 2014, the Adjusted EBITDA reported in our 2014 Form 10-K of $1,582.7 million was adjusted as follows to determine AIP-Adjusted EBITDA of $1,665.8 million: (a) increased by $38.2 million to eliminate the net effect of changes in commodity prices between the prices used by the Compensation Committee to set plan targets and the prices as of December 31, 2014; (b) increased by $24.1 million to recognize actual Adjusted EBITDA for the month of December 2014 for QEP Field Services Company (as the target assumed 12 months of midstream Adjusted EBITDA and the Midstream Sale occurred on December 2, 2014); and (c) increased $16.5 million to exclude bonuses awarded in connection with the Midstream Sale ($11.8 million) and the implementation of our new ERP System ($4.7 million) and other non-comparable items as determined by our Compensation Committee ($4.3 million). See Appendix A for reconciliation of Adjusted EBITDA to net income.

Performance Highlights: HSE Multiplier
Our new HSE component of the Annual Incentive Plan consisted of four key areas the Compensation Committee used to assess our performance on this critical aspect of our business: Near Miss Reporting Rate (NMRR), Total Recordable Injury Rate (TRIR), Environmental Release Rate (ERR), and progress on HSE Systems and Processes.

We targeted a 150% improvement in NMRR in 2014 to encourage employees and contractors to observe and report unplanned events that could have resulted in a loss or injury. These invaluable learning opportunities provide a leading indicator of our safety and environment practices. We exceeded expectations with a 300% increase in NMRR over 2013. While we always strive for zero injuries, our goal in 2014 was a 15% reduction in TRIR over 2013. We achieved a 42% reduction, with 0.65 recordable injuries per 200,000 employee work hours. These are significant results both from a company and industry perspective.

Our performance on ERR was below expectations with 1.35 spills or releases per 1MMbbls of product produced, representing a 34% increase over 2013. Additionally, the implementation of our HSE management systems and processes has not progressed as quickly as expected.

The Compensation Committee scored the HSE multiplier at 95% (below target) due to the balance of these achievements and concerns.

Performance Highlights: Strategic Objectives

The Compensation Committee recognized the successful completion of a number of key strategic initiatives in 2014, including the divestiture of non-core assets in the Midcontinent, acquisition of oil and gas properties in the Permian Basin, sale of a 40% membership interest in Green River Processing to QEPM and the significant effort associated with the sale of our midstream business to Tesoro in December. After announcing our intention to separate the midstream business in December 2013, we managed a dual path process, contemplating both a spin-off and outright sale to optimize shareholder return. We filed an initial draft of SEC Form 10 which involved the

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preparation of in-depth, carve-out financial statements with three years' history. At the same time, we prepared a Confidential Information Memorandum and developed a comprehensive management presentation that was presented to management teams of interested parties. After the Q&A due diligence process, we negotiated the sale and transition agreements with Tesoro for an all cash transaction on December 2, 2014, with proceeds of $2.5 billion, which exceeded market expectations despite turbulent market conditions.

The primary focus for our E&P business in 2014 was the optimization of our new oil properties. The Compensation Committee noted the excellent production results and record drilling times we achieved in the Williston Basin and the 51% increase in daily production in our new Permian Basin asset by year-end. We have also made significant progress on our multiyear strategy of growing crude oil production and reserves to build a more balanced portfolio of both crude oil and natural gas. In 2014, crude oil production revenue comprised 58% of total field-level production revenue and 32% of total company production.

The efforts of our Business Development team in 2014 were noted by the Compensation Committee. The acquisition of the Permian properties early in the year was instrumental in progressing our strategy to build a more balanced portfolio of both crude oil and natural gas. Throughout the year, the team monitored drilling and completion activity across the active and emerging oil and gas plays in the continental U.S., continually evaluating well results and play economics and identifying those areas that have superior results/growth opportunities. The team built a proprietary tool and implemented new software to efficiently screen potential asset or company acquisitions. A significant portion of the team's activity was dedicated to support of the Permian Basin acquisition and its initial development to ensure the success of this key acquisition in a new play for the Company. Additionally, the team was heavily involved in the successful divestiture of our Midcontinent properties.

The Compensation Committee also noted the steady improvement in teamwork, collaboration and communications across the Company. We launched our new company brand identity in November, including the development of a new Vision/Mission/Values statement, logo and websites (both internal and external). Our executive team conducted Town Halls in all of our operating locations and quarterly all-employee meetings/webcasts to improve communications and give employees more opportunities to hear from and ask questions of our senior leaders. We launched our QEP Cares corporate giving program, including employee programs and the investment of $2.4 million in various organizations in the communities where we operate. We developed and implemented a very successful in-house training program that helps educate employees on various aspects of the business so they understand how the different functions in our company work together, thus facilitating greater collaboration. Our own internal experts presented topics such as Geoscience, Drilling & Completions, Land/Title and Lease, and Production Operations. We also developed and implemented new training programs for leaders and employees to improve team effectiveness and leadership skills.
Finally, on May 1, 2014 our new ERP System (the culmination of a multi-year project) became fully functional. The project resulted in more accessible financial data, improved financial controls, streamlined processes, reduction of redundant data entry and increased information sharing. The many work streams in our business are now better-integrated through complimentary systems and uniform business processes based on recognized best practices.


2014 AIP Payouts
In addition to determining the payout based on overall Company performance, our Compensation Committee, in its sole discretion, may adjust (increase or decrease) the cash award otherwise payable to any NEO based on an individual’s performance during the year.

In February 2015, the Compensation Committee determined 2014 AIP awards based on Company and individual performance. For this performance year, the Compensation Committee did not exercise upward discretion on individual payouts outside of the discretion applied to the strategic objectives component of the Company score. The following table shows the payout on the 2014 AIP awards.

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NEO1
 
Base Salary
 
Target % of
Base Salary
 
Company Score
 
Individual
Performance
Score
 
Annual
Incentive Payout
Mr. Stanley
 
$850,000
 
100%
 
168%
 
100%
 
$1,428,000
Mr. Doleshek
 
$563,000
 
90%
 
168%
 
100%
 
$851,256
Mr. Torgerson
 
$499,000
 
90%
 
168%
 
100%
 
$754,488
Mr. Woosley
 
$347,000
 
70%
 
168%
 
100%
 
$408,072
Mr. Murr
 
$298,000
 
55%
 
168%
 
100%
 
$275,352

1See "Compensation Tables - Summary Compensation Table" for information regarding the annual incentive award for Mr. Richards, Former Senior Vice President, Field Services Company.

2012-2014 PSU Performance Period
The awards granted in February 2012 for the 2012-2014 performance period were eligible to vest upon the end of the performance period on December 31, 2014, subject to certification by the Compensation Committee. The Compensation Committee evaluated TSR performance during the performance period against our peers. QEP's TSR ranked at the 46th percentile of our peers, which resulted in the vesting of 90% of the targeted number of PSUs for each NEO who was employed as of the end of the performance period.

The payout on the PSUs for the 2012-2014 performance period was as follows:
NEO1
 
Target Award
 
Target PSUs
 
Payout Percentage
 
Q4 2014 Average Stock Price
 
Payout2
Mr. Stanley
 
$1,383,362
 
44,769

 
90%
 
$23.32
 
$939,633
Mr. Doleshek
 
$666,668
 
21,575

 
90%
 
$23.32
 
$452,828
Mr. Torgerson
 
$400,001
 
12,945

 
90%
 
$23.32
 
$271,701
Mr. Woosley
 
$133,334
 
4,315

 
90%
 
$23.32
 
$90,575
Mr. Murr
 
$175,018
 
5,664

 
90%
 
$23.32
 
$118,885

1See "Compensation Tables - Summary Compensation Table" and "Compensation Tables - Option Exercises and Stock Vested in 2014" for information regarding the payout on the PSUs for Mr. Richards, Former Senior Vice President, Field Services Company.

2The payout calculation is Target # PSUs x Payout Percentage (rounded up to whole shares) x Average Q4 stock price of final year of performance period.

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Key Executive Compensation Design Policies and Considerations
Following are important policies and factors considered by our Compensation Committee when structuring our executive compensation.

Severance Protections

The Compensation Committee has established the QEP Executive Severance Compensation Plan-CIC, which provides certain benefits to our executives upon a qualifying termination after a change-in-control of the Company. These benefits are based on market practices and do not include any excise tax gross-ups. These benefits support our business strategy by encouraging our officers to consider strategic alternatives to increase shareholder value without regard to the impact on their future employment.

In early 2014, the Compensation Committee approved the QEP Basic Executive Severance Compensation Plan (Basic Severance Plan), which provides market competitive severance benefits in situations not involving a change in control for our NEOs except Mr. Stanley, as detailed in the Potential Payments Upon Termination or Change in Control section of this proxy statement. In addition to helping attract and retain qualified executives by offering competitive executive programs, the Basic Severance Plan establishes key parameters for severance benefits and requires executives to agree to non-solicitation and confidentiality provisions as a condition to receiving severance. The plan has a two year term, expiring at the end of 2015.


Executive Share Ownership Requirements

We have established stock ownership guidelines for executive officers with the goal of promoting ownership of our common stock and aligning the interests of our executive officers with those of our shareholders. The ownership guidelines are currently established at the following minimum levels:1 
Named Executive Officer
Guideline1
  
Ownership Status
as of 12/31/14
Mr. Stanley
6x base salary
  
In compliance
Mr. Doleshek
3x base salary
  
In compliance
Mr. Torgerson
2x base salary
 
In compliance
Mr. Woosley
2x base salary
 
In compliance
Mr. Murr
2x base salary
 
In compliance

1Our executives are required to achieve the applicable level of stock ownership within five years of the date the person first becomes an officer. Shares that count toward satisfaction of the guidelines include shares owned outright by the executive, restricted shares, shares held in the 401(k) Plan (described below) and phantom stock attributable to deferred compensation under the QEP Deferred Compensation Wrap Plan, but exclude stock options and PSUs.      


Tax and Accounting Considerations

Our Compensation Committee considers tax and accounting rules and regulations when structuring the executive compensation paid to our NEOs, including the following:
 
Under Section 280G and Section 4999 of the Code, compensation that is granted, accelerated or enhanced upon the occurrence of a change in control may give rise, in whole or in part, to “excess parachute payments” and, to such extent, will be non-deductible by the Company and will be subject to a 20% excise tax payable by the executive. Our compensation arrangements do not provide for gross-ups for this excise tax.

Section 162(m) of the Code generally precludes us from deducting for tax purposes compensation paid in excess of $1,000,000 in any taxable year to any NEO listed in the Summary Compensation Table who is employed by us at the end of such taxable year (other than our CFO), unless the compensation is “performance-based compensation” and meets certain other requirements. Our policy is primarily to design and administer compensation plans that support the achievement of short- and long-term strategic objectives and enhance shareholder value. Where it is consistent with our compensation philosophy, the

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Compensation Committee may also attempt to structure compensation programs to comply with the performance-based compensation exception to Code Section 162(m), or that are otherwise tax-advantageous to us. Currently, only awards under our CIP can be structured in a manner intended to constitute performance-based compensation, although there is no requirement or guarantee that such awards (such as AIP awards or PSUs) will, in fact, qualify as performance-based compensation. Equity incentive awards under our LTSIP will not constitute performance-based compensation, as the LTSIP has not been approved by our shareholders subsequent to the Spin-off in 2010. We note, however, that a significant portion of equity awards to our NEOs under the LTSIP are time-vested restricted stock awards, which, although consistent with our compensation philosophy, would not qualify as performance-based compensation in any event.

Section 409A of the Code requires that nonqualified deferred compensation be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, the timing of payments and certain other matters. Failure to satisfy these requirements can expose our employees and other service providers to accelerated income tax liabilities and penalty taxes and interest on their vested compensation under such plans. Our Compensation Committee endeavors to structure executive compensation in a manner that is either compliant with, or exempt from the application of, Section 409A of the Code, although there is no guarantee that any particular element of compensation will, in fact, be so compliant or exempt.

Fair Value of Stock-Based Payments – Awards of stock options and restricted stock under the LTSIP and awards of performance share units under the CIP are accounted for under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (FASB ASC Topic 718), formerly referred to as SFAS No. 123(R). FASB ASC Topic 718 requires the recognition of expense for the fair value of stock-based compensation. Our Compensation Committee considers the accounting and financial statement impact in evaluating QEP’s executive compensation programs.


Compensation Risk Assessment

We annually evaluate the major risks to our business, including how risks taken by management could impact the value of executive compensation. Our Compensation Committee reviews a risk assessment (completed by the Consultant) of the Company’s executive and non-executive compensation programs. Based on this review, our Compensation Committee believes that while there are certain risks inherent in the nature of the Company’s business, the Company’s compensation program does not encourage our executives or our non-executive employees to take inappropriate or excessive risks. The risk-mitigating factors considered by our Compensation Committee included the following:
 
An appropriate balance of operating and financial performance measures;
An appropriate balance of fixed and at-risk compensation components;
A balanced mix of cash and equity, with significant weighting on long-term incentive awards;
Significant stock ownership requirements for executives and policies prohibiting hedging, pledging and engaging in derivative transactions;
Extended three-year vesting schedules on equity grants;
Caps and defined thresholds for payout on incentive awards; and
Compensation Committee authority over plan design and final determination of actual compensation awards.

Our Compensation Committee believes that these factors encourage all of our employees to focus on QEP’s sustained long-term performance.


Prohibition on Hedging, Pledging and Derivatives Trading

The Company has a policy that prohibits directors, officers and employees from engaging in derivative transactions involving QEP stock for any purpose, including short-term trading, options trading, pledging, trading on margin and hedging.


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Clawback of Compensation

The Compensation Committee has evaluated adding a clawback policy to our executive compensation program in advance of the SEC's adoption of rules implementing Section 954 of the Dodd-Frank Act. Although it is the intent of the Compensation Committee to implement a clawback provision for QEP executive compensation programs, the Compensation Committee decided to wait for SEC guidance to ensure that the provisions are comprehensive and meet or exceed all regulatory requirements.

Succession Planning

QEP conducts a comprehensive succession planning process that involves assessment across the organization of employee performance and potential as well as readiness of potential successors for key roles and developmental needs. This process also helps inform the Compensation Committee in making compensation decisions. The Compensation Committee annually reviews this process with specific focus on the CEO and his direct reports and views this as a critical process to ensure continuity of our business and to provide challenging and rewarding career opportunities for our employees.


Compensation Tables

Summary Compensation Table

The following table summarizes the total compensation paid to our NEOs for services rendered during the fiscal years ended 2014, 2013 and 2012:
 
Name and Principal
Position
Year
Salary
Bonus
Stock
Awards
Option
Awards
Non-Equity
Incentive
Plan
Compen-
sation
Change in
Pension Value
and
Nonqualified
Deferred
Compen-sation
Earnings
All
Other
Compen-
sation
Total
(a)
(b)
($)
($)
($)1
($)2
($)3
($)4
($)5
($)6
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Charles B. Stanley
Chairman, President,
and CEO
2014
844,792

 

 
3,840,032

 
884,147

 
1,428,000

831,384

108,688

7,937,043

2013
819,167

 

 
3,286,998

7
1,533,348

 
825,000


116,817

6,581,330

2012
783,333

 

 
2,766,724

 
1,309,172

 
955,900

1,872,501

120,650

7,808,280

Richard J. Doleshek
Executive Vice President and CFO
2014
558,417

 

 
1,888,022

 
434,712

 
851,256

408,342

71,219

4,211,968

2013
536,667

 

 
1,665,261

7
750,006

 
486,900

104,412

74,285

3,617,531

2012
510,833

 

 
1,333,335

 
630,924

 
560,835

746,772

77,455

3,860,154

Jim E. Torgerson
Executive Vice President, QEP Energy
2014
494,000

 

 
1,280,010

 
294,719

 
754,488


80,320

2,903,537

2013
435,000

 

 
995,297

 
483,376

 
403,750


73,965

2,391,388

2012
366,667

 

 
800,001

 
378,566

 
363,000


57,718

1,965,952

Christopher K. Woosley
Vice President and General Counsel
2014
343,458

 

 
552,022

 
127,105

 
408,072


55,383

1,486,040

2013
325,000

 

 
433,366

 
216,671

 
231,000


200,155

1,406,192

2012

 

 

 

 




Austin S. Murr
Senior Vice President, Business Development
2014
295,292

 

 
440,044

 
101,309

 
275,352


44,663

1,156,660

2013

 

 

 

 




2012

 

 

 

 




Perry H. Richards
Former Senior Vice President, Field Services
2014
295,587

8
200,000

9
832,219

10
139,240

11
71,379


424,735

1,963,160

2013
298,333

 

 
455,129

 
200,003

 
165,000


36,902

1,155,367

2012
286,667

 

 
400,031

 
189,283

 
175,450

1,020,443

39,744

2,111,618



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Table of Contents

1.
Amounts in column (e) include awards of PSUs granted under the CIP, restricted stock granted under the LTSIP, and, in the case of Mr. Richards, QEPM phantom units granted under the QEPM LTIP, in each case calculated based on the grant date fair values determined in accordance with FASB ASC Topic 718 (excluding the effect of estimated forfeitures), as follows for 2014
Name
Performance Share
Units ($)(a)(b)
Restricted Stock
($)(b)
QEPM Phantom Units
($)(c)
Mr. Stanley
1,920,016
1,920,016
Mr. Doleshek
944,011
944,011
Mr. Torgerson
640,005
640,005
Mr. Woosley
276,011
276,011
Mr. Murr
220,022
220,022
Mr. Richards
391,866 (d)
390,341 (e)
50,012 (f)

a.
The maximum grant date values of the PSUs (based upon QEP's common stock price on the date of issuance, and assuming that each individual ultimately earned 200% of the total number of PSUs granted) are as follows: Mr. Stanley - $3,840,032; Mr. Doleshek - $1,888,022; Mr. Torgerson - $1,280,010; Mr. Woosley - $552,022; Mr. Murr - $440,044; and Mr. Richards - $400,050.
b.
The grant date fair values for the 2014 PSU and restricted stock awards were determined pursuant to FASB ASC Topic 718 (excluding the effect of estimated forfeitures) by multiplying the number of units/shares awarded times the QEP stock price on the date of grant.
c.
The grant date fair values of the awards of QEPM phantom units were determined in accordance with FASB ASC Topic 718 (excluding the effect of estimated forfeitures) by multiplying the number of phantom units by the QEPM unit price on the date of grant.
d.
In connection with Mr. Richards’ termination of employment on December 2, 2014, the Compensation Committee amended the vesting of all unvested PSUs held by Mr. Richards as of that date, which resulted in the modification of 19,416 PSUs covering three different performance periods.  Amount shown in the Performance Share Units column includes (i) the grant date fair value of the 6,302 PSUs for the 2014-2016 performance period, granted on February 13, 2014, based on the probable payout on 100% of the PSUs ($200,025 as of the date of grant); (ii) the fair value of those same 6,302 PSUs and of the 13,114 unvested PSUs for the 2013-2015 and 2012-2014 performance periods, to reflect modifications on December 2, 2014 ($191,841 as of the date of modification), which fair value is based on the probable outcome of the performance conditions as of the date of modification (i.e., probable payout on 58% of the 6,302 PSUs for the 2014-2016 performance period, 0% of the 6,641 PSUs for the 2013-2015 performance period, and 52% of the 6,473 PSUs for the 2012-2014 performance period).
e.
In connection with Mr. Richards’ termination of employment on December 2, 2014, the Compensation Committee amended the vesting of all unvested restricted stock held by Mr. Richards as of that date, which resulted in the modification of the vesting of 11,310 shares of restricted stock.  Amount shown in the Restricted Stock column includes (i) the grant date fair value of the 4,726 shares of restricted stock granted on February 13, 2014 ($150,003 as of the date of grant); (ii) the fair value of those same 4,726 shares of restricted stock and of 6,584 shares of restricted stock previously granted, to reflect the modifications on December 2, 2014 ($240,338 as of the date of modification).  
f.
No modifications were made to the QEPM phantom units held by Mr. Richards.
2.
Amounts in column (f) reflect the aggregate grant date fair value of option awards calculated in accordance with FASB ASC Topic 718 (excluding the effect of estimated forfeitures) using the Black-Scholes-Merton Model. The following table includes the assumptions used to calculate the aggregate grant date fair value of option awards reported for 2014, 2013, and 2012:
Grant Date
Assumptions

Volatility
(%)
Expected Life (Years)
Risk-Free
Interest Rate
(%)
Dividend Yield
(%)
2/13/2014
37.2
4.5
1.3
0.25
2/13/2013
55.0
5.5
1.0
0.27
2/13/2012
55.9
5.0
0.8
0.26

3.
Amounts in column (g) reflect the annual cash incentive awards under our CIP for 2014 that were determined by the Compensation Committee and paid out on March 2, 2015.
4.
Amounts in column (h) represent the increase in the estimated actuarial present value of benefits under the QEP Resources, Inc. Retirement Plan and the QEP Resources, Inc. Supplemental Executive Retirement Plan. These estimates are based on discount rate, mortality and other assumptions described in Footnote 3 to the 2014 Pension Benefit Table, which are consistent with those used in QEP’s consolidated financial statements (except for pre-retirement decrements). The increase in the estimated actuarial present value for Messrs. Stanley and Doleshek reflect an increase in value due to an additional year of service, compensation increases, and changes in mortality rate and discount rate assumptions used for computing the value. Amount for Mr. Richards is shown as zero, because the present value of his benefits under the plans decreased from last year by $387,714, as further explained in Footnote 3 and 5 to the 2014 Pension Benefits Table. Messrs. Torgerson, Woosley and Murr are not eligible to participate in these closed plans. Amounts in column (h) do not include any Nonqualified Deferred Compensation earnings, because such earnings, as reflected in the Nonqualified Deferred Compensation table column (d), do not consist of any above-market or preferential earnings.
5.
All Other Compensation amounts include employer matches under the 401(k) Plan and the Deferred Compensation Wrap Plan.  Employer matches under the Deferred Compensation Wrap Plan are as set forth in column (c) of the 2014 Nonqualified Deferred Compensation table.  No amounts were included for perks and personal benefits, as the aggregate value of perks and personal benefits for each executive was less than $10,000. In addition, the amount for Mr. Richards includes an estimated $388,600 to be paid on September 10, 2015 (when Mr. Richards reaches age 55) to compensate him for a benefit reduction under the SERP as result of his termination and early commencement of benefits. See “2014 Pension Benefits Table.”

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Table of Contents

6.
As reflected in the Summary Compensation Table above, the salary received by each of our NEOs as a percentage of his respective total compensation during the year indicated was as follows: 

    
Name
Year
Percentage of Total Compensation
Mr. Stanley
2014
10.6%
2013
12.4%
2012
10.0%
Mr. Doleshek
2014
13.3%
2013
14.8%
2012
13.2%
Mr. Torgerson
2014
17.0%
2013
18.2%
2012
18.7%
Mr. Woosley
2014
23.1%
2013
23.1%
Mr. Murr
2014
25.5%
Mr. Richards
2014
15.1%
2013
25.8%
2012
13.6%

7.
As a result of the Midstream Sale, Messrs. Stanley and Doleshek forfeited 6,667 unvested QEPM phantom units and 5,000 unvested QEPM phantom units, respectively, which had been awarded in 2013.
8.
Amount excludes $39,469 of accrued and unused paid time off, which Tesoro has agreed to assume the obligation to pay in connection with the Midstream Sale.
9.
Amount represents a retention bonus for continued employment with QEP through the closing of the Midstream Sale.
10.
In connection with Mr. Richards’ termination of employment on December 2, 2014, the Compensation Committee amended the vesting of all unvested PSUs and restricted stock held by Mr. Richards as of that date, which resulted in the modification of 19,416 PSUs covering three different performance periods and the vesting of 11,310 shares of restricted stock.  Amount shown in the Stock Awards column includes (i) the grant date fair value of the 6,302 PSUs for the 2014-2016 performance period, granted on February 13, 2014, based on the probable payout on 100% of the PSUs ($200,025 as of the date of grant); (ii) the fair value of those same 6,302 PSUs and of the 13,114 unvested PSUs for the 2013-2015 and 2012-2014 performance periods, to reflect modifications on December 2, 2014 ($191,841 as of the date of modification), which fair value is based on the probable outcome of the performance conditions as of the date of modification (i.e., probable payout on 58% of the 6,302 PSUs for the 2014-2016 performance period, 0% of the 6,641 PSUs for the 2013-2015 performance period, and 52% of the 6,473 PSUs for the 2012-2014 performance period); (iii) the grant date fair value of the 4,726 shares of restricted stock granted on February 13, 2014 ($150,003 as of the date of grant); (iv) the fair value of those same 4,726 shares of restricted stock and of 6,584 shares of restricted stock previously granted, to reflect the modifications on December 2, 2014 ($240,338 as of the date of modification). No modifications were made to the 3,778 QEPM phantom units held by Mr. Richards.
11.
In connection with Mr. Richards’ termination of employment on December 2, 2014, the Compensation Committee accelerated the vesting of options to purchase 22,140 shares of common stock, which represented all unvested options held by Mr. Richards as of that date. The amendment of the options requires the presentation of the fair value of the modified options on December 2, 2014, as “new” grants in this table. Accordingly, amount shown in the Option Awards column includes the grant date fair value of the option granted February 13, 2014 to purchase 9,083 shares of common stock, as well as the fair value of that same award together with previously granted options to purchase 13,057 shares of common stock, as modified pursuant to Mr. Richards’ termination. The assumptions used to calculate the aggregate grant date fair value of option awards modified for Mr. Richards on December 2, 2014 were as follows:
Grant Date
Assumptions

Volatility
(%)
Expected Life (Years)
Risk-Free
Interest Rate
(%)
Dividend Yield
(%)
2/13/2014
35.4
3.1
1.0
0.38
2/13/2013
33.0
2.6
0.8
0.38
2/13/2012
31.9
2.1
0.6
0.38








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Table of Contents

Grants of Plan-Based Awards for 2014

This table shows the plan-based awards granted to the NEOs during 2014. For non-equity and equity incentive plans, it sets forth the ranges of possible awards. For stock and option awards, the table shows the number of shares or options granted and the grant date fair values of those awards.
Name
Grant Date
Estimated Future Payouts Under
Non-Equity 
Incentive Plan Awards
1
Estimated Future Payouts 
Under
Equity Incentive Plan Awards
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
All Other
Option
Awards:
Number
of
Securities
Under-
lying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/share)
5
Grant Date
Fair Value
of Stock
and Option
Awards
($)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Charles B.
Stanley
2/13/14
AIP
1 
21,250

850,000

1,700,000

 
 
 
 
 
 
 
2/13/14
PSU
2 
 
 
 
30,246

60,492

120,984

 
 
 
1,920,016

2/13/14
SO
3 
 
 
 
 
 
 
 
87,194

31.74

884,147

2/13/14
RS
4 
 
 
 
 
 
 
60,492

 
 
1,920,016

Richard J.
Doleshek
2/13/14
AIP
1 
12,668

506,700

1,013,400

 
 
 
 
 
 
 
2/13/14
PSU
2 
 
 
 
14,871

29,742

59,484

 
 
 
944,011

2/13/14
SO
3 
 
 
 
 
 
 
 
42,871

31.74

434,712

2/13/14
RS
4 
 
 
 
 
 
 
29,742

 
 
944,011

Jim E.
Torgerson
2/13/14
AIP
1 
11,228

449,100

898,200

 
 
 
 
 
 
 
2/13/14
PSU
2 
 
 
 
10,082

20,164

40,328

 
 
 
640,005

2/13/14
SO
3 
 
 
 
 
 
 
 
29,065

31.74

294,719

2/13/14
RS
4 
 
 
 
 
 
 
20,164

 
 
640,005

Christopher K. Woosley
2/13/14
AIP
1 
6,073

242,900

485,800

 
 
 
 
 
 
 
2/13/14
PSU
2 
 
 
 
4,348

8,696

17,392

 
 
 
276,011

2/13/14
SO
3 
 
 
 
 
 
 
 
12,535

31.74

127,105

2/13/14
RS
4 
 
 
 
 
 
 
8,696

 
 
276,011

Austin S. Murr
2/13/14
AIP
1 
4,098

163,900

327,800

 
 
 
 
 
 
 
2/13/14
PSU
2 
 
 
 
3,466

6,932

13,864

 
 
 
220,022

2/13/14
SO
3 
 
 
 
 
 
 
 
9,991

31.74

101,309

2/13/14
RS
4 
 
 
 
 
 
 
6,932

 
 
220,022

Perry H.
Richards
2/13/14
AIP
1 
4,249

169,950

339,900

 
 
 
 
 
 
 
2/13/14
PSU
2 
 
 
 
3,151

6,302

12,604

 
 
 
200,025

2/13/14
SO
3 
 
 
 
 
 
 
 
9,083

31.74

92,102

2/13/14
RS
4 
 
 
 
 
 

 
4,726

 
 
150,003

2/13/14
QEPM
6 
 
 
 
 
 
 
2,112

 
 
50,012

12/2/14
PSU
7 
 
 
 
 
7,022

 
 
 
 
191,841

12/2/14
SO
7 
 
 
 
 
 
 
 
4,354

30.90 8

6,052

12/2/14
SO
7 
 
 
 
 
 
 
 
8,703

30.12 8

18,015

12/2/14
SO
7 
 
 
 
 
 
 
 
9,083

31.74 8

23,071

12/2/14
RS
7 
 
 
 
 
 
 
11,310

 
 
240,338

 
1.
The amounts included in these columns reflect estimated future cash payouts under the annual incentive program of our CIP based on actual base salaries for 2014. If threshold levels of performance are not met, then actual payout could be zero. Actual incentive payouts earned in 2014 are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
2.
This row represents the range of the number of PSUs that may be earned with respect to PSUs granted pursuant to our CIP in 2014. Payment for earned awards is made in cash after the end of the performance period. If threshold levels of performance are not met, then actual payout could be zero.
3.
This row shows options granted pursuant to our LTSIP during 2014.
4.
This row shows grants of restricted stock pursuant to our LTSIP during 2014.
5.
Except as noted in Footnote 8, the exercise price represents the closing price per share of QEP common stock on grant date.
6.
This row reflects QEPM phantom units received by Mr. Richards.
7.
As noted in Footnotes 1, 9, 10 and 11 Summary Compensation Table, the Compensation Committee amended the terms of Mr. Richards' (i) performance share unit agreements under the CIP to modify the vesting of all unvested PSUs, resulting in the vesting of an additional 7,022 PSUs, (ii) restricted stock agreements under the LTSIP to accelerate the vesting of 11,310 shares of restricted stock, and (iii) stock option agreements under the LTSIP to accelerate the vesting of stock options to purchase 22,140 shares of common stock, all effective December 2, 2014. Without such amendments, all awards would have been forfeited. The modification of the awards requires the presentation of the

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Table of Contents

amended awards as “new” grants in this table. See further discussion in “Compensation Discussion and Analysis.” No modifications were made to the 3,778 QEPM phantom units held by Mr. Richards.
8.
The exercise price represents the closing price per share of QEP common stock on the original grant date. The exercise price was not modified when the stock option was accelerated in connection with Mr. Richard's termination of employment.
Outstanding Equity Awards at Fiscal Year-End 2014

This table shows outstanding equity awards for the NEOs. All values shown are as of December 31, 2014.
Option Awards1
Stock Awards
Restricted Stock
 
PSUs
Name
(a)