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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:
 
 
 
 
 
 
 
x
 
Preliminary proxy statement
 
 
 
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o
 
Definitive proxy statement
 
 
 
o
 
Definitive additional materials
 
 
 
o
 
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):
ý
No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:

(2)
Aggregate number of securities to which transaction applies:

(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)
Proposed maximum aggregate value of transaction:

(5)
Total fee paid:

¨
Fee paid previously with preliminary materials.
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
(1)
Amount previously paid:


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


April 4, 2019

To Our Shareholders:

The 2019 Annual Meeting of Shareholders of QEP Resources, Inc. (Annual Meeting) will be held on May 14, 2019, 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. We urge you to vote whether or not you plan 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 2018 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.

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


Sincerely,
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David A. Trice                
Chair of the Board                


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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 14, 2019
 
To the Shareholders of QEP Resources, Inc.:

The Annual Meeting of Shareholders of QEP Resources, Inc., a Delaware corporation (the Company), will be held on May 14, 2019, 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 eight directors nominated by our Board for one year terms, until their successors are duly elected and qualified (Item No. 1);
2.
Approve, by non-binding advisory vote, the compensation of the Company’s named executive officers as disclosed in the accompanying proxy statement (Item No. 2);
3.
Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (Item No. 3);
4.
Vote on a Company proposal to amend the Company's Bylaws to allow holders of 25% or more of outstanding shares to call special meetings of shareholders (Item No. 4);
5.
Vote on an advisory shareholder proposal to allow holders of 10% or more of outstanding shares to call special meetings of shareholders (Item No. 5); and
6.
Transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only holders of the Company's common stock at the close of business on March 28, 2019, the record date, may vote at the Annual Meeting or any adjournment or postponement thereof. If you are a record holder, you may revoke your proxy at any time before your proxy 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. 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 4, 2019.

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
 
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Dane E. Allen
 
Corporate Secretary
Denver, Colorado
April 4, 2019

Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 14, 2019. The proxy statement and annual report are available online at www.proxyvote.com.


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TABLE OF CONTENTS

ITEM NO. 1 – ELECTION OF DIRECTORS
Director Nominees
Policies and Procedures for Review and Approval of Related-Person Transactions
Related-Person Transactions

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Company Overview and 2018 Business Highlights
Summary of 2018 Compensation Committee Actions
Say on Pay
Realizable Pay Demonstrates Pay and Performance Alignment
Compensation Philosophy and Objectives
Base Salary
2018 Executive Severance Program
Compensation Committee's Decision Making Process
Role of the Chief Executive Officer/Other Officers
Role of the Independent Compensation Consultant
Determination of Peer Group
Assessment of Our Executive Compensation Program's Impact on Risk Taking
ITEM NO. 2 – ADVISORY VOTE ON EXECUTIVE COMPENSATION
ITEM NO. 3 – RATIFICATION OF OUR INDEPENDENT AUDITOR
ITEM NO. 4 – COMPANY PROPOSAL TO AMEND THE COMPANY'S BYLAWS TO ALLOW HOLDERS OF 25% OR MORE OF OUTSTANDING SHARES TO CALL SPECIAL MEETINGS OF SHAREHOLDERS
ITEM NO. 5 – SHAREHOLDER PROPOSAL TO ALLOW HOLDERS OF 10% OR MORE OF OUTSTANDING SHARES TO CALL SPECIAL MEETINGS OF SHAREHOLDERS
Shareholder Nominations and Proposals
APPENDIX A

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QEP RESOURCES, INC.

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 14, 2019

GENERAL INFORMATION

The Board of Directors (Board) of QEP Resources, Inc. (the Company or QEP) is soliciting proxies for use at the Annual Meeting of Shareholders (Annual Meeting) to be held on May 14, 2019, beginning at 8:00 a.m. Mountain Daylight Time, at the Company's 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 4, 2019. 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 future meetings, you should follow the instructions for requesting such materials included in the Notice.

Entitlement to Vote

Shareholders who owned shares of QEP common stock as of the close of business on March 28, 2019, the record date, may vote at the Annual Meeting. Each shareholder is entitled to one vote for each share of QEP common stock held by such shareholder on that date.

Voting Items

You will vote on the annual election of all eight directors (the Nominees): Phillips S. Baker, Jr., Timothy J. Cutt, Julie A. Dill, Robert F. Heinemann, Michael J. Minarovic, M.W. Scoggins, Mary Shafer-Malicki and David A. Trice. You will also vote on compensation of the Company's named executive officers (on an advisory basis), the ratification of the appointment of PricewaterhouseCoopers LLP (PwC) as the Company's independent registered public accounting firm, a Company proposal to amend the Company's Bylaws to allow holders of 25% or more of outstanding shares to call special meetings of shareholders, and an advisory shareholder proposal to allow holders of 10% or more of outstanding shares to call special meetings of shareholders.

Board Voting Recommendations

The Board recommends that you vote as follows on the proposals:

1.
FOR the approval of the eight individuals nominated by our Board for one year terms, until their successors are duly elected and qualified (Item No. 1);
2.
FOR the approval, by non-binding advisory vote, of the compensation of the Company's named executive officers as disclosed in the accompanying proxy statement (Item No. 2);
3.
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm (Item No. 3);

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4.
FOR the approval of the Company proposal to amend the Company's Bylaws to allow holders of 25% or more of outstanding shares to call special meetings of shareholders (Item No. 4); and
5.
AGAINST an advisory shareholder proposal to allow holders of 10% or more of outstanding shares to call special meetings of shareholders (Item No. 5).

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 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.

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 hold your shares in street name 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 hold your shares in street name 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 13, 2019, Fidelity will vote the Company shares credited to your 401(k) Plan account in the same proportion as all other shares for which Fidelity received instructions.

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 LLC (Georgeson) to assist in the distribution of proxy materials and the solicitation of votes. The Company will pay Georgeson a base fee of $13,500, plus customary costs and expenses, for these services and has agreed to indemnify Georgeson against certain liabilities in connection with its engagement.


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Quorum Requirements

On March 28, 2019, the record date, the Company had ___________ shares of common stock issued and outstanding. A majority of the issued and outstanding 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 nominee must exceed the number of shares voted "against" such nominee. 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. For purposes of determining the vote outcome for each nominee, 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. For purposes of determining the vote outcome of Item No. 2, abstentions will be included in the vote totals and, therefore, an abstention will have 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 outcome of Item No. 2. Although non-binding, our Board and Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.

Ratification of the Company's Independent Registered Public Accounting Firm. Ratification of the selection of PwC as the Company's independent registered public accounting firm for fiscal year 2019 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 the vote outcome of Item No. 3, abstentions will be included in the vote totals and, therefore, an abstention will have the same effect as a negative vote.

Company Proposal to Amend the Company's Bylaws to Allow Holders of 25% or More of Outstanding Shares to Call Special Meetings of Shareholders. The vote to approve an amendment of the Company's Bylaws in Item No. 4 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 the vote outcome of Item No. 4, abstentions will be included in the vote totals and, therefore, an abstention will have 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 outcome of Item No. 4.

Shareholder Proposal to Allow Holders of 10% or More of Outstanding Shares to Call Special Meetings of Shareholders. Approval of the advisory shareholder proposal in Item No. 5 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 the vote outcome of Item No. 5, abstentions will be included in the vote totals and, therefore, an abstention will have 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 outcome of Item No. 5.

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. If you submit a signed proxy card that does not include voting instructions, the proxy card will be voted for the election of all nominees under Item No. 1, for Item No. 2, for Item No. 3, for Item No. 4, and against Item No. 5, unless the shares represented by the proxy card are held in the 401(k) Plan. The trustee for the 401(k) Plan will vote shares for which no direction is given in the same proportion as all other shares for which the trustee received instructions.


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The Annual Meeting

Any shareholder of record as of March 28, 2019 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.

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

You are asked to consider eight nominees for election to our Board. Each nominee would serve for a one-year term until the 2020 Annual Meeting.
Each of the director nominees has consented to being named in this proxy statement and to serve as a director 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.

Board Size and Elections

Each Nominee possesses 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. All of our directors nominated under this Item No. 1 are independent except for Mr. Cutt. We empower independent directors through frequent board and committee executive sessions. We also annually appoint either a Chair of the Board or, if the Chair of the Board is not independent, an independent lead director. The Board exercises a strong independent oversight function. This oversight function is enhanced by our Audit, Compensation and Governance Committees, each of which is 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 and well-rounded 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 and that are particularly desirable for our directors to possess in order to help meet specific Board needs, including:

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;


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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 and accountability for management and the Board, and protection of our shareholders' interests.

Our Certificate of Incorporation provides for a Board consisting of between seven and 11 directors, with the precise number to be determined by the Board. Currently the Board consists of nine directors, and following the retirement of William Thacker, will consist of eight directors after the Annual Meeting. 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.

If elected by our shareholders at the Annual Meeting, each Nominee will serve on the Board for a one year term expiring at the 2020 Annual Meeting.
Director Qualification Table

The following table highlights each Nominee's specific skills, knowledge and experience. A particular director may possess other valuable skills, knowledge and experience not indicated below.

Name
Financial and
Accounting
Exploration & Production
Executive Leadership
Enterprise Risk Management
Public Company
Governance
Phillips S. Baker, Jr.
X
 
X
X
X
Timothy J. Cutt
X
X
X
X
X
Julie A. Dill
X
 
X
X
X
Robert F. Heinemann
X
X
X
X
X
Michael J. Minarovic
X
X
X
X
 
M. W. Scoggins
X
X
X
X
X
Mary Shafer-Malicki
X
X
X
X
X
David A. Trice
X
X
X
X
X

Biographical information concerning our directors appears below. Unless otherwise indicated, such individuals have been engaged in the same principal occupation for the past five years. Ages are as of April 1, 2019.


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Director Nominees

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Mr. Phillips S. Baker, Jr., age 59, has served as a QEP director since June 2010. 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 CEO in May 2003. He has over 30 years of business experience, including 19 years of financial management, more than ten years as CEO of an NYSE-listed company and more than 20 years of directorships of public companies. Mr. Baker has also served as Chairman of the Board for the National Mining Association since October 2017, and has been a Board member since 2010. He has also served as a Board member of the National Mining Hall of Fame and Museum. 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.
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Mr. Timothy J. Cutt, age 58, is the President and Chief Executive Officer of QEP and has served as a director of QEP since January 15, 2019. Prior to joining QEP, Mr. Cutt was the Chief Executive Officer of Cobalt International Energy, a development-stage petroleum exploration and production company (2016 to 2018). Cobalt International voluntarily filed a petition for relief under Chapter 11 of the United States Bankruptcy Code on December 14, 2017, and a plan to sell all the assets of the company was approved on April 10, 2018. Prior to joining Cobalt International, Mr. Cutt served as President of the Petroleum Division of BHP Billiton, a global natural resources company (2013 to 2016), and prior to that he also served as President of Production for BHP Billiton's Petroleum Division (2007 to 2011). Prior to joining BHP Billiton, Mr. Cutt served in various roles at ExxonMobil in the prior 25 years, including President of ExxonMobil de Venezuela (2005 to 2007), President ExxonMobil Canada Energy (2004 to 2005), President Hibernia Management & Development Company (2001 to 2004) and Regional Coordinator, North America. He also served as a Board member of the American Petroleum Institute from 2013 to 2018. In concluding that Mr. Cutt is qualified to serve as a director, the Board considered, among other things, his 35 years of experience in the oil and gas industry.
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Ms. Julie A. Dill, age 59, has been a QEP director since May 2013 and also currently serves as a director of Rayonier Advanced Materials Inc., and Inter Pipeline Ltd. Ms. Dill recently served as the Chief Communications Officer for Spectra Energy Corp. (Spectra) from 2013 until completion of Spectra's merger with Enbridge, Inc. (the Merger) in the first quarter of 2017. She also served on the board of Spectra Energy Partners from 2012 until the completion of the Merger. 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 and the President and CEO of Spectra Energy Partners, LP from 2012 until 2013, and prior to that she served as President of Union Gas Limited from 2007 until 2011. Previously, she served in various financial and operational roles with Duke Energy, Duke Energy International and Shell Oil Company. Ms. Dill also serves on an advisory board for Centuri Construction, a subsidiary of Southwest Gas Holdings, and on an advisory board for Southern Star Central Gas Pipeline. She is also a member of the Advisory Council for the College of Business and Economics at New Mexico State University and also serves on the Memorial Hermann Hospital Community Relations Committee. 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 35 years of experience in the energy industry.

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Dr. Robert F. Heinemann, age 66, 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 currently serves on the board of directors of Chaparral Energy, LLC, where he has also served as Chairman of the Board since May 2017, Crescent Point Energy Corp., and Great Western Oil and Gas Company, LLC, where he was also Chairman of the Board from 2014 through 2016. He previously was a director of Yates Petroleum Corporation until its merger in late 2016 and he formerly served as Chairman of the Board of C12 Energy, LLC until late 2015. 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.
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Mr. Michael J. Minarovic, age 54, has been a QEP director since May 2017. Mr. Minarovic is the Co-Founder and Managing Director of Arena Energy, LP (Arena), an employee-owned exploration and production company focused on the Gulf of Mexico (GOM). Since founding Arena in 1999, Mr. Minarovic developed and executed a successful strategy of exploiting drilling opportunities in the GOM that were left behind after fifty years of drilling by the major oil companies. By completing a number of acquisitions and joint ventures, in addition to his responsibilities of reservoir engineering, risk management and opportunity generation, Mr. Minarovic grew Arena into one the largest private operators in the GOM, producing over 33,000 barrels of oil equivalent per day. Under his leadership, Arena achieved this success by investing over $3.2 billion in capital since 1999 without any outside equity participation. He is also the Managing Director and a Co-Founder of Arena Offshore, LP, an affiliated drilling and operating company that has been the second most active driller in the GOM during the past five years. Prior to co-founding Arena, Mr. Minarovic served as a petroleum engineer with Newfield Exploration Company and Conoco, Inc. Mr. Minarovic is an active member of the University of Texas PGE External Advisory Committee, Society of Petroleum Engineers, The John Cooper School Board of Trustees, and is an Executive Director of the United States Oil and Gas Association. In concluding that Mr. Minarovic is qualified to be nominated to our Board, the Board considered, among other things, his more than 30 years of oil and gas experience working in the independent, private and public sectors, including his entrepreneurial, executive and operational expertise as well as his background in negotiating and managing acquisitions and joint ventures with large public companies.

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Dr. M. W. Scoggins, age 71, has been a QEP director since June 2010 and also has served as a director of Laredo Petroleum, Inc. since 2012. Dr. Scoggins previously served as a director of Cobalt International Energy, Inc. from 2010 until 2018, Trico Marine Services, Inc. from 2005 until 2011, Venoco, Inc. from 2007 until 2012, and Questar Corporation from 2005 until 2010. He is President Emeritus of the Colorado School of Mines, an engineering and applied science research university. He served as Mines' President from June 2006 until his retirement in July 2015. 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 has a Ph.D. in Petroleum Engineering from the University of Tulsa. 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.

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Ms. Mary Shafer-Malicki, age 58, has served as a QEP director since July 2017 and also currently serves as a director of McDermott International, Inc. and Wood plc. Ms. Shafer-Malicki retired in 2009 after a 26-year career with BP Exploration Operating Company (BP) and Amoco Corporation. She served as Senior Vice President/CEO and Chief Operating Officer/General Manager for BP's operations in Angola from 2005 to 2009 and Director General for BP's operations in Vietnam from 2003 to 2005. Prior to this, she served as the Business Unit Leader for BP's Central North Sea gas business in Scotland from 2001 to 2003, General Manager for support services to all of BP's Continental Shelf upstream operations in the United Kingdom from 2000 to 2001, and President and General Manager for Amoco/BP's Dutch onshore and offshore production and gas storage operations in the Netherlands from 1998 to 2000. Ms. Shafer-Malicki currently serves as a director of the University of Wyoming Foundation as well as a member of industry advisory boards for the Chemical Engineering departments at the University of Wyoming and Oklahoma State University. In concluding that Ms.Shafer-Malicki is qualified to serve as a director, the Board considered, among other things, her extensive energy industry experience, including her serving in senior executive positions, and her experience as a director on multiple public company boards. Ms. Shafer-Malicki was appointed as a director by the Board in July 2017 as part of the Board's succession-planning process and was recommended as a director candidate by the Company's current Board Chair, who was serving as Lead Director at the time.

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Mr. David A. Trice, age 70, has been a QEP director since 2011 and was appointed Chair of the Board in January 2019 after having served as Lead Director since May 2016. 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 Select Energy Services, Inc., since November 2017. Mr. Trice previously served as a director of McDermott International, Inc. from 2009 to 2018, Grant Prideco, Inc. from 2003 to 2008, and Hornbeck Offshore Services, Inc. from 2002 until 2011. He also served as a director of privately held Rockwater Energy Solutions, Inc., from 2012 until its merger with Select Energy Services in 2017, and at privately held Crazy Mountain Brewery, LLC from 2011 until January 2015. 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.


For Item No. 1, the Board recommends that you vote FOR each of the nominees listed above.

GOVERNANCE INFORMATION

Governance Update

There were several governance developments to highlight from the past year, including:

A Company-supported proposal to immediately declassify our Board was approved by our shareholders at the 2018 Annual Meeting. The Company subsequently took steps to amend and restate its Certificate of Incorporation and Bylaws to implement the changes included in the proposal, and consequently all directors are now serving one-year terms ending at the 2019 Annual Meeting.
After thorough review, the Board has approved amendments to the Company's Bylaws, which are subject to shareholder approval in Item No. 4 below, that would provide holders of 25% or more of the Company's outstanding shares the right to call special meetings of shareholders.
In conjunction with the retirement of our former CEO and the hiring of Tim Cutt as our new CEO in early 2019, after thorough review, our Board decided to split the role of Chair and CEO.
As noted in the "Shareholder Engagement" section below, the Company continued to focus on its shareholder outreach program during 2018, contacting shareholders who collectively owned over 60% of our outstanding shares. The Company is committed to continuing annual shareholder outreach.


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General Governance Information

We seek to implement best practices in corporate governance, including robust Code of Conduct, Corporate Governance Guidelines and committee charters, each of which is available on the Company's website at http://ir.qepres.com/phoenix.zhtml?c=237732&p=irol-govhighlights. These documents provide the framework for our corporate governance. Any of these documents will be furnished in print without charge to any interested party who requests them.

Shareholder Engagement

Continuous and transparent communication with our shareholders helps our Board and senior management team gain useful feedback on a wide range of topics including corporate governance matters and executive compensation. Accountability to shareholders is not only a mark of our good governance but an important component of our success. In keeping with our shareholder outreach efforts in recent years as noted in the "Governance Update" section above, in 2018 we contacted shareholders who collectively owned in excess of 60% of our outstanding shares. The Board considered investor feedback on numerous corporate governance and executive compensation topics and this feedback was an important factor in deciding to split the role of our CEO and Chair in early 2019. Feedback from our investors was also an important factor when our Board decided to recommend approval of a Company proposal that would provide shareholders holding 25% or more of our outstanding shares to call a special meeting of shareholders (see Item No. 4 below) and to also recommend that our shareholders not support a competing shareholder proposal (see Item No. 5 below). We value the feedback provided by our shareholders and look forward to continued, open dialogue on corporate governance issues, executive compensation decisions and other matters relevant to our business.

Director Independence

The Board evaluated all relationships between the Company and its directors and determined that all non-management directors currently serving on the Board (Phillips S. Baker, Jr., Julie A. Dill, Robert F. Heinemann, Michael J. Minarovic, M.W. Scoggins, Mary Shafer-Malicki, William L. Thacker, III, and David A. Trice) are independent under all applicable rules and regulations, including the listing requirements of the NYSE, as set forth in Section 303A.02 of the NYSE 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://media.corporate-ir.net/media_files/IROL/23/237732/Corporate%20Governance%20Guidelines%20-%20As%20Updated%205-16-16.pdf". The Board evaluates independence on an ongoing basis.

Board Leadership Structure

Based on the Board's 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 United States. Given the dynamic and competitive environment in which we operate, the Board believes that the right leadership structure may vary as circumstances change.

In the past, our Board has believed that a strong Lead Director and a combined Chair and CEO was the best structure, allowing our Lead Director to provide independent Board leadership and permitting our Chair and CEO to use his knowledge of the Company to focus Board discussions. Further, our shareholders had historically demonstrated support for this approach with a strong majority opposing shareholder proposals in 2013 and 2016 to separate the roles of Chair and CEO.

In conjunction with the departure of Charles B. Stanley in January 2019 after more than eight years at the Company, including more than six years as our Chair, and the hiring of Mr. Cutt as our new CEO, the Board decided to split the role of Chair and CEO and eliminate the Lead Director position as part of the succession process. The Board believes that having an independent chair will encourage diversity of thinking, improve

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board oversight, and allow our new CEO to focus on the everyday demands of managing our Company as we continue to execute on our strategic initiatives.

Board Committees

Our Board has an Audit Committee, Compensation Committee and a 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 at http://ir.qepres.com/phoenix.zhtml?c=237732&p=irol-govhighlights. The Company will provide each charter to any interested party who requests it in print without charge. 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
Compensation
Governance
Phillips S. Baker, Jr.
X
 
X
Timothy J. Cutt
 
 
 
Julie A. Dill
X
 
X
Robert F. Heinemann
X
Chair
 
Michael J. Minarovic
X
X
 
M. W. Scoggins
Chair
X
 
Mary Shafer-Malicki
X
 
X
William L. Thacker, III
 
X
X
David A. Trice
 
X
Chair

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 registered public accounting firm. The Audit Committee also has sole authority to preapprove all terms and fees for audit services, audit-related services and other services to be performed by the Company's independent registered public accounting firm. 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. The Compensation Committee also considers and makes recommendations to the full Board regarding compensation for independent directors.

The Compensation Committee meets the independence requirements set forth in Section 303A.02 of the NYSE Listed Company Manual, and each member qualifies as an independent director under Rule 16b-3 of the

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Exchange Act and as an outside director under Section 162(m) of the Internal Revenue Code of 1986, as amended. The Compensation Committee frequently meets in executive sessions and meets with its compensation consultant outside of the presence of management.

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 Chair between meetings. The Compensation Committee retained Meridian Compensation Partners, LLC (Meridian) as its independent consultant to advise it as to executive and director compensation in 2018. The Compensation Committee considered the factors outlined by the NYSE and determined that Meridian is independent under those factors, and that Meridian's work in 2018 did not create any conflict of interest with respect to its representation of the Compensation Committee. See the "Compensation Process – Role of Independent Compensation Consultant" in the Compensation Discussion and Analysis section for a description of Meridian's duties.

The Compensation Committee has authorized Mr. Cutt, our CEO, and Lauren Miller, the Vice President of Human Resources, in their respective capacities as officers, 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 reviews each grant made by Mr. Cutt or Ms. Miller at its next meeting following any such grant. The Compensation Committee has also delegated to its Chair, currently Dr. Heinemann, authority to replenish the pool of shares to be granted by Mr. Cutt or Ms. Miller. The full Compensation Committee reviews 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, its committees and individual directors; and making recommendations to the full Board on various governance issues. 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 nominees selected by the Governance Committee. 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 business; experience as a CEO, 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 public 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 Governance Committee 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. Board nominees must be less than 72 years of age, unless that requirement is waived by the Board.

The Governance Committee also considers any recommendations for director nominees made by shareholders. The Governance Committee evaluates nominees recommended by the shareholders using the same criteria it uses for other nominees.

We amended our Bylaws in December 2016 to permit a group of up to 20 shareholders who collectively have owned at least 3% of our outstanding capital stock for at least three consecutive years to submit director nominees for up to 20% of the Board for inclusion in our proxy statement if the shareholder(s) and the nominee(s) meet the other requirements in our Bylaws. We further amended our Bylaws in October 2017 to require the Company to provide to the shareholders additional information about director nominees in advance of the annual meeting, and to require that director nominees proposed by both our Board and our shareholders must complete and update background questionnaires regarding the director nominee's qualifications; to

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authorize the presiding person at shareholder meetings to enact rules of conduct and determine if business has been properly brought before the meeting; and to require a majority of directors (instead of two directors) to call a special meeting. Shareholders who wish to nominate directors for inclusion in our proxy statement or at an annual meeting should follow the instructions in the "Other Matters - Shareholder Nominations and Proposals" section below.

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 is charged with satisfying itself that the risk management processes designed by management are functioning effectively and as designed. Our Board and its committees regularly discuss material risk exposures, the disclosure of 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 process, reserve estimates, changes to reserve estimates and disclosures regarding reserve estimates; 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 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 provides input as to Board composition, size and committee assignments, and recommends 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 each such director's annual cash compensation. Shares that count toward satisfaction of the guidelines include common stock owned by the director and phantom stock attributable to deferred compensation. Each of the independent directors who has served for five years or longer holds a sufficient number of shares to satisfy these guidelines. The Board reviewed these guidelines again in 2018 and determined these guidelines were appropriate.


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Limits on Board Service

Our directors may not serve on the board of directors of more than five public companies at any given time. Our CEO may not serve on more than two boards in addition to our Board at any given time. A member of our Audit Committee may not simultaneously serve on the audit committee of more than two other public companies at any given time 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 2018 were Dr. Heinemann, Mr. Minarovic, Dr. Scoggins, Mr. Thacker and Mr. Trice. No member of our Compensation Committee was at any time prior to or during 2018, or the first three months of 2019, an officer or employee of our Company. Additionally, no member of the Compensation Committee had any relationship with our Company requiring disclosure as a related-person transaction. During 2018, 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.

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 2018:
 
Board
Audit Committee
Compensation
Committee
Governance
Committee
Number of Meetings
21
7
6
4

Each director attended at least 75% of the aggregate of (1) the number of Board meetings held while he or she was a director; and (2) the number of meetings of all committees of the Board held while he or she served as a member of his or her respective committee. Our directors are expected to attend the Annual Meeting. All of the directors attended the 2017 Annual Meeting of Shareholders, except for Dr. Scoggins and Mr. Thacker.

Family Relationships

No director or executive officer is related to any other director or executive officer.

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 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 Chair of the Board and Chair of the Governance Committee. The Board will then review the continued appropriateness of Board membership under the changed circumstances. The Board may waive its director retirement requirements in certain situations.


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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.

Policies and Procedures for Review and Approval of Related-Person Transactions

Pursuant to the terms of our Corporate Governance Guidelines, we require that all executive officers and directors report to our Corporate Secretary or Assistant Corporate Secretary any event or anticipated event that might qualify as a related-person transaction. The Corporate Secretary or Assistant Corporate Secretary then reports those transactions to the Audit Committee. We also collect information from questionnaires sent to executive 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 reevaluation 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.

Related-Person Transactions

As of March 15, 2019, Mr. Doleshek and his spouse own debt securities issued by the Company in the following amounts: $150,000 of our 6.80% Senior Notes due 2020, $450,000 of our 6.875% Senior Notes due 2021 and $20,000 of our 5.375% Senior Notes due 2022. These amounts were unchanged from the amounts disclosed in our 2018 Proxy Statement. During 2018, we paid Mr. Doleshek and his spouse interest on the Senior Notes held by both of them in the aggregate amount of $42,213.

The Audit Committee determined that the ownership of the Company's Senior Notes and the associated interest payments do not conflict with the best interests of the Company or conflict with our Code of Conduct.

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.


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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 15, 2019. Shares not outstanding but deemed beneficially owned by virtue of the right of a person to acquire shares within 60 days of March 15, 2019, 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 powers 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.
 
Amount and Nature of Beneficial Ownership
Name
Common Stock
Beneficially
Owned
 
Common Stock Acquirable Within 60 Days
Total Beneficially Owned
Percent of
Class
9
Charles B. Stanley1
844,600

2 
679,428
 
1,524,028
*

Richard J. Doleshek
519,887

2,3,4 
267,465
 
787,352
*

Jim E. Torgerson5
332,613

2,3,4 
200,963
 
533,576
*

Christopher K. Woosley
226,708

2,3 
111,314
 
338,022
*

Phillips S. Baker, Jr.
28,897

 
104,992
6 
133,889
*

Julie A. Dill
5,525

 
92,939
6 
98,464
*

Robert F. Heinemann
7,200

 
91,193
6 
98,393
*

Michael J. Minarovic
0

 
55,257
6 
55,257
*

M. W. Scoggins
7,700

7 
192,068
6 
199,768
*

Mary Shafer-Malicki
0

 
54,430
6 
54,430
*

William L. Thacker III8
0

 
89,562
6 
89,562
*

David A. Trice
50,000

 
110,693
6 
160,693
*

All directors and executive officers
(12 individuals)
2,023,130

 
2,050,304
 
4,073,434
1.71
%

1.
Mr. Stanley retired effective January 14, 2019. All amounts reflected in the table for Mr. Stanley are as of January 14, 2019.
2.
Does not include the following phantom stock units held in the QEP Deferred Compensation Wrap Plan: Mr. Stanley owned 53,605 units as of January 14, 2019; Mr. Doleshek owns 7,147 units; and Mr. Torgerson owned 6,133 units as of January 2, 2019.
3.
Includes the following unvested restricted shares for which the owners have sole voting power, but which cannot be disposed of until they vest: Mr. Doleshek owns 245,076 shares; Mr. Torgerson owned 163,330 shares as of January 2, 2019; and Mr. Woosley owns 148,110 shares.
4.
Does not include the following executives' long-term cash incentive amounts measured in performance share units (PSUs) pursuant to the QEP Cash Incentive Plan, which are subject to a cash payout to the extent certain performance objectives are achieved: Mr. Doleshek owns 341,858 PSUs; Mr. Torgerson owned 268,900 PSUs as of January 2, 2019; and Mr. Woosley owns 151,662 PSUs.
5.
Mr. Torgerson retired effective January 2, 2019. All amounts reflected in the table for Mr. Torgerson are as of January 2, 2019.
6.
Represents fully-vested phantom stock units held in the QEP Deferred Compensation Plan for Directors, which are payable in cash or shares of QEP common stock (at the director's election) upon termination of the director's service on the Board.
7.
Shares are held in a joint account for which Dr. Scoggins has shared voting and dispositive powers with his spouse.
8.
Mr. Thacker will no longer serve on the board after the 2019 Annual Meeting.
9.
The percentage of shares owned is less than 1% unless otherwise stated.


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Certain Beneficial Owners

The following table sets forth information with respect to each person known by the Company to beneficially own more than 5% of our common stock as of March 15, 2019.
Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Percent of 
Class
Credit Suisse AG, Uetlibergstrasse 23, CH 8070, Zurich, Switzerland
22,118,6691
9.3%
The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA 19355
21,935,2592
9.3%
BlackRock, Inc., 55 East 52nd Street, New York, NY 10055
21,413,9683
9.0%
Dimensional Fund Advisors LP, 6300 Bee Cave Road, Austin, TX 78746
18,055,8874
7.6%
State Street Corporation, One Lincoln Street, Boston, MA 02111
12,681,4735
5.4%
AllianceBernstein L.P., 1345 Avenue of Americas, New York, NY 10105
12,081,8156
5.1%

1.
Based upon its Schedule 13G filed with the SEC on February 13, 2019, as of December 31, 2018, Credit Suisse had shared voting power of 22,118,669 shares; and shared dispositive power of 22,118,669 shares.
2.
Based upon its Schedule 13G filed with the SEC on February 12, 2019, as of December 31, 2018, Vanguard Group, Inc. had sole voting power of 116,041 shares; sole dispositive power of 21,806,419 shares; shared voting power of 37,411 shares; and shared dispositive power of 128,840 shares.
3.
Based on its Schedule 13G filed with the SEC on February 6, 2019, as of December 31, 2018, BlackRock, Inc. had sole voting power of 20,446,348 shares and sole dispositive power of 21,413,968 shares.
4.
Based on its Schedule 13G filed with the SEC on February 8, 2019, as of December 31, 2018, Dimensional Fund Advisors LP had sole voting power of 17,718,818 shares and sole dispositive power of 18,055,887 shares.
5.
Based on its Schedule 13G filed with the SEC on February 13, 2019, as of December 31, 2018, State Street Corporation had shared voting power of 12,364,274 shares and shared dispositive power of 12,681,473 shares.
6.
Based upon its Schedule 13G filed with the SEC on February 13, 2019, as of December 31, 2018, AllianceBernstein, L.P. had sole voting power of 9,927,789 shares; sole dispositive power of 11,802,539 shares; and shared dispositive power of 279,276 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 and officers subject to Section 16(a) and persons who beneficially own more than 10% of the Company's stock are required to file reports of ownership and changes in ownership with the SEC. The Company prepares reports for directors and officers subject to Section 16(a) 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 with respect to the Company's directors and officers subject to Section 16(a) were satisfied in 2018.


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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, 2018. We discussed with representatives of PwC, the Company's independent registered public accounting firm, 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 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 Board the inclusion of the audited financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC.

By the Audit Committee:

M. W. Scoggins, Chair
Phillips S. Baker, Jr.
Julie A. Dill
Robert F. Heinemann
Michael J. Minarovic
Mary Shafer-Malicki

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 for filing with the SEC.

By the Compensation Committee:

Robert F. Heinemann, Chair
Michael J. Minarovic
M. W. Scoggins
William L. Thacker, III
David A. Trice

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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COMPENSATION DISCUSSION AND ANALYSIS

This section describes the objectives and elements of the executive compensation programs for our Named Executive Officers (NEOs). Our NEOs for this Proxy Statement include our principal executive officer, our principal financial officer, our two other executive officers, as well as one former officer that would have been one of the three other most highly compensated executive officers had she still been employed by QEP at year end. Our NEOs for 2018 are:

Charles B. Stanley, Chairman, President and Chief Executive Officer (CEO) (departed January 14, 2019)
Richard J. Doleshek, Executive Vice President, Chief Financial Officer (CFO)
Jim E. Torgerson, Executive Vice President, QEP Energy (departed January 2, 2019)
Christopher K. Woosley, Senior Vice President and General Counsel
Margo D. Fiala, Former Vice President, Human Resources (departed March 30, 2018)

On December 5, 2018, the Board of Directors (Board) appointed Timothy J. Cutt as a director and as the President and Chief Executive Officer of the Company, effective January 15, 2019. In connection with the appointment of Mr. Cutt, Mr. Stanley retired as President and CEO of the Company and resigned as a director, effective January 14, 2019.

Executive Summary

Company Overview and 2018 Business Highlights


QEP is an independent crude oil and natural gas exploration and production (E&P) company. As a result, our earnings, cash flows, asset values and stock price are significantly influenced by the cyclical and volatile nature of commodity prices for crude oil, natural gas, and natural gas liquids. Since our spin-off from Questar in 2010, we've been on a deliberate path to increase oil as a percentage of total production and proved reserves, as well as simplify our asset portfolio. Through a series of acquisitions in two world-class oil provinces, first in the Williston basin and then in the Permian, and through divestiture of noncore gas weighted assets in the Midcontinent and the Rockies, we have successfully increased liquids from less than 15% of total production in 2011 to over 55% in 2018.

2018 Business Highlights

Our Company delivered significant results and accomplishments in 2018:

Entered into a purchase and sale agreement to sell its assets in Haynesville/Cotton Valley in 2019 for an aggregate purchase price of approximately $735.0 million, subject to purchase price adjustments;
Entered into a purchase and sale agreement to sell its assets in the Williston Basin in 2019 for a purchase price of $1,725.0 million, subject to purchase price adjustments;
Received $243.6 million proceeds from disposition of assets in 2018, including the Uinta Basin and other non-core assets, which were used to pay down debt;
Recognized a net realized oil price of $53.02 per bbl, a $4.80 per bbl increase compared to 2017;
Delivered oil equivalent production of 51.9 MMboe;
Delivered record oil and condensate production of 23.9 MMbbls, including a record 12.1 MMbbls in the Permian Basin;
Reported year-end total proved reserves of 658.2 MMboe, including record proved crude oil and condensate reserves of 339.1 MMbbls, a 6% increase compared to 2017;
Incurred capital expenditures (excluding property acquisitions) of $1,176.6 million, a 4% decrease over 2017;
Repurchased and retired 6.2 million shares of the Company's outstanding common stock for $58.4 million; and
Generated a net loss of $1,011.6 million, or $4.25 per diluted share, primarily due to impairment expense of $1,560.9 million related to our Williston Basin and Uinta Basin assets.

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The 2018 Strategic Initiatives referenced throughout our proxy are defined as strategic and financial initiatives to transition the Company to a pure-play Permian Basin Company and to address the significant discount to net asset value in the Company's share price through the following activities:

Strategic Initiatives

Engage financial advisors to assist with the divestiture of the Company’s Williston and Uinta Basin Assets, with data rooms expected to be opened in late March or early April; and
Market remaining non-Permian assets, including the Haynesville/Cotton Valley (Haynesville), in the second half of 2018.

Financial Initiatives

Use proceeds from asset sales to fund Permian Basin development program, until the program reaches operating cash flow neutrality in 2019, reduce debt and return cash to shareholders through share repurchases;
Authorized a $1.25 billion share repurchase program; and
Approved 2018 capital plan of approximately $1.075 billion, of which approximately 65% will be directed toward the Permian Basin.

2018 was a transformative year for QEP as we set out to accomplish our 2018 Strategic Initiatives laid out in February 2018 which were aimed at streamlining our operations, optimizing our cost structure and rationalizing our asset portfolio. As a result of 2018 Strategic Initiatives, the Company's Board of Directors implemented severance and retention programs to manage through this transition. See the "Compensation Elements - 2018 Executive Severance Program" section below for more information.

Our progress on the 2018 Strategic Initiatives was significant, including the divestiture of our Uinta Basin natural gas assets, entering into a purchase and sale agreement to sell our assets in the Haynesville/ Cotton Valley and entering into a purchase and sale agreement to sell our assets in the Williston Basin. We continued to enhance our drilling and completion designs in the Permian Basin and grew oil equivalent production in the Basin by over 94% compared with 2017.

In January of 2019, we closed the sale of our assets in the Haynesville/Cotton Valley. In February of 2019, we agreed with the buyer to terminate the purchase and sale agreement for our assets in the Williston Basin. We will continue to operate and develop assets in the Williston Basin, including the Company's South Antelope and Fort Berthold leaseholds.

Summary of 2018 Compensation Committee Actions

During 2018, our Compensation Committee took a number of actions to ensure our successful transition to a pure-play Permian Basin company, including retaining our key employees necessary to make the transition, continuing QEP's focus on operating cost-effectively in a volatile commodities market, and being responsive to feedback received from our fall 2017 shareholder outreach program. In addition, with the departure of three named executive officers, our Compensation Committee took additional actions related to executive succession and severance.

Retention and Focus on 2018 Strategic Initiatives
Our Compensation Committee implemented the 2018 Executive Severance Program and Executive Retention Program to retain executive management who are integral to achieving our 2018 Strategic Initiatives, which included:

Severance agreements that provide that if the executive's employment with the Company is terminated without cause or the executive terminates his or her employment for good reason prior to September 30, 2020, the executive will be entitled to receive certain severance payments and benefits; and

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A one-time cash retention payment of $500,000 payable in March 2019, subject to continued employment through such date, for each of our named executive officers other than Mr. Stanley and Mr. Doleshek.

In addition, the Compensation Committee reconstructed our 2018 peer group to generally reflect similarly sized public companies with primary operations in the Permian Basin. The Compensation Committee also established formulaic metrics in our Annual Incentive Plan (AIP) for our CEO and CFO specifically tied to the execution of our 2018 Strategic Initiatives with the goal of ensuring the Company received the appropriate value for the assets being divested, that our Permian Basin production goals were achieved and that our Permian operating costs were reduced.

Returns and Cost-Effective Operation
To continue our focus on operating cost-effectively in a volatile commodities market and to be responsive to shareholders' comments to sharpen our focus on generating profits and strong returns on investments, our Compensation Committee:

Maintained a drilling rate of return metric in our 2018 AIP for our executives other than our CEO and CFO;
Added a metric to our 2018 AIP tied to lease operating expense plus transportation and processing costs per Boe for our executives other than our CEO and CFO;
Discontinued adjustment of 2018 AIP metrics for commodity price fluctuations (except Drilling Rate of Return);
Reduced our CEO's long-term incentive (LTI) grant by 10%;
Discontinued the use of stock options in our LTI award mix;
Kept our CEO's base salary unchanged for the fourth year in a row and made minor increases to the salaries of certain other named executive officers to maintain competitiveness with market rates;
Paid out the 2016 PSU awards at 87% of grant date target based upon our relative total shareholder return (TSR) performance score of 100% from January 1, 2016 to December 31, 2018, and the absolute share price performance over the same period; and
Approved an overall 2018 AIP company score of 100% for our CEO and CFO and 147% for our other executives.

Response to Shareholder Feedback
Our Compensation Committee took a number of actions in response to the feedback received from our shareholder outreach program in the fall of 2017 in addition to implementing the pay metrics focused on returns as discussed above. The Compensation Committee:

Established a TSR cap and threshold in our PSU program;
Removed the discretionary AIP metric and shifted to a more formulaic scorecard;
Provided for certain AIP metrics that can be calculated from our Annual Report on Form 10-K disclosures, including Adjusted EBITDA, Lease Operating Expense plus Transportation & Processing Costs and Production; and
Added additional Proxy Statement disclosure to provide clarity as to how QEP's metrics are intended to encourage executive actions/decisions that improve the Company's bottom-line performance.

Succession and Severance
Our Compensation Committee took actions related to the departures of three named executive officers: Margo Fiala, Vice President, Human Resources (announced in March 2018); Jim Torgerson, Executive Vice President, QEP Energy (announced in November 2018); and Charles Stanley, President and CEO (announced in December 2018). The Compensation Committee:

Utilized our succession planning process to promote from within to fill the position of VP, Human Resources held by Ms. Fiala until March 2018, and to assign Mr. Torgerson's responsibilities to other officers as the Company executed its strategic initiatives. Our Compensation Committee also retained an executive search firm to replace the CEO position vacated by Mr. Stanley when he retired in January 2019.

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Reviewed and approved severance arrangements in connection with the departure of these three named executives. Ms. Fiala and Mr. Torgerson received severance pursuant to the terms of their Severance Participation Letters executed in February 2018. For a summary of those terms, see the "Compensation Elements - 2018 Executive Severance Program" section below. In connection with Mr. Stanley’s retirement and in light of the contributions of Mr. Stanley to the Company during his tenure, the Compensation Committee determined that Mr. Stanley would receive benefits similar to those described in his Severance Participation Letter executed in February 2018. For the actual payments made to Ms. Fiala, Mr. Torgerson and Mr. Stanley, see the "Compensation Tables - Potential Payments Upon Termination or Change in Control" section below and accompanying footnotes.

The Compensation Committee also structured and approved the compensation package for Mr. Cutt, our new President and CEO, whose employment commenced on January 15, 2019, to include:

a base salary of $750,000;
a cash payment of $350,000 paid on March 1, 2019;
a 2019 AIP target award of $750,000; and
a special equity grant of $3.6 million, comprised of (i) $1.8 million in restricted stock that will vest in equal annual installments over a three-year period ending March 2022, and (ii) $1.8 million in PSUs for a performance period ending on December 31, 2021.

Mr. Cutt also received our standard Tier 1 relocation program. Mr. Cutt is eligible to receive severance benefits pursuant to our Executive Severance Plan (Change in Control) in the event of certain terminations related to a change in control of the Company and pursuant to the 2018 Executive Severance Program if his employment is terminated without Cause or by Mr. Cutt for Good Reason prior to September 30, 2020, the terms of which are consistent with those available to Mr. Stanley. For further details, see the "Compensation Tables - Potential Payments Upon Termination or Change in Control" section below.

Say on Pay

Our shareholders have approved our executive compensation programs in past say-on-pay votes with an average of 91% of the votes cast for the past five years. We value ongoing dialogue with our shareholders as to our executive compensation programs and other corporate governance matters. During 2018, we continued our shareholder outreach efforts, which included contacting shareholders representing more than 60% of our outstanding shares. Based on our engagement efforts, we believe our shareholders continue to strongly support our executive compensation programs. As noted above and in our 2018 Proxy Statement, our Compensation Committee took specific actions to address shareholder feedback when making 2018 executive compensation program decisions in February 2018.


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Realizable Pay Demonstrates Pay and Performance Alignment

Our pay programs are designed to align pay outcomes with both short-term and long-term company strategy and performance, and we believe they are working as designed. Our CEO's actual realizable compensation based on performance has varied significantly from the intended target value, as illustrated by the graph below.
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12782677&doc=13

Grant Price is the fair value on the date of grant for PSUs, stock options and restricted stock, as reported in the Summary Compensation Table.

Target Pay includes base salary, target annual incentive and grant date fair value of LTI awards (PSUs, restricted stock and stock options).

Realizable Pay includes base salary, actual annual incentive paid, actual PSU performance for the 2016-2018 cycle and period-to-date PSU performance for the 2017-2019 and 2018-2020 performance periods as of December 31, 2018, and value of vested and unvested LTI awards at the current price ($5.63).

The strong correlation between Company performance and our CEO's realizable pay, as reflected in the table above, is a direct function of our CEO's pay mix and the design of our executive compensation programs.

As shown in the graph below, 71% of our CEO's 2018 target total pay was tied to stock performance and 51% of our CEO's 2018 target total pay was tied to performance metrics (PSUs and Annual Incentive). Excluding the one-time cash bonus awarded to Mr. Cutt, his pay mix is similar, with 71% of target total pay tied to stock performance and 50% of target total pay tied to performance metrics.
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12782677&doc=3
Based on the CEO's pay mix, changes in stock price over time have directly and substantially impacted the CEO's realizable pay, highlighting the link between pay and performance.

In addition to pay mix, the design of both our short-term and long-term incentives aligns realizable pay with Company performance. Our AIP metrics are based on short-term goals, the achievement of which the

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Compensation Committee expects will result in strong positioning within our industry and greater shareholder value over time. Generally, the extent to which those goals are achieved directly impacts CEO realizable pay. Our long-term incentives are based primarily on share price and/or relative shareholder return, meaning that, except for special retention awards and certain payments upon termination, pay is realizable only as and when our stock performs. For example, with the decline in commodity prices in our industry and the significant decline in our stock price since the end of 2014, all of our outstanding stock options are out-of-the-money (i.e. have exercise prices greater than the current market price for our common stock) as of December 31, 2018. Additionally, our total shareholder return was at the median of our peers (50th percentile) for the 2016-2018 performance cycle, but the value of the cash payout on the PSUs earned by our CEO was 87% of grant date target value due to stock price performance.

Key Features of Our Executive Compensation Program 

Our Executive Compensation Practices
(What We Do)
ü     Pay for Performance – We structure our CEO's compensation so that more than 85% of our CEO's target total compensation varies based on performance (stock price and performance metrics).
ü     Responsive to Shareholder Feedback – We seek shareholder input on our pay practices and regularly take action on feedback received.
ü     Double-Trigger Severance and LTI Award Vesting – Upon a change in control, LTI awards and cash benefits under our Executive Severance Plan (the CIC Plan) vest or become payable only if the employee is terminated without cause or constructively terminated within three years following the change in control.
ü     Clawback Policy – AIP awards for our Section 16 Officers are subject to clawback in the event of a financial restatement due to fraud or misconduct, at the discretion of the Compensation Committee.
ü     Executive Ownership Guidelines – Our stock ownership guidelines for our executives and directors are consistent with good corporate governance practices, requiring 6x base salary for our CEO, 3x for our CFO and EVP and 2x for other officers.
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     Independent Compensation Consultant – Our 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 comprehensive reports of each NEO's total compensation package prior to making executive compensation decisions.
ü     Annual Risk Assessment of Compensation Practices – Our Compensation Committee conducts an annual risk assessment to consider carefully 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.
Prohibited Executive Compensation Practices
(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 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 return 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.

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Compensation Philosophy and Objectives

In designing and administering our executive compensation program, our Compensation Committee is guided by an overall philosophy that emphasizes the following objectives:

Attract, retain and reward effective leaders. Our philosophy is to attract, retain and reward effective leaders by paying our executives competitively with our peers, with a majority of executive pay being earned over time and dependent on Company performance. In order to gauge whether our compensation structure is competitive with our peers, 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 QEP'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. In connection with the announcement of our 2018 Strategic Initiatives and the announcement of our Board's evaluation of strategic alternatives in February 2019, attraction and retention of executives became of paramount importance.

Incentivize and pay for performance. Our executives should get paid more when the Company and our stock perform well and less when the Company and our stock are not performing well. To create the link between pay and performance, the majority of each of our NEO's compensation is based on the Company's attainment of short-term goals, long-term stock price performance and TSR performance relative to our peers.

Align our executives' interests with our shareholders' interests. Our executive compensation programs should incentivize our executives to think like shareholders and take into account shareholder concerns. Accordingly, a substantial portion of their 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 substantial stock ownership guidelines so that they have an investment in QEP and are incentivized to increase the value of that investment. We also engage in ongoing dialogue with our largest shareholders regarding executive compensation and governance matters, so that our executive compensation programs address any areas of concern.

Ensure appropriate management of risk. Our 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, our Compensation Committee has structured our compensation to include extended three-year vesting schedules on LTI awards, and generally, to base at least a portion of annual incentive awards on meeting strategic objectives regarding safety, legal and regulatory compliance. Annually, the Compensation Committee's independent compensation consultant conducts an assessment of our compensation programs to ensure that our programs do not encourage executives to take inappropriate or excessive risks that could negatively impact the Company. In addition, we strictly prohibit hedging, pledging or derivatives trading of QEP stock.


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Compensation Elements

Our compensation program for NEOs aligns with our compensation philosophy and incorporates elements designed to address a variety of objectives. The following table highlights each element of our compensation program and the primary role of such element in achieving our executive compensation objectives. Refer to specific sections of this proxy statement 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, competitive market data, and the relative value of the individual's role within the Company; and
• Attracts and retains executive talent and helps the Company remain competitive in our industry.
Annual Incentive Program
• Motivates executives to achieve our strategic initiatives;
• Rewards annual Company and individual performance;
• Motivates participants to meet or exceed internal and external performance expectations; and
• Recognizes individual contributions to the organization's results.
Long-Term Incentive Program
w Performance Share Units
w Restricted Stock
w Stock Options

• 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 performance;
• 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
w Health & Welfare
w Retirement
w Deferred Compensation
w Other
• Attracts and retains executive talent and helps the Company 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 and Retention Benefits
w CIC Plan
w 2018 Executive Severance Program



• Attracts and retains executive talent as we execute a change in business strategy in a competitive and changing industry; and
• Ensures executives act in the best interests of shareholders in times of heightened uncertainty.

Base Salary

Our base salary program is designed to reward the NEOs with market competitive salaries based upon their role, experience, competence and sustained performance. The Compensation Committee evaluated base salaries in February 2018 and made minimal adjustments in light of company performance, market rates and implementation of other compensation programs. Salaries for our named executive officers for 2018 were as follows:
NEO
2017 Base Salary
2018 Base Salary
% Change
Mr. Stanley
$850,000
$850,000
—%
Mr. Doleshek
$580,000
$580,000
—%
Mr. Torgerson
$515,000
$515,000
—%
Mr. Woosley
$383,000
$400,000
4%
Ms. Fiala
$288,000
$297,000
3%


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Annual Incentive Program

Our Compensation Committee approves annual cash awards pursuant to the AIP. As reflected in the table below, in early 2018 the Compensation Committee made only one adjustment to our NEOs' AIP targets. Mr. Woosley's target increased from 75% to 80% to incorporate competitive benchmark data and to reflect his responsibilities and contributions relative to that of our other executives.
NEO
2018 AIP Target
 (% of Base Salary)
2018 AIP Target Award
Mr. Stanley
110%
$935,000
Mr. Doleshek
95%
$551,000
Mr. Torgerson
95%
$489,250
Mr. Woosley
80%
$320,000
Ms. Fiala
60%
$178,200

For 2018, our Compensation Committee established specific performance goals for our CEO and CFO related to the execution of our 2018 Strategic Initiatives, as the Compensation Committee determined that our CEO and CFO were in the best position to effect timely and successful implementation of our 2018 Strategic Initiatives. For the remainder of our NEOs, the 2018 AIP consisted of key metrics used in prior years, which were focused on company-wide operations and financial health, and a new cost metric related to lease operating expense and transportation and processing costs, which was based on shareholder feedback and the Compensation Committee's and management's assessment of what will drive success during this strategic transition. The table below summarizes the 2018 AIP metrics. 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.
Metric
What It Is
Why We Used It
How We Set The Target
CEO & CFO (NEW)
Asset Sales ($ million)

The sum of unadjusted gross purchase prices for all Purchase Sale Agreements executed in 2018.
Successful execution of our 2018 business strategy required a swift transition to a Permian pure-play company, balanced with maximizing the value of the assets sold.
Board approved financial analysis.
Permian Total Equivalent Production - Thousand Barrels of Oil Equivalent per Day (Mboed)

Oil, natural gas and natural gas liquids production in the Permian Basin converted to an oil equivalent at a 6-to-1 ratio as measured in Thousand Barrels of Oil Equivalent per Day (Mboed).
Our Permian Basin production goal was derived from our capital spending program and was a key component in our ability to deliver our targeted returns from capital investment.
Board approved 2018 Operating Plan.
Permian Lease Operating Expense plus Adjusted Transportation & Processing Costs ($ per Boe) (Non-GAAP)

An operating cost metric calculated as:
Permian LOE (the cost of operating and maintaining property and equipment on a producing oil and gas lease),
plus Permian Adjusted Transportation & Processing Costs (the cost of transporting, marketing and processing produced oil and gas), divided by Permian Total Equivalent Production (see above).
Ensured focus on profitability and cost control and not just on production "at any cost."
Board approved 2018 Operating Plan.
Other NEOs
Total Equivalent Production - Million Barrels of Oil Equivalent (MMboe)


Oil, natural gas and natural gas liquids production converted to an oil equivalent at a 6-to-1 ratio as measured in Million Barrels of Oil Equivalent (MMboe).
Our production goal was derived from our capital spending program and was a key component in our ability to deliver our targeted returns from capital investment.
Board approved 2018 Operating Plan.

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Metric
What It Is
Why We Used It
How We Set The Target
Drilling Rate of Return (RoR)

Internal RoR for wells drilled Q4 2017 through Q3 2018. Measure estimated future cash flows based on individual well performance results, before taxes, assuming commodity prices of $55 per bbl and $3 per MMbtu of gas.
Well-level economics are the best leading indicator of capital efficiency and successful capital allocation decisions.
Set at a level that covers the cost to drill, complete and equip the individual wells drilled in this period and includes a proportionate share of the acquisition costs, which exceeds our weighted average cost of capital.
Adjusted EBITDA (Non-GAAP)

As disclosed in our quarterly and annual financial statements, this is a non-GAAP financial measure which management defines 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, loss from early extinguishment of debt and certain other items.
Ensured focus on profitability and tied directly to our financial statements.
Board approved 2018 Operating Plan.
Lease Operating Expense plus Adjusted Transportation & Processing Costs ($ per Boe) (Non-GAAP) (NEW)
An operating cost metric calculated as:
LOE (the cost of operating and maintaining property and equipment on a producing oil and gas lease),
plus Adjusted Transportation & Processing Costs (the cost of transporting, marketing and processing produced oil and gas), divided by Total Equivalent Production (see above).
Ensured focus on profitability and cost control and not just on production "at any cost."
Board approved 2018 Operating Plan.
Total Recordable Incident Rate (TRIR)
Number of recordable injuries per 200,000 work hours.
Safety is a critical component of our business. We strive to ensure that all of our employees and contractors go home safely every day.
Based on Bureau of Labor Statistics data as reported in American Petroleum Institute (API) Workplace Injuries and Illness Report.
Environmental Severity Rate (spills)
Number of barrels released per million barrels equivalent produced.
Our core values include operating in an environmentally responsible manner. This year we shifted our focus slightly to measure not the number of spills, but the severity.
Based on operator data reported in American Exploration & Production Council (AXPC) annual benchmarking survey results.
Hazard Identification and Reporting Rate (HIRR)
Number of near misses and safety observations per 200,000 work hours.
This metric provides a leading indicator of safety awareness and safe behaviors which reduces incidents.
Set by Board based on prior year results.














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The Compensation Committee's assessment of 2018 performance for the CEO and CFO scorecard is summarized in the following table:
Metric
Weight
Threshold
50%
Target
100%
Stretch
150%
Max
200%
Result
Score
(Payout %)
Asset Sale Agreements ($ in billions)
60%
$1,600
$2,000
$2,400
$2,800
(1) 
100%(1)
Permian Total Equivalent Production per Day (Mboed)
20%
36.0
38.0
40.0
42.0
44
200%
Permian Lease Operating Expense plus Adjusted Transportation & Processing Expense per Boe2
20%
$7.20
$7.07
$6.91
$6.80
$7.27
0%
Total CEO and CFO Score
 
100%(1)

1.
The Board of Directors exercised its discretion in setting the Asset Sale Agreements Metric and Total CEO and CFO Score at 100%. The performance targets with respect to the Asset Sale Agreements metric were based on the plan to execute purchase and sale agreements for both the Uinta Basin assets and Williston Basin assets in 2018. The Compensation Committee gave credit for the Company’s execution of a third purchase and sale agreement for the divestiture of the Haynesville/Cotton Valley assets in November 2018, which closed in January 2019, but limited the payout score to 100% because total asset sale values were less than anticipated.
2.
Permian Adjusted Transportation & Processing Cost is a Non-GAAP financial measure and includes the Permian portion of the transportation and processing costs shown on the Consolidated Statement of Operations plus the portion of the transportation and processing costs deducted from total revenues for the Permian Basin. Refer to pages 70-71 of our Annual Report on Form 10-K. To calculate the score for the AIP-Permian Lease Operating Expense plus Adjusted Transportation & Processing Costs per BOE metric, our Compensation Committee made adjustments to Permian Lease Operating Expense plus Adjusted Transportation & Processing Costs to eliminate certain expenses associated with Permian infrastructure assets, which were not anticipated by management or the Compensation Committee when setting the performance target. The AIP-Permian Lease Operating Expense plus Adjusted Transportation & Processing Costs per BOE was $7.27 per Boe, which was below the threshold amount, resulting in a 0% payout for this metric.

The Compensation Committee's assessment of 2018 performance for the other NEOs' scorecard is summarized in the following table:
Metric
Weight
Threshold
50%
Target
100%
Stretch
150%
Max
200%
Result
Score
(Payout %)
Total Equivalent Production (MMboe)
20%
47.5
49.0
51.0
52.5
51.9
179%
Drilling Rate of Return
20%
25%
35%
42.5%
55%
34.4%
97%
AIP-Adjusted EBITDA1
20%
 $841
 $891
 $991
 $1,041
$947.0
128%
AIP-Lease Operating Expense plus Adjusted Transportation & Processing Costs per Boe2
20%
 $9.03
 $8.87
 $8.66
 $8.52
$8.32
200%
Health, Safety and Environment
20%
 
 
 
 
 
 
Hazard Identification Reporting Rate
 
200
225
248
276
279
200%
Total Recordable Incident Rate
 
1.11
0.90
0.77
0.54
0.54
200%
Spill Severity Rate
 
40.0
30.0
20.0
9.0
41.2
0%
Total Score
 
147%

1.
To calculate the score for the AIP-Adjusted EBITDA, our Compensation Committee made adjustments to reported Adjusted EBITDA to eliminate the impact of expenses associated with the implementation of our 2018 Strategic Initiatives (for example, restructuring costs) and other special projects. The Adjusted EBITDA reported on pages 64-65 of our Annual Report on Form 10-K of $974.8 million was increased by $61 million to eliminate the costs associated with our 2018 Strategic Initiatives, resulting in AlP-Adjusted EBITDA of $1,035.8 million. Further, the Board of Directors used its discretion to reduce the AIP-Adjusted EBITDA by the amount of the Company's capital expenditures in excess of the amount approved by the Board in January 2018. AlP-Adjusted EBITDA was calculated as follows:

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 2018 ($ in millions)
Adjusted EBITDA
$974.8
Restructuring costs
$54.3
Special projects
$6.7
AIP-Adjusted EBITDA
$1,035.8
Board of Directors Adjustment
$(88.8)
Final AIP-Adjusted EBITDA
$947

2.
To calculate the score for the AIP-Lease Operating Expense plus Adjusted Transportation & Processing Costs per Boe, our Compensation Committee made adjustments to Lease Operating Expense plus Adjusted Transportation & Processing Costs to eliminate certain expenses associated with Permian infrastructure assets, which were not anticipated by management or the Compensation Committee when setting the performance target. The Lease Operating Expense reported on page 70 of our Annual Report on Form 10-K of $263.1 million was reduced by $4.1 million, or $0.08 per Boe, which resulted in AIP-Lease Operating Expense plus Adjusted Transportation & Processing Costs per Boe of $8.32 per Boe, calculated as follows:
 
2018 ($ in millions, except per Boe)
Lease Operating expense (LOE)
$263.1
Minus: Permian infrastructure adjustment for AIP
$(4.1)
LOE, as adjusted
$259
Plus: Adjusted transportation & processing (T&P) costs
$172.6
LOE plus Adjusted T&P Costs, as adjusted
$431.6
Total Equivalent Production (MMboe)
$51.9
AIP-LOE & Adjusted T&P per Boe
$8.32

2018 AIP Payouts

In February 2019, our Compensation Committee determined 2018 AIP payouts for our NEOs based on AIP scorecard performance and target individual performance.

The following table shows the 2018 AIP payouts for our NEOs.
NEO
Target Award
Scorecard Result
Target Award Adjusted for Company Score
Final Award
Mr. Stanley1
$935,000
100%
$935,000
$935,000
Mr. Doleshek
$551,000
100%
$551,000
$551,000
Mr. Torgerson2
$489,250
n/a
n/a
$489,250
Mr. Woosley
$320,000
147%
$470,400
$470,400
Ms. Fiala2
$178,200
n/a
n/a
$44,550

1.
Mr. Stanley's AIP payout was paid at target for 2018 pursuant to his severance arrangement, based on the Compensation Committee's assumption of a 100% result for the 2018 CEO/CFO scorecard.
2.
Mr. Torgerson's and Ms. Fiala's AIP payouts were based on their target AIP awards for 2018 pursuant to the terms of their Severance Participation Letters.


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Long-Term Incentive Program

Our long-term incentive (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. Our Compensation Committee first determines the total target LTI value for the annual grant to NEOs. When setting the total target LTI value for 2018, as reflected in the table below, our Compensation Committee reduced the grant value to our CEO by 10% in light of the Company's 2017 performance and increased the total target LTI value for Mr. Woosley to incorporate competitive market data and recognize individual contributions.
NEO
2017 LTI Grant Value
2018 LTI Grant Value
% Change
Mr. Stanley
$4,800,000
$4,320,000
(10
)%
Mr. Doleshek
$2,360,000
$2,360,000
 %
Mr. Torgerson
$2,200,000
$2,200,000
 %
Mr. Woosley
$1,000,000
$1,110,000
11
 %
Ms. Fiala
$475,000
$475,000
 %

Our Compensation Committee then determined how to deliver the total target LTI value through a mix of vehicles including PSUs and restricted stock. While stock options had been utilized in prior years, our Compensation Committee decided not to grant stock options to executives in 2018 due to a significant decline in the prevalence of stock options in our industry. In 2018, our LTI mix for NEOs was 50% restricted stock and 50% PSUs, except for Ms. Fiala who received 60% restricted stock and 40% PSUs.
 
In May 2018, our shareholders approved the 2018 Long-Term Incentive Plan (LTIP), which replaces the 2010 Long-Term Stock Incentive Plan (LTSIP). Awards approved by the Compensation Committee in February 2018 and priced on March 1, 2018, were made under the LTSIP. Retention awards of restricted stock to Mr. Woosley approved by the Compensation Committee and the Board on December 5, 2018, and granted on March 1, 2019, were made under the LTIP.

Performance Share Units

PSUs utilize phantom shares of stock that track the value of QEP shares but are typically settled in cash. PSUs align our executive compensation with the Company's TSR performance relative to our peers in the industry. The value realized for PSUs is dependent on both QEP's stock price and our TSR performance relative to our peers over a three-year period. The following chart summarizes the features of the PSU grants to our NEOs under our Cash Incentive Plan (CIP).
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, if any, to determine the total return to the shareholder. TSR is calculated using the average share price for the quarter immediately prior to the beginning and at the 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 or shares upon Board certification in the first quarter of the following year.
Target Number of PSUs Awarded
The target number of PSUs awarded 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 2018-2020 performance period, granted in March 2018, the peer group is outlined in the section below titled "Compensation Process - Determination of Peer Group".
Performance Scale
The performance scale is based on QEP's percentile rank in the peer group, with linear interpolation between each point:
• 90th percentile or above: 200% score
• 70th percentile: 150% score
• 50th percentile: 100% score
• 30th percentile: 50% score
• Below 30th percentile: 0% score

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Cap/Floor
For awards granted in March 2018, a payout cap and floor applies based on absolute TSR performance. If QEP's TSR is between 0% and -25%, the payout is capped at 150% and if QEP's TSR is less than -25% the payout is capped at 100%. Likewise, if QEP's annualized TSR is greater than 15% during the performance period, the payout will be a minimum of 50%.
Payout Calculation
Cash payouts under the program at the end of the performance period are calculated using the following formula: Target # PSUs awarded times Performance Score times Average Q4 stock price of the final year of the performance period (Note: if awards are to be paid in shares, the same payout formula is used but would exclude the Average Q4 stock price component).
Termination Rules
For terminations without cause or for good reason through September 30, 2020, as defined in the February 2018 Participation Letters for our NEOs, PSUs fully vest and are paid based on actual performance through the last day of the month prior to termination. Otherwise, shares automatically vest only upon an involuntary or constructive termination following a change in control (double trigger) per the terms of our Executive Severance Plan. See the "Compensation Tables – Potential Payments Upon Termination or Change in Control" section below for more information. In the event of retirement, death or disability, the number of PSUs is prorated based on termination date and paid based on actual performance at the end of the applicable performance period.

2016-2018 PSU Performance Period

The awards granted in February 2016 for the 2016-2018 performance period were eligible to vest upon the end of the performance period on December 31, 2018, subject to our relative TSR during the performance period as certified by our Compensation Committee. QEP's TSR ranked at the 50thpercentile of our peers, which resulted in a cash payout at 87% of grant date target value for each NEO who was employed as of the end of the performance period based on the vesting of 100% of the targeted number of PSUs. Our total shareholder return was just below the median of our peers, but the decline in absolute share price over the period decreased the payout value of the award as compared to the grant date target value. The TSR ranking for the 2016-2018 performance period as compared to QEP's peers was as follows:

Company
Ticker
TSR
TSR %ile Rank
Performance Score %
WPX Energy, Inc.
WPX
104.01%
100%
 
Continental Resources, Inc.
CLR
59.86%
96%
 
Diamondback Energy, Inc.
FANG
50.77%
92%
 
Concho Resources, Inc.
CXO
23.93%
88%
 
Cabot Oil & Gas Corporation
COG
22.92%
83%
 
Encana Corporation
ECA
20.36%
79%
 
Denbury Resources, Inc.
DNR
6.79%
75%
 
Oasis Petroleum, Inc.
OAS
-15.08%
71%
 
SM Energy Company
SM
-23.15%
67%
 
Cimarex Energy Company
XEC
-24.96%
63%
 
Antero Resources Corporation
AR
-33.57%
58%
 
EQT Corporation
EQT
-38.47%
54%
 
QEP Resources, Inc.
QEP
-39.70%
50%
100%
Chesapeake Energy Corporation
CHK
-44.64%
46%
 
Whiting Petroleum Corporation
WLL
-45.88%
42%
 
Newfield Exploration Company
NFX
-45.98%
38%
 
Range Resources Corporation
RRC
-47.98%
33%
 
Southwestern Energy Company
SWN
-49.81%
29%
 
Carrizo Oil & Gas, Inc.
CRZO
-51.44%
25%
 

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Laredo Petroleum, Inc.
LPI
-52.07%
21%
 
Gulfport Energy Corporation
GPOR
-67.16%
17%
 
EP Energy Corporation
EPE
-72.42%
13%
 
Energen Corporation1
EGN
-100.00%
0%
 
Rice Energy, Inc.1
RICE
-100.00%
0%
 
Ultra Petroleum Corporation1
UPLMQ
-100.00%
0%
 
 
1Per the Performance Share Unit Award Agreement, should a peer company file a bankruptcy or similar petition or otherwise seek any protection from creditors under an available legal process or cease to exist as a separate publicly traded company during the Performance Period (e.g., due to acquisitions, etc.), it will nonetheless remain as a member of the Company’s peer group for purposes of the Payout calculation and the Company shall be ranked higher than such peer company for purposes of the Payout calculation.

The payout on the PSUs for the 2016-2018 performance period was as follows:
NEO
Target Award Value
Grant Price (2016)
Target PSUs
Performance Score
Vest Price (2018)
Cash Payout1
Cash Payout % of Target Award Value
Mr. Stanley
$2,160,003
$10.12
213,439

100%
$8.78
$1,873,994
87%
Mr. Doleshek
$1,062,003
$10.12
104,941

100%
$8.78
$921,382
87%
Mr. Torgerson
$900,002
$10.12
88,933

100%
$8.78
$780,832
87%
Mr. Woosley
$324,002
$10.12
32,016

100%
$8.78
$281,100
87%

1The payout calculation is Target # PSUs x % Performance Score (rounded up to whole shares) x Vest Price (Average Q4 stock price of final year of performance period).

Pursuant to the terms of her Severance Participation Letter, the vesting was accelerated on all of Ms. Fiala’s unvested PSUs to provide for payout based on actual performance in relation to the applicable performance measures through February 28, 2018, the end of the month prior to the month of the termination of her employment, resulting in a payout of 134% of the 19,896 PSUs for the 2018-2020 performance period, no payout for the 11,190 PSUs for the 2017-2019 performance period and a payout of 69% for the 16,898 PSUs for the 2016-2018 performance period (for a total payment of $362,133).

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 following chart summarizes the features of the restricted stock granted to our NEOs. The terms of the restricted stock awards are the same under both the LTSIP and LTIP.
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 Awarded
The number of shares awarded 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, if declared, are paid on unvested (restricted) shares.
Termination Rules
For terminations without cause or for good reason through September 2020, as defined in the February 2018 Participation Letters for our NEOs, all unvested shares fully vest. Otherwise, shares automatically vest only upon an involuntary or constructive termination following a change in control (double trigger) per the terms of our CIC Plan. See the "Compensation Tables – Potential Payments Upon Termination or Change in Control" section below for more information.




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Stock Options

While stock options had been utilized in prior years, our Compensation Committee noted a significant decline in the prevalence of stock options in our industry and decided not to grant stock options to executives for 2018. Stock options granted to our NEOs in 2016 and 2017 are still subject to vesting. The following chart summarizes the features of the stock options granted to 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.
Number of Options Awarded
The number of options awarded 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.
Term
Stock options expire seven years from the date of grant if not earlier exercised or forfeited upon the executive's termination of employment.
Value Realized
The grants have no value unless the share price increases above the stock price after the grant date.
Termination Rules
For terminations without cause or for good reason through September 2020, as defined in the February 2018 Severance Participation Letters for our NEOs, all unvested shares fully vest. Otherwise, shares automatically vest only upon an involuntary or constructive termination following a change in control (double trigger) per the terms of our CIC Plan. See the "Compensation Tables – Potential Payments Upon Termination or Change in Control" section below for more information.

Other
The LTSIP and LTIP do not permit backdating, discounting or repricing of stock options without shareholder approval.


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2018 Executive Severance Program

In February 2018, our Compensation Committee and Board approved an executive severance program as a part of the 2018 Strategic Initiatives (2018 Executive Severance Program). The goal of the program is to address the uncertainty for executives during and as a result of the Company's transition and retain executive management who are integral to the successful execution of our 2018 Strategic Initiatives.

In February 2018, our Compensation Committee and Board approved a cash retention payment of $500,000 payable in March 2019, subject to continued employment through such date, for each of our named executive officers other than Mr. Stanley and Mr. Doleshek.

Also pursuant to the 2018 Executive Severance Program, each of the Company's named executive officers executed Severance Participation Letters. These letter agreements provide that in the event the executive's employment with the Company is terminated without Cause or the executive resigns his or her employment for Good Reason (as such terms are defined in the Severance Participation Letters) and such termination or resignation occurs prior to September 30, 2020, the executive will be entitled to receive the following severance payments and benefits, subject to the execution and non-revocation of a release of claims agreement containing, among other terms, confidentiality and non-solicitation restrictions, and other customary conditions:

A lump sum cash payment equal to 1.5 times (2.5 times for Mr. Stanley and Mr. Cutt and 2.0 times for Mr. Doleshek) the sum of the executive's annual base salary and annual target bonus award opportunity;
A pro-rated bonus award for the year of termination, which will be at the target level for all executives, except that Messrs. Stanley, Cutt and Doleshek, will be based on actual performance for the year1;
A pro-rated retention award, if applicable;
Accelerated vesting of all outstanding equity and long-term incentive awards, provided that the vesting of PSUs is based on and subject to the actual level of performance in relation to applicable performance measures through the period ended on the last day of the month prior to the month of termination;
A lump sum cash payment representing 24 months (36 months for Mr. Cutt) of premium payment amounts required to continue the executive's and the executive's covered dependents' medical, dental and vision coverage pursuant to COBRA; and
For executives participating in the Pension Plan and/or the SERP, a cash payment representing two additional years of service credit under such plans, plus interest credited from the date of termination through the date of such payment.

The severance benefits payable under the Severance Participation Letters are in lieu of any other severance entitlements applicable to the participating executives, provided that in the event a change in control of the Company occurs during the term of the Severance Participation Letters, the executives will not receive the benefits under the Severance Participation Letters and will instead be eligible to receive the benefits provided under the CIC Plan as discussed under "Compensation Tables - Potential Payments Upon Termination or Change in Control" below.

In anticipation of the payout in March 2019 of the February 2018 retention bonus to Mr. Woosley, the Compensation Committee and Board implemented an additional retention agreement for Mr. Woosley in December 2018, which became effective March 1, 2019, subject to continued employment and the provisions of the Severance Participation Letter. The additional retention agreement provided Mr. Woosley with a $250,000 restricted stock grant on March 1, 2019, which will vest in full on July 1, 2020, as well as cash retention bonuses of (i) $125,000 payable on August 1, 2019 and (ii) $125,000 payable on December 31, 2019, subject in each case to Mr. Woosley's continued employment through such dates.






1Mr. Stanley's actual AIP payout upon retirement was at target pursuant to his severance arrangement, which was based on the Compensation Committee's assumption of results for the 2018 CEO/CFO scorecard.

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Compensation Process

Our Compensation Committee is guided by the compensation philosophy described above and utilizes the expertise and objectivity of the independent Consultant (defined below) and competitive benchmarking to ensure our executive compensation programs continue to support our business objectives.

Compensation Committee's Decision Making Process

Our Compensation Committee meets at least once per quarter to evaluate and oversee our compensation programs, with standing agenda items that align with responsibilities outlined in the Compensation Committee Charter and otherwise help the Compensation Committee fulfill its responsibilities.

In the first quarter of each year, the Compensation Committee:

Assesses risks associated with our compensation programs;
Approves key financial, operational and strategic goals and weightings for the current year AIP based on recommendations and input from management;
Selects the peer group for the PSU awards and compensation benchmarking;
Establishes targeted compensation for the NEOs, including base salary, AIP target award and LTI grant value;
Assesses overall company performance against goals in the prior year;
Assesses performance of each NEO;
Determines payout amounts for the prior year AIP, including, in its sole discretion, increases or decreases to individual NEO awards; and
Certifies results for outstanding PSU awards.

With the support of the Consultant, the Compensation Committee recommends total compensation for the CEO, which is approved by all of the independent directors, except in the case of Mr. Stanley's compensation. Mr. Baker did not participate in the setting of Mr. Stanley's compensation, because Mr. Stanley serves as a director of Hecla Mining where Mr. Baker is the CEO.

At subsequent meetings throughout the year, our CEO provides updates on progress toward our AIP goals and relative TSR performance under outstanding PSU awards. The Compensation Committee also receives updates on governance and regulatory trends and analysis and benchmarking provided by the Consultant.

In the third quarter of each year, the Consultant conducts a benchmarking analysis to use as a reference point for assessing the competitiveness of QEP's executive compensation programs. The peer group benchmarking analysis includes the 25th, 50th and 75th percentiles for each component of compensation (base salary, AIP and LTI) 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 allow for informed decisions. This approach provides flexibility to our Compensation Committee to address several different factors such as proficiency in role, scope of role, succession potential and internal pay equity.

To support specific compensation decisions, the Compensation Committee also reviews information provided by tally sheets, including stock ownership levels and calculations of potential payments upon various termination events.


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Table of Contents

Role of the Chief Executive Officer/Other Officers

The Compensation Committee considers input from the CEO when assessing overall company performance as well as individual performance of our other NEOs. The CEO does not participate in discussions or recommendations regarding his own compensation. Our CEO provides a written assessment of his performance to the independent directors at the end of each year. In the first quarter, the Board meeting agenda includes a discussion of the CEO's performance evaluation. 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. The Vice President, Human Resources does not participate in discussions or recommendations regarding her own compensation.

Role of the Independent Compensation Consultant

Our Compensation Committee has engaged Meridian Compensation Partners, LLC (Consultant) as its independent 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;
The Consultant's extensive experience and familiarity with 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;
Evaluating any risks to our Company due to our executive compensation program;
Reviewing plan design and recommendations periodically;
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.

During 2018, the Consultant provided input on our 2018 Executive Severance Program and the compensation package for our new CEO.

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 on occasion met with the Chair of the Compensation Committee or 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 2018 did not create any conflicts of interest and that the Consultant remains independent.


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Table of Contents

Determination of Peer Group

Our Compensation Committee maintains a 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 primary 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. The Compensation Committee uses a peer group for determining relative TSR performance under the PSU program and for benchmarking executive compensation.

In July 2017, our Compensation Committee reevaluated the peer group based on industry dynamics and made several changes. We have historically used a subset of the relative TSR peer group that better reflects QEP's size to benchmark executive compensation. The Compensation Committee concluded that two groups were not necessary for 2018 as the peer group did not have companies significantly larger than QEP. The peer group below was used for benchmarking compensation for 2018 and for determining relative TSR performance for our 2018 PSU awards, with new companies denoted with an asterisk (*).

2018 Peer Group
Callon Petroleum Co.*
Gulfport Energy Corp.
PDC Energy Inc.*
Carrizo Oil & Gas Inc.
Jagged Peak Energy Inc.*
Range Resources Corp.
Centennial Resource Development Inc.*
Laredo Petroleum Inc.
RSP Permian Inc.*
Cimarex Energy Co.
Matador Resources Co.*
SM Energy Co.
Diamondback Energy Inc.
Newfield Exploration Co.
Southwestern Energy Co.
Energen Corp.
Oasis Petroleum Inc.
Whiting Petroleum Corp.
EP Energy Corp.
Parsley Energy Inc.*
WPX Energy Inc.
Extraction Oil & Gas Inc.*
 
 

Removed for 2018: Antero Resources Corp., Cabot Oil and Gas Corp., Chesapeake Energy Corp., Concho Resources Inc., Continental Resources Inc., Denbury Resources Inc., Encana Corp., EQT Corp., and Rice Energy Inc.

In July 2018, our Compensation Committee reconstructed the peer group in light of the 2018 Strategic Initiatives to transition our Company to a pure-play Permian Basin company. The new peer group generally reflects similarly sized, publicly traded companies with primary operations in the Permian Basin. Due to industry activity after July 2018 and because the reconstituted peer group has some companies significantly larger than QEP, the Compensation Committee concluded that our peer group used for executive compensation benchmarking should be different than the peer group used to determine relative TSR performance. New companies are denoted with an asterisk (*). The Compensation Committee used the following peer group to determine the compensation package for Mr. Cutt, our new CEO, in December 2018 and for executive compensation benchmarking for 2019.
2019 Peer Group - Executive Compensation
Callon Petroleum Co.
Laredo Petroleum Inc.
SM Energy Co.
Carrizo Oil & Gas Inc.
Matador Resources Co.
SRC Energy Inc.*
Centennial Resource Development Inc.
Newfield Exploration Co.
Whiting Petroleum Corp.
Extraction Oil & Gas, Inc.
Oasis Petroleum Inc.
Wildhorse Resource Development Corp.*
Jagged Peak Energy Inc.
PDC Energy Inc.
 

Removed for 2019: Cimarex Energy Co., Diamondback Energy Inc., Energen Corp., EP Energy Corp., Gulfport Energy Corp., Parsley Energy Inc., Range Resources Corp., RSP Permian Inc., Southwestern Energy Co., and WPX Energy Inc.


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The Compensation Committee identified the following peer group for determining relative TSR performance for our PSU awards for the 2019 to 2021 performance period.
2019 Peer Group - Relative TSR
Callon Petroleum Co.
Laredo Petroleum Inc.
SM Energy Co.
Carrizo Oil & Gas Inc.
Matador Resources Co.
SRC Energy Inc.*
Centennial Resource Development Inc.
Oasis Petroleum Inc.
Whiting Petroleum Corp.
Jagged Peak Energy Inc.
PDC Energy Inc.
WPX Energy Inc.

Removed for 2019: Cimarex Energy Co., Diamondback Energy Inc., Energen Corp., Extraction Oil & Gas, Inc., Gulfport Energy Corp., Newfield Exploration Co., Parsley Energy Inc., Range Resources Corp., RSP Permian Inc., Southwestern Energy Co., and Wildhorse Resource Development Corp.

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 2018 Executive Severance Program provides certain benefits to our executives upon a termination without cause or a termination for good reason prior to September 30, 2020. The CIC Plan provides certain benefits to our executives upon a qualifying termination after a change-in-control of the Company. These benefits are based on a review of market practices and do not include any excise tax gross-ups. Our Compensation Committee believes these benefits support our business strategy by encouraging our officers to execute on our strategic initiatives and consider other strategic alternatives to increase shareholder value without regard to the impact on their future employment. For additional details regarding these plans, see the "Compensation Tables - Potential Payments Upon Termination or Change in Control" section below.

Executive Share Ownership Guidelines

Our Compensation Committee believes it is important to have stock ownership guidelines for executive officers to promote ownership of our common stock and align the interests of our executive officers with those of our shareholders. Our executives are required to achieve the applicable level of stock ownership within five years of the date the person first becomes an executive 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), phantom stock attributable to deferred compensation under the QEP Deferred Compensation Wrap Plan (described below) and PSUs.

The ownership guidelines for our NEOs are currently established at the following minimum levels:
NEO
Guideline
Ownership Status as of 12/31/18
Mr. Stanley
6x base salary
In compliance
Mr. Doleshek
3x base salary
In compliance
Mr. Torgerson
3x base salary
In compliance
Mr. Woosley
2x base salary
In compliance


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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 Internal Revenue Code of 1986, as amended (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, as modified by the Tax Cuts and Jobs Act of 2017, generally precludes us from deducting for tax purposes compensation paid in excess of $1,000,000 in any taxable year to any "covered employee" (generally, any individual that has ever been listed in the Summary Compensation Table for our 2017 or later proxy statements), unless the compensation is paid pursuant to a written contract that was in existence on or prior to November 2, 2017 and either (i) qualifies as "performance-based compensation" or (ii) is otherwise exempt under certain Section 162(m) grandfathering rules. 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 Compensation Committee may also attempt to structure compensation programs that are otherwise tax-advantageous to us. As of December 31, 2018, only awards of PSUs granted under our CIP prior to November 2, 2017, can constitute performance-based compensation, although there is no requirement or guarantee that such awards will, in fact, qualify as performance-based compensation. No equity incentive awards issued under our LTSIP will constitute performance-based compensation, as the LTSIP was not approved by our shareholders subsequent to the spin-off of the Company from Questar Corporation in 2010. Equity incentive awards issued under the 2018 LTIP will not be grandfathered, as the 2018 LTIP was adopted after November 2, 2017.

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 or arrangements. 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/or 2018 LTIP 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 or, in the case of awards settled in cash (such as our PSUs), requires the recognition of expense based on the cash liability of such awards adjusted each measuring period. Our Compensation Committee considers the accounting and financial statement impact in evaluating QEP's executive compensation programs.

Assessment of Our Executive Compensation Program's Impact on Risk Taking

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 programs do 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:
 

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An appropriate balance of strategic, operating and financial performance measures, which generally include operational metrics specifically targeted at the health and safety aspects of the Company's business;
A compensation clawback policy for amounts paid under the AIP (see the "Key Executive Compensation Design Policies and Considerations - Clawback of Compensation" section below);
An appropriate balance of fixed and Company performance-related compensation components;
A mix of cash and equity, with significant weight placed on LTI awards;
Significant stock ownership requirements and policies prohibiting hedging, pledging and engaging in derivative transactions for all executives;
Extended three-year vesting schedules on equity grants;
Caps and defined thresholds for payout on most 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 and officers from engaging in derivative transactions involving QEP stock for any purpose, including short-term trading, options trading, pledging, trading on margin and hedging.

Clawback of Compensation

Upon the recommendation of our Compensation Committee, our Board of Directors adopted a clawback policy in 2015 in advance of final SEC rules implementing Section 954 of the Dodd-Frank Act. Pursuant to this policy, AIP payouts to our Section 16 officers are subject to clawback in the event of a restatement of our financial statements due to fraud or misconduct, at the discretion of the Compensation Committee. Our Compensation Committee will continue to monitor the status of the anticipated SEC rules to ensure our clawback policy complies with final rules when they are implemented.

Succession Planning

QEP conducts a comprehensive succession planning process that involves assessment across the organization of employee performance and potential and readiness of potential successors for key roles and developmental needs. This process also helps inform our Compensation Committee in making compensation decisions. Our 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.


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COMPENSATION TABLES

Summary Compensation Table

The following table summarizes the total compensation paid to our NEOs for services rendered during the fiscal years ended 2018, 2017 and 2016, except that only 2017 and 2018 compensation is summarized for Ms. Fiala, as she was not an NEO in 2016:
Name and 
Principal
Position
Year
Salary
Bonus
Stock
Awards
1
Option
Awards
2
Non-Equity
Incentive
Plan
Compen-
sation
3
Change in
Pension Value
and
Nonqualified
Deferred
Compen-sation
Earnings
4

All Other
Compen-
sation
5
Total6
(a)
(b)
($)
($)
($)
($)
($)
($)
($)
($)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Charles B. Stanley
Chairman, President,
and CEO
2018
850,000

 

 
4,320,018

 

 
935,000

593,700

99,712

6,798,430

2017
850,000

 

 
3,840,010

 
871,757

 
670,208

844,491

154,703

7,231,169

2016
850,000

 

 
3,780,013

 
534,319

 
1,105,000

726,980

100,300

7,096,612

Richard J. Doleshek
Executive Vice President, CFO
2018
580,000

 

 
2,360,016

 

 
551,000

417,370

66,997

3,975,383

2017
576,458

 

 
1,888,023

 
428,618

 
394,957

503,763

104,972

3,896,791

2016
563,000

 

 
1,858,508

 
262,707

 
724,581

388,479

66,602

3,863,877

Jim E. Torgerson
Executive Vice President, QEP Energy
2018
515,000

 

 
2,200,014

 

 
489,250


77,756

3,282,020

2017
511,667

 

 
1,760,028

 
399,559

 
350,694


111,531

3,133,479

2016
499,000

 

 
1,575,006

 
222,633

 
583,830


77,162

2,957,631

Christopher K. Woosley
Senior Vice President and General Counsel
2018
396,458

 

 
1,110,016

 

 
470,400


71,102

2,047,976

2017
375,500

 

 
800,030

 
181,621

 
386,064


73,224

1,816,439

2016
347,000

 

 
708,754

 
100,185

 
315,770


51,806

1,523,515

Margo D. Fiala
Former Vice President, Human Resources
2018
125,015

7 
41,667

8 
1,309,604

9 
42,575

10 


817,723

2,336,584

2017
285,917

 

 
380,012

 
86,273

 
154,829


55,249

962,280

2016

 

 

 

 





1.
Amounts in column (e) include awards of PSUs granted under the CIP and restricted stock granted under the LTSIP, 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 2018
Name
Performance Share Unitsa,b
($)
Restricted Stockb
($)
Mr. Stanley
2,160,009

2,160,009

Mr. Doleshek
1,180,008

1,180,008

Mr. Torgerson
1,100,007

1,100,007

Mr. Woosley
555,008

555,008

Ms. Fialac
552,140

757,464


a.
The maximum grant date values of the PSUs assuming the highest level of performance achievement (based upon QEP's common stock price on the date of issuance, and assuming that each individual ultimately earns 200% of the total number of PSUs granted) are as follows: Mr. Stanley, $4,320,018; Mr. Doleshek, $2,360,016; Mr. Torgerson, $2,200,014; Mr. Woosley, $1,110,016; and Ms. Fiala $1,104,280.
b.
The grant date fair values for the 2018 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.
Pursuant to the terms of her Severance Participation Letter, the vesting of all of the 47,984 unvested PSUs and 43,991 shares of restricted stock held by Ms. Fiala as of March 30, 2018, her last day of employment, was accelerated.
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 method. The following table includes the assumptions used to calculate the aggregate grant date fair value of option awards reported for 2017 and 2016 (no options were granted in 2018):

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Grant Date
Assumptions

Volatility
(%)
Expected Life
(Years)
Risk-Free
Interest Rate
(%)
Dividend Yielda
(%)
2/13/2017
43.8
4.5
1.8
2/16/2016
43.4
4.5
1.2

a.
The Board suspended dividends in early 2016.

3.
Amounts in column (g) reflect the annual cash incentive awards (i.e., the AIP awards) for 2018. The AIP award for Mr. Stanley was based on the target award pursuant to his severance arrangement following his departure, based on the Compensation Committee's assumption of a 100% result for the 2018 CEO/CFO scorecard. The AIP awards for Mr. Torgerson and Ms. Fiala were based on the target award pursuant to their severance arrangements following their departures. The AIP awards for Messrs. Doleshek and Woosley were determined by the Compensation Committee in February 2019 and paid out on March 1, 2019.
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 2018 Pension Benefits Table below, 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. Mr. Torgerson and Mr. Woosley are not, and Ms. Fiala was 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 column (d) in the "2018 Nonqualified Deferred Compensation" table included in the "Savings Plans" section below do not consist of any above-market or preferential earnings.
5.Amounts in column (i) include the following:
Name
Employer Matches under Savings Plans($)a
Officer Allowance($)
Severance($)b
Total($)
Mr. Stanley
91,212

8,500


99,712

Mr. Doleshek
58,497

8,500


66,997

Mr. Torgerson
69,256

8,500


77,756

Mr. Woosley
62,602

8,500


71,102

Ms. Fiala
19,166

8,500

790,057

817,723


a.
Includes 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 2018 Nonqualified Deferred Compensation table.
b.
Represents cash severance paid pursuant to the terms of Ms. Fiala’s Severance Participation Letter and the 2018 Executive Severance Program upon her departure. Ms. Fiala’s prorated retention bonus is included in column (d) for Bonus.

6.
As reflected in the Summary Compensation Table above, the salary received by each of our NEOs as a percentage of his or her respective total compensation during the year indicated was as follows: 
Name
Year
Percentage of Total Compensation
Mr. Stanley
2018
12.5%
2017
11.8%
2016
12.0%
Mr. Doleshek
2018
14.6%
2017
14.8%
2016
14.6%
Mr. Torgerson
2018
15.7%
2017
16.3%
2016
16.9%
Mr. Woosley
2018
19.4%
2017
20.7%
2016
22.8%
Ms. Fiala
2018
5.4%
2017
29.7%

7.
Ms. Fiala's salary amount includes $40,265 of accrued vacation, which was payable upon her departure.
8.
Ms. Fiala received a prorated portion of her retention bonus.
9.
Pursuant to the terms of Ms. Fiala’s Severance Participation Letter, the vesting of the 47,984 PSUs and 43,991 shares of restricted stock held by Ms. Fiala was accelerated, instead of the awards being forfeited, upon her departure. Modification of the vesting of the PSUs and restricted stock requires the presentation of the fair value of the modified awards as "new" grants in the table as of the modification date. Accordingly, the amounts shown in the Stock Awards column include (i) the grant date fair value of the 19,896 PSUs

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granted on March 1, 2018 ($190,007 as of the day of the grant), (ii) the fair value of those same 19,896 PSUs and of 28,088 PSUs granted in prior years, to reflect the modifications of the PSUs ($362,133 as of the date of the modification), which fair value is based on performance in relation to the applicable performance measures through February 28, 2018 (i.e., payout on 134% of the 19,896 PSUs for the 2018-2020 performance period, 0% of the 11,190 PSUs for the 2017-2019 performance period and 69% of the 16,898 PSUs for the 2016-2018 performance period); (iii) the grant date fair value of the 29,843 shares of restricted stock granted on March 1, 2018 ($285,001 as of the day of the grant), and (iv) the fair value of those same 29,843 shares of restricted stock and of 14,148 shares of restricted stock granted in prior years to reflect the modification on the awards ($472,463 as of the date of the modification).
10.
Pursuant to the terms of Ms. Fiala’s Severance Participation Letter, the vesting of options to purchase 13,508 shares of common stock was accelerated, instead of the awards being forfeited, upon her departure. Modification of the vesting of the options requires the calculation of the fair value of the modified options as of the modification date. Accordingly, the amount shown in column (f) for 2018 includes the difference between the fair value before and after modification. The table below shows the assumptions used to calculate the fair value of options on the date of modification:
Grant Date
Modification Date
Assumptions

Volatility
(%)
Expected Life
(Years)
Risk-Free
Interest Rate
(%)
Dividend Yielda
(%)
2/13/2017
4/11/2018
55.7
2.9
2.4
0
2/16/2016
4/11/2018
55.9
2.4
2.4
0

a.
The Board suspended dividends in early 2016.

CEO Pay Ratio


The SEC requires disclosure of the CEO to median employee pay ratio. Mr. Stanley's 2018 total compensation was $6,798,430 as reported in the Summary Compensation Table. Our median employee's total compensation for 2018 was $197,869. As a result, Mr. Stanley's total compensation for 2018 was approximately 34 times that of our median employee's total compensation.

In determining our median employee, we defined compensation using a consistently applied compensation measure to include annualized base salary plus any additional wages (e.g. overtime earnings), annual incentive paid and grant date fair value of long-term incentives. We determined a new median employee for 2018, rather than using the same median employee from 2017, because our employee population has changed as a result of asset divestitures pursuant to our 2018 Strategic Initiatives. We determined our median employee based on our employee population (including part-time employees) as of December 1, 2018, which is within the last three months of our fiscal year.

Median employee total compensation increased in 2018, as compared with 2017, due to: 1) changes in our employee population as a result of asset divestitures pursuant to our 2018 Strategic Initiatives; 2) retention bonuses in place due to strategic initiatives, which were payable to non-executives in 2018 and for which our CEO was not eligible; and 3) a difference in Annual Incentive Payout calculation as a result of a company score of 147% for the Other NEOs scorecard (which also applies to the median employee) vs. a score of 100% for the CEO/CFO scorecard. As a result, the ratio between CEO and median employee pay is 36% lower in 2018 as compared with 2017.

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Table of Contents

Grants of Plan-Based Awards for 2018

This table sets forth the plan-based awards granted to the NEOs during 2018. For non-equity and equity incentive plans, it provides the ranges of possible awards. For stock and option awards, the table sets forth the number of shares of restricted stock or stock 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
($/share)
Grant Date
Fair Value
of Stock
and Option
Awards
($)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Charles B.
Stanley
3/1/18
AIP
1,2 
-
935,000

1,870,000

 
 
 
 
 
 
 
3/1/18
PSU
3 
 
 
 
113,090

226,179

452,358

 
 
 
2,160,009

3/1/18
RS
4 

 
 
 
 
 
226,179

 
 
2,160,009

Richard J.
Doleshek
3/1/18
AIP
1,2 
-
551,000

1,102,000

 
 
 
 
 
 
 
3/1/18
PSU
3 
 
 
 
61,781

123,561

247,122

 
 
 
1,180,008

3/1/18
RS
4 

 
 
 
 
 
123,561

 
 
1,180,008

Jim E.
Torgerson
3/1/18
AIP
1,2 
-
489,250

978,500

 
 
 
 
 
 
 
3/1/18
PSU
3 
 
 
 
57,592

115,184

230,368

 
 
 
1,100,007

3/1/18
RS
4 

 
 
 
 
 
115,184

 
 
1,100,007

Christopher K. Woosley
3/1/18
AIP
1,2 
-
320,000

640,000

 
 
 
 
 
 
 
3/1/18
PSU
3 
 
 
 
29,058

58,116

116,232

 
 
 
555,008

3/1/18
RS
4 

 
 
 
 
 
58,116

 
 
555,008

Margo D. Fiala
3/1/18
AIP
1,2 
-
178,200

356,400

 
 
 
 
 
 
 
3/1/18
PSU
3 

 
 
9,948

19,896

39,792

 
 
 
190,007

3/1/18
RS
4 

 
 
 
 
 
29,843

 
 
285,001

4/11/18
SO
5 

 
 
 
 
 
 
4,687

10.126
18,935

4/11/18
SO
5 

 
 
 
 
 
 
8,821

16.986
23,640

4/11/18
PSU
5 

 
 
 
 
 
11,660

 
 
110,187

4/11/18
PSU
5 

 
 
 
 
 
26,661

 
 
251,946

4/11/18
RS
5 

 
 
 
 
 
43,991

 
 
472,463



1.
The amounts included in these columns reflect estimated future cash payouts under the AIP of our CIP based on a targeted percentage of actual base salaries for 2018. AIP payouts earned in 2018 are reflected in the Non-Equity Incentive Plan Compensation column (g) of the "Summary Compensation Table" above.
2.
There is no applicable threshold for the AIP.
3.
This row represents the range of the number of PSUs that may be earned with respect to PSUs granted pursuant to our CIP in 2018. Payment for earned awards is made in cash or shares after the end of the three-year performance period ending December 31, 2020. If the threshold level of performance of 30% is not met, then actual payout will be zero.
4.
This row sets forth the annual grants of restricted stock pursuant to our LTSIP during 2018.
5.
As noted in footnotes 8 and 9 of the "Summary Compensation Table" above, the vesting of 47,984 PSUs, 43,991 shares of restricted stock and stock options to purchase 13,508 shares of common stock was accelerated in connection with Ms. Fiala’s departure pursuant to the terms of her Severance Participation Letter. Without such modification, all awards would have been forfeited. The modification of her awards requires the presentation of the modified awards as "new" grants in this table.
6.
The exercise price represents the closing price per share of QEP common stock on the original grant date. Exercise prices were not modified when the stock options were accelerated in connection with Ms. Fiala's departure.

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Outstanding Equity Awards at Fiscal Year-End 2018

This table shows outstanding equity awards for the NEOs. All values shown are as of December 31, 2018.
Name

(a)
Option Awards
Stock Awards
Restricted Stock
PSUs
Number of Shares of
Common
Stock
Underlying
Unexercised
Options
Exercisable
(#)
(b)
Number of Shares of
Common Stock
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
Option
Exercise
Price
($)
(e)
Option
Expiration
Date

(f)
Number of Shares or
Units of
Stock That
Have Not
Vested
(#)
(g)
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)
(h)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
(i)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(j)
Charles B. Stanley
90,350


30.90
2/13/2019
53,360

1 
300,417

141,343

4 
795,761
100,088


30.12
2/13/2020
56,537

2 
318,303

226,179

5 
1,273,388
87,194


31.74
2/13/2021
226,179

3 
1,273,388





125,985


21.69
2/12/2022









94,738
47,368
1 
10.12
2/16/2023









44,569
89,136
2 
16.98
2/13/2024









Richard J. Doleshek
43,542


30.90
2/13/2019
26,235

1 
147,703

69,494

4 
391,251
48,956


30.12
2/13/2020
27,798

2 
156,503

123,561

5 
695,648
42,871


31.74
2/13/2021
123,561

3 
695,648





61,943


21.69
2/12/2022









46,580
23,289
1 
10.12
2/16/2023









21,913
43,826
2 
16.98
2/13/2024









Jim E. Torgerson
26,126


30.90
2/13/2019
22,233

1 
125,172

64,783

4 
364,728
28,286


30.12
2/13/2020
25,913

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