QEP Resources, Inc.

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PRE 14A
QEP RESOURCES, INC. filed this Form PRE 14A on 03/09/2018
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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.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
(1)
Amount previously paid:




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


April 5, 2018

To Our Shareholders:

The 2018 Annual Meeting of Shareholders of QEP Resources, Inc. (Annual Meeting) will be held on May 15, 2018, 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. I 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 2017 Annual Report on Form 10-K, are available in the Investor Relations section of our website at www.qepres.com. The Annual Report does not form any part of the material for solicitation of proxies. I also encourage you to visit our website during the year for more information about QEP.

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


Sincerely,

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



QEP Resources, Inc.
1050 17th Street, Suite 800
Denver, Colorado 80265
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 15, 2018
 
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 15, 2018, 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.
Approve a proposal to amend the Company’s Amended and Restated Certificate of Incorporation to declassify the Board of Directors (Board) and to provide for the annual election of directors (Item No. 1);
2.
If Item No. 1 to declassify our Board is approved, elect eight directors nominated by our Board for one year terms, until their successors are duly elected and qualified (Item No. 2);
3.
If Item No. 1 to declassify our Board is not approved, to elect eight directors nominated by our Board to the class and for the term described in Item No. 3, until their successors are duly elected and qualified (Item No. 3);
4.
Approve, by non-binding advisory vote, the compensation of the Company’s named executive officers as disclosed in the accompanying proxy statement (Item No. 4);
5.
Approve the QEP Resources, Inc. 2018 Long-Term Incentive Plan (Item No. 5);
6.
Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (Item No. 6); and
7.
Transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only holders of common stock at the close of business on March 26, 2018, 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 5, 2018.

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 5, 2018

Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 15, 2018. The proxy statement and annual report are available online at www.proxyvote.com.



TABLE OF CONTENTS

ITEM NO. 1 – COMPANY PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD AND PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS
ITEM NO. 2 – ELECTION OF DIRECTORS
Director Nominees
Current Director (Term to Expire in 2019)
ITEM NO. 3 – ELECTION OF CLASSIFIED DIRECTORS (ITEM NO. 3 WILL NOT BE ADOPTED IF OUR SHAREHOLDERS APPROVE ITEM NO. 1)
Policies and Procedures for Related-Person Transactions
Related-Person Transactions

i


Company Overview, 2017 Business Highlights and 2018 Strategic Initiatives
Strong Say on Pay Results and Summary of 2017 Compensation Actions
Response to 2017 Shareholder Feedback
Realizable Pay Demonstrates Pay and Performance Alignment
Compensation Philosophy and Objectives
Base Salary
Compensation Committee's Decision Making Process
Role of the Chief Executive Officer/Other Officers
Role of the Independent Compensation Consultant
Determination of Peer Group
ITEM NO. 4 – ADVISORY VOTE ON EXECUTIVE COMPENSATION
ITEM NO. 5 – APPROVAL OF THE QEP RESOURCES, INC. 2018 LONG-TERM INCENTIVE PLAN
ITEM NO. 6 – RATIFICATION OF OUR INDEPENDENT AUDITOR
APPENDIX A
APPENDIX B

ii


QEP RESOURCES, INC.

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 15, 2018


The Board of Directors (Board) of QEP Resources, Inc. (Company or QEP) is soliciting proxies for use at the Annual Meeting of Shareholders (Annual Meeting) to be held on May 15, 2018, 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 March 30, 2018. 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 as of the close of business on March 26, 2018, 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 a Company proposal to declassify the Board and provide for the annual election of directors.
This year Phillips S. Baker, Jr., Julie A. Dill, Robert F. Heinemann, Michael J. Minarovic, M.W. Scoggins, Mary Shafer-Malicki, Charles B. Stanley and David A. Trice (the Nominees) will be nominated for election for the terms set forth in Item No. 2 or Item No. 3, as applicable. You will also vote on compensation of the Company's named executive officers (on an advisory basis), the approval of the QEP Resources, Inc. 2018 Long-Term Incentive Plan and the ratification of the appointment of PricewaterhouseCoopers LLP (PwC) as the Company's independent registered public accounting firm.

Board Voting Recommendations

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

1.
FOR the approval of the Company's proposal to amend the Company's Amended and Restated Certificate of Incorporation to declassify the Board and to provide for the annual election of directors (Item No. 1);
2.
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. 2);
3.
FOR the approval of the eight individuals nominated by our Board to the class and term described herein if Item No. 1 is not approved (Item No. 3);

1


4.
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. 4);
5.
FOR the approval of the QEP Resources, Inc. 2018 Long-Term Incentive Plan (Item No. 5);
6.
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm (Item No. 6); and
7.
Transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

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. 6, 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 14, 2018, 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 $15,000, 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 26, 2018, 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

Company Proposal to Amend the Company's Certificate of Incorporation to Declassify the Board and Provide for the Annual Election of Directors. Pursuant to Article X of the Company's Amended and Restated Certificate of Incorporation, effective May 17, 2017 (Certificate of Incorporation), approval of the declassification of the Board in Item No. 1 requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock. For purposes of determining the vote outcome of Item No. 1, 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. 1.

Election of Directors. Election of the director nominees named in Item No. 2 and Item No. 3 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. 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. Although non-binding, our Board and Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.

Approval of the QEP Resources, Inc. 2018 Long-Term Incentive Plan. Approval of the QEP Resources, Inc. 2018 Long-Term Incentive Plan 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 proposal. 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.

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 2018 in Item No. 6 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. 6, abstentions will be included in the vote totals and, therefore, an abstention will have the same effect as a negative vote.

Other than the items of business described in this proxy statement, we do not expect any other matter to come before the Annual Meeting. If any other matter is presented at the Annual Meeting, your signed proxy gives the named proxies authority to vote your shares at their discretion. 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. 2 or Item No. 3, as the case may be, and "For" all other proposals, 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 26, 2018, 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 - COMPANY PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD AND PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS

The Board adopted, and recommends that the shareholders approve, an amendment to Article V of the Certificate of Incorporation to provide for the elimination of the classified structure of the Board and for the annual election of directors (the Declassification Amendment). The Declassification Amendment, if approved, will allow our shareholders to vote on the election of our entire Board each year, starting with the annual meeting of the shareholders in 2019 (the 2019 Annual Meeting), rather than on the staggered basis that our current classified board structure requires. The proposed revisions to the Certificate of Incorporation are attached as Appendix A to this proxy statement.
All of our directors, except for Mr. William L. Thacker, III, will tender their resignations from the Board immediately prior to the Annual Meeting, with such resignations being immediately effective.
If our shareholders approve this Item No. 1 at the Annual Meeting, the eight individuals nominated for election to our Board in Item No. 2 will serve for a one-year term until the 2019 Annual Meeting. If our shareholders do not approve this Item No. 1, we will continue to have a classified Board structure and our stockholders will instead be asked to elect the eight individuals nominated for election to our Board to the class and for one, two or three year terms, in each case as described in Item No. 3. The Declassification Amendment would not change the present number of directors or the Board's authority to change that number and to fill any vacancies or newly created directorships.
In addition, if the Declassification Amendment is approved, the Board intends to cause the Declassification Amendment to be filed with the Secretary of State of the State of Delaware following the Annual Meeting and to adopt conforming amendments to the Board's Corporate Governance Guidelines.
Current Classified Board Structure

Under our Certificate of Incorporation, the Board is currently separated into three classes equal in size. Absent the earlier resignation or removal of a director, each year the shareholders are asked to elect the directors comprising one of the classes for a three-year term, such that every three years, all of the classes undergo elections. The term of the class of directors that includes Mr. Phillips S. Baker, Jr., Ms. Mary Shafer-Malicki, and Mr. Charles B. Stanley is set to expire at the Annual Meeting. The terms of the other two classes of directors are set to expire in 2019 and 2020, respectively. However, each of the current directors, other than Mr. Thacker, will tender their resignations from the Board immediately prior to the Annual Meeting, with such resignation being immediately effective. Under the current classified board structure, shareholders may only elect approximately one-third of the Board of Directors each year.



4


Rationale for Declassification

A majority of our shareholders expressed their support for declassification proposals contained in our 2013, 2014 and 2015 proxy statements. However, those proposals did not pass because our governing documents required a supermajority (80%) of outstanding shares to support those proposals. Based on input from our shareholders, the Company sought shareholder approval in 2016 and 2017 to amend our governing documents to replace the 80% requirement with a requirement that holders of not less than a majority of the outstanding shares of our common stock approve such proposals. These efforts were not successful in 2016, but our shareholders approved this change at the 2017 annual meeting. Although the Board believes that the classified board structure has promoted continuity and stability, encouraged a long-term perspective on the part of directors and may be beneficial in the event of an unsolicited takeover attempt, the Board recognizes the sentiment of shareholders and institutional investor groups in favor of the annual election of directors. In response to input from our shareholders, during 2017, the Board considered the various positions for and against a classified board and recognized that an annual election fosters board accountability, enables shareholders to express a view on each director's performance by means of an annual vote and supports the Company's ongoing efforts to maintain "best practices" in corporate governance. Based on the Company's desire to maintain best practices in corporate governance, as well as input received from shareholders, the Company is proposing the immediate elimination of its classified board as discussed below.

Shareholder Approval Required

The approval of this proposal will require the affirmative vote of the holders of not less than a majority of the outstanding shares of common stock of the Company. In determining whether this proposal has received the requisite number of affirmative votes, abstentions and broker non-votes will not be counted and will have the same effect as a vote against the proposal. If a shareholder returns a validly executed proxy, the shares represented by the proxy will be voted on the Declassification Amendment in the manner specified by the shareholder. If a shareholder does not specify the manner in which shares represented by a validly executed proxy are to be voted on this matter, such shares will be voted for the proposal.

The Board recommends that you vote FOR Item No. 1.

ITEM NO. 2 – ELECTION OF DIRECTORS

If our shareholders approve Item No. 1 at the Annual Meeting, our shareholders will be asked to consider eight nominees for election to our Board. Each nominee would serve for a one-year term until the 2019 Annual Meeting if our shareholders approve the Declassification Amendment (Item No. 1) at the Annual Meeting. If our shareholders do not approve the Declassification Amendment, the current classified board structure will remain in place and this Item No. 2 will not be submitted to a vote of our shareholders at the Annual Meeting, and instead Item No. 3 (Election of Classified Directors) will be submitted in its place.
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

As noted above, each of Phillips S. Baker, Jr., Julie A. Dill, Robert F. Heinemann, Michael J. Minarovic, M. W. Scoggins, Mary Shafer-Malicki, Charles B. Stanley and David A. Trice (collectively, the Nominees) will tender his or her resignation from the Board immediately prior to the Annual Meeting, with such resignation being immediately effective.


5


Each Nominee and Mr. Thacker 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 current directors (eight of which we are nominating under this Item No. 2) are independent except for Mr. Stanley. We empower independent directors through frequent board and committee executive sessions. We also annually appoint 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;

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 is expected to continue to consist of nine directors after the Annual Meeting.

Our Certificate of Incorporation also currently provides for the Board to be divided into three classes of directors, as nearly equal in number as possible, serving staggered three-year terms. Directors must receive a majority of the votes cast for the election of directors, and any director who fails to receive a majority of the votes cast during an uncontested election must submit his or her resignation to the Board.

If Item No. 1 is approved by our shareholders at the Annual Meeting, each Nominee will serve on the Board for a one year term expiring at the 2019 Annual Meeting.


6


Director Qualification Table

The following table highlights each Nominee's and Mr. Thacker'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
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
Charles B. Stanley
X
X
X
X
X
William L. Thacker, III
X
 
X
X
X
David A. Trice
X
X
X
X
X

Biographical information concerning our directors appears below. Unless otherwise indicated, such individuals have been engaged in the same principal occupation for the past five years. Ages are correct as of the date of this proxy statement.

Director Nominees

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Mr. Phillips S. Baker, Jr., age 58, 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 30 years of business experience, including 18 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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Ms. Julie A. Dill, age 58, has been a QEP director since May 2013. She most 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 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 65, 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 53, 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 29 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 70, has been a QEP director since June 2010 and also currently serves as a director of Cobalt International Energy, Inc. and Laredo Petroleum, Inc. He served as a director of 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. He served on the board of Trico Marine Services from 2005 until 2011, and Venoco, Inc. from 2007 until 2012.
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 57, 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 lead director.

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Mr. Charles B. Stanley, age 59, has served as President, CEO and a director of QEP since June 2010 and Chairman of the Board since May 2012. He also served in the same roles for QEP Midstream Partners, GP, LLC, the general partner of QEP Midstream Partners, LP, from 2013 until December 2014. Mr. Stanley served as Executive Vice President of Questar Corporation (Questar) from 2002 to 2008 and as Executive Vice President and Chief Operating Officer from 2008 until 2010. He also served as a director of Questar from 2002 until 2010. Prior to joining Questar, he served as President, CEO and a director of El Paso Oil and Gas Canada from 2000 to 2002, and as President and CEO of Coastal Gas International Company from 1995 to 2000. He is a director of Hecla Mining Company and serves on the boards of various natural gas industry trade organizations, including the American Exploration and Production Council. Mr. Stanley has served as Chairman of America's Natural Gas Alliance, an industry association representing large independent natural gas producers. In concluding that Mr. Stanley is qualified to serve as a director, the Board considered, among other things, his more than 30 years of experience in the oil and gas industry.

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Mr. David A. Trice, age 69, has been a QEP director since 2011. He was CEO of Newfield Exploration Company (Newfield), an oil and natural gas exploration and production company from 2000 until his retirement in 2009. He also served as Chairman of the Board of Newfield from 2004 until 2010. Mr. Trice has served as a director of New Jersey Resources Corporation since 2004, and McDermott International, Inc. since 2009. Mr. Trice previously served as a director of Grant Prideco, Inc. from 2003 to 2008, as a director of Hornbeck Offshore Services, Inc. from 2002 until February 2011, and as a director of privately held Crazy Mountain Brewery, LLC from 2011 until January 2015. He is also a director of Rockwater Energy Solutions, Inc., a privately held company. He served as the Chairman of the American Exploration and Production Council from 2008 to 2009, and as Chairman of America's Natural Gas Alliance from 2009 to 2010. In concluding that Mr. Trice is qualified to serve as a director, the Board considered, among other things, his experience as the CEO of a publicly traded independent exploration and production company.

For Item No. 2, the Board recommends that you vote FOR each of the nominees listed above.

Current Director (Term to Expire in 2019)
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William L. Thacker, III, age 72, has been a QEP director since February 2014.
Mr. Thacker served as non-executive Chairman of the Board of Copano Energy LLC from 2009 through 2013 (he served on the Copano board beginning in 2004). Previously, he served as Chairman and CEO of TEPPCO Partners. Mr. Thacker also served on the board of Pacific Energy Management prior to the sale of Pacific Energy Partners to Plains All American Pipeline in 2006. He served on the board of GenOn Energy Inc. from January 2006 until November 2012 when GenOn merged with NRG Energy. He also serves on the boards of the Kayne Anderson Midstream Energy Fund and the Kayne Anderson Energy Development Company. In concluding that Mr. Thacker is qualified to serve as a director, the Board considered, among other things, his extensive energy industry experience and his experience as a director on multiple public company boards.

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ITEM NO. 3 – ELECTION OF CLASSIFIED DIRECTORS (ITEM NO. 3 WILL NOT BE ADOPTED IF OUR SHAREHOLDERS APPROVE ITEM NO.1)

Our shareholders will be asked to vote on this Item No. 3 only in the event that at the Annual Meeting the shareholders do not approve Item No. 1 (the adoption of the amendments to our Certificate of Incorporation to eliminate our classified Board). If the shareholders approve Item No. 1, then we will amend our Certificate of Incorporation to eliminate our classified Board by filing the Amended and Restated Certificate of Corporation, a form of which is attached as Appendix A to this proxy statement, with the Secretary of State of the State of Delaware, and the shareholders will proceed to vote on Item No. 2 and not this Item No. 3. If, however, the shareholders do not approve Item No. 1, a vote will be taken on this Item No. 3.
If the shareholders do not approve Item No. 1, the current classified board structure will remain in place. As such, each of the following are nominated for election to the class and for the term set forth in the table below.
Name
Class
Expiration of Term
Robert F. Heinemann
I
2020
Michael J. Minarovic
I
2020
David A. Trice
I
2020
Phillips S. Baker
II
2021
Mary Shafer-Malicki
II
2021
Charles B. Stanley
II
2021
Julie A Dill
III
2019
M. W. Scoggins
III
2019

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.
The Board recommends, only in the case that Item No. 2 is not approved, 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 eliminate 80% supermajority voting received support from the holders of over 80% of our then-outstanding shares, and, therefore, the proposal was approved. The Company subsequently took steps to amend and restate its Certificate of Incorporation and Bylaws to implement the changes included in the proposal.
Given the elimination of the 80% supermajority voting requirement that has previously proved to be a barrier to approving the declassification of our Board, and feedback from our shareholders, our Board is recommending in Item No. 1 that our shareholders approve changes to our Certificate of Incorporation that will declassify our Board over a one-year period.
The Board continued to focus on succession-planning by adding two new directors to the Board, which resulted in increasing the diversity and the size of the Board. Additionally, the Board decided to allow Mr. Thacker to serve the third and final year of his elected term even though he will be 72 years old at the upcoming annual meeting.
As noted in the "Shareholder Engagement" section below, the Company continued to focus on its shareholder outreach program during 2017, contacting shareholders who collectively owned over 65% 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 2015 and 2016, as noted in "Governance Update" above, in 2017 we contacted shareholders who collectively owned in excess of 65% of our outstanding shares. The Board considered investor feedback in deciding to recommend approval of the Declassification Amendment (Item No. 1) as well as decisions related to our executive compensation programs, as discussed in the Compensation Discussion and Analysis section 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.

Currently, our Board believes that a strong Lead Director, in addition to a combined Chairman and CEO allow our Lead Director to provide independent Board leadership and permit our Chairman and CEO to use his knowledge of the Company to focus Board discussions. The combined role of Chairman and CEO also ensures that the Company presents its strategy to shareholders, employees and other stakeholders with a single voice. Our shareholders have demonstrated support for this approach with a strong majority opposing shareholder proposals in 2013 and 2016 to separate the roles of Chairman and CEO. Moreover, during our meetings with shareholders over the last three years, there has been overwhelming support expressed for our current combined Chairman/CEO role.


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The Lead Director is selected by our Board annually. Currently, David A. Trice is serving as Lead Director, and he is expected to continue to serve as Lead Director if he is elected pursuant to Item No. 2 or Item No. 3, as the case may be. In this role, Mr. Trice:

Presides at all executive sessions of the independent directors and the board meetings at which the Chairman is not present;
Serves as liaison between the Chairman and the independent directors;
Approves information sent to the Board;
Approves meeting agendas for the Board;
Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;
Has the authority to call meetings of the independent directors; and
Ensures that he is available for consultation and direct communication, if requested by major shareholders.

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
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
Charles B. Stanley
 
 
 
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.


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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 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 Chairman 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 2017. 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 2017 did not create any conflict of interest with respect to its representation of the Compensation Committee. See "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. Stanley, our CEO, and Margo Fiala, 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. Stanley or Ms. Fiala at its next meeting following any such grant. The Compensation Committee has also delegated to its Chair, currently Mr. Heinemann, authority to replenish the pool of shares to be granted by Mr. Stanley or Ms. Fiala. 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.

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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 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 "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.


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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 2017 and determined these guidelines were appropriate.

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 2017 were Dr. Heinemann, Dr. Scoggins, Mr. Trice, Mr. Thacker and Mr. Minarovic (since May 2017). No member of our Compensation Committee was at any time prior to or during 2017, or the first three months of 2018, 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 2017, 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 2017:
 
Board
Audit Committee
Compensation
Committee
Governance
Committee
Number of Meetings
10
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.

Family Relationships

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


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Director Retirement Policy

Our Board has adopted a retirement policy that permits an independent director to continue serving until the annual meeting following his or her 72nd birthday, provided that the director remains actively engaged in business, financial or community affairs. The Board does not believe that directors who retire, resign or otherwise materially change their position with their employers should necessarily leave the Board; however, they are required to submit a notice of any such retirement, resignation or change to the Chairman of the Board and Chairman of the Governance Committee. The Board will then review the continued appropriateness of Board membership under the changed circumstances. The Board may waive its director retirement requirements in certain situations. As noted above, the Board made a determination to allow Mr. Thacker, who will be 72 years old at the May 2018 annual meeting, to serve the third and final year of the term he was elected to by our shareholders in May 2016.

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

In the fourth quarter of 2017, we completed two transactions to refinance all or a portion of our senior notes that mature in 2018, 2020 and 2021. We offered to purchase up to $361 million aggregate principal amount of our outstanding 6.80% Senior Notes due 2020 and 6.875% Senior Notes due 2021 (Tender Offer). We also redeemed all of the $134 million of principal amount outstanding of our 6.8% Senior Notes due 2018 (Redemption). Pursuant to the Tender Offer, Richard Doleshek, our Executive Vice President and Chief Financial Officer, tendered $400,000 in principal amount of the 6.80% Senior Notes due 2020 and $1,500,000 in principal amount of the 6.875% Senior Notes due 2021, and we purchased all of these tendered senior notes for a purchase price of $430,000 and $1,627,500, respectively. Pursuant to the Redemption, we redeemed $312,000 in principal amount of the 6.8% Senior Notes due 2018 held by Mr. Doleshek and his spouse for an amount equal to 101.559% of the principal amount plus accrued and unpaid interest.

Prior to the Tender Offer and Redemption, the highest principal amounts owned by Mr. Doleshek, together with his spouse, during 2017 were $312,000 of 6.80% Senior Notes due 2018, $550,000 of 6.80% Senior Notes due 2020, $1,950,000 of 6.875% Senior Notes due 2021 and $520,000 of 5.375% Senior Notes due 2022. As of March 1, 2018, Mr. Doleshek, together with his spouse, continued to own $150,000 of the Senior Notes due

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2020, $450,000 of the Senior Notes due 2021 and $20,000 of the Senior Notes due 2022. During 2017, we paid Mr. Doleshek and his spouse interest on senior notes held by both of them totaling $229,022.

Mr. Doleshek reported his intent to participate in the Tender Offer to the Company's Corporate Secretary prior to tendering his senior notes in the Tender Offer. Our Audit Committee reviewed the original purchases of the senior notes by Mr. Doleshek and his spouse, the payment of interest on senior notes held by Mr. Doleshek and his spouse, the tender by Mr. Doleshek of portions of his 6.8% Senior Notes due 2020 and his 6.875% Senior Notes due 2021, and the redemption of his 6.8% Senior Notes due 2018. The Audit Committee determined that these transactions did 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.

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 8, 2018. Shares not outstanding but deemed beneficially owned by virtue of the right of a person to acquire shares within 60 days of March 8, 2018, 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. Stanley
992,407

1,2,3,4,5 
542,924
 
1,535,331
*

Richard J. Doleshek
405,489

1,2,3 
265,805
 
671,294
*

Jim E. Torgerson
332,613

1,2,3 
200,963
 
533,576
*

Christopher K. Woosley
142,742

1,2 
93,148
 
235,890
*

Margo D. Fiala6
83,045

1,2,3 
56,501
 
139,546
*

Phillips S. Baker, Jr.
28,897

 
82,293
7 
111,190
*

Julie A. Dill
5,525

 
70,240
7 
75,765
*

Robert F. Heinemann
7,200

 
66,129
7 
73,329
*

Michael J. Minarovic
0

 
32,558
7 
32,558
*

M. W. Scoggins
7,700

8 
156,616
7 
164,316
*

Mary Shafer-Malicki
0

 
31,731
7 
31,731
*

William L. Thacker III
0

 
66,863
7 
66,863
*

David A. Trice
50,000

 
80,585
7 
130,585
*

Other executive officers
59,446

1,2 
28,786
 
88,232
*

All directors and executive officers
(14 individuals)
2,115,064

 
1,775,142
 
3,890,206
1.60
%

1.
Includes the following unvested restricted shares for which the owners have sole voting power, but which cannot be disposed of until they vest: Mr. Stanley owns 336,076 shares; Mr. Doleshek owns 177,594 shares; Mr. Torgerson owns 163,330 shares; Mr. Woosley owns 86,494 shares; Ms. Fiala owns 43,991 shares; and the other executive officers have a combined ownership of 35,136 shares.
2.
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. Stanley owns 580,961 PSUs; Mr. Doleshek owns 297,996 PSUs; Mr. Torgerson owns

17


268,900 PSUs; Mr. Woosley owns 113,690 PSUs; Ms. Fiala owns 47,984 PSUs; and the other executive officers have a combined ownership of 37,858 PSUs.
3.
Does not include the following phantom stock units held in the QEP Deferred Compensation Wrap Plan: Mr. Stanley owns 53,605 units; Mr. Doleshek owns 7,147 units; Mr. Torgerson owns 6,133 units; and Ms. Fiala owns 3,566 units.
4.
Does not include 169,907 shares owned by the QEP Resources Educational Foundation (Foundation), a non-profit corporation. As Chairman of the Foundation's Board of Trustees, Mr. Stanley has voting power for the shares but disclaims any beneficial ownership of the shares.
5.
Includes 524,712 shares held in a trust for which Mr. Stanley has shared voting and dispositive powers with his spouse.
6.
Ms. Fiala will no longer be employed by the Company effective March 31, 2018.
7.
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.
8.
Shares are held in a joint account for which Dr. Scoggins has shared voting and dispositive powers with his spouse.
9.
The percentage of shares owned is less than 1% unless otherwise stated.

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 8, 2018.
Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Percent of 
Class
BlackRock, Inc., 55 E. 52nd Street, New York, NY 10055
20,778,1621
8.6%
Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA 19355
20,556,0382
8.5%

1.
Based on its Schedule 13G filed with the SEC on January 29, 2018, as of December 31, 2017, BlackRock had sole voting power of 19,826,524 shares and sole dispositive power of 20,778,162 shares.
2.
Based upon its Schedule 13G filed with the SEC on February 12, 2018, as of December 31, 2017, Vanguard had sole voting power of 129,228 shares; sole dispositive power of 20,242,499 shares; shared voting power of 24,097 shares; and shared dispositive power of 131,539 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 2017.


18


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, 2017. 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, 2017 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.


19


COMPENSATION DISCUSSION AND ANALYSIS

This section describes the objectives and elements of the executive compensation programs for our Named Executive Officers (NEOs). Our NEOs include our principal executive officer, our principal financial officer, our three other most highly compensated Section 16 officers, as well as one former officer that would have been one of the three other most highly compensated Section 16 officers had he still been employed by QEP at year end. Our NEOs for 2017 are:

Charles B. Stanley, Chairman, President and Chief Executive Officer (CEO)
Richard J. Doleshek, Executive Vice President, Chief Financial Officer (CFO)
Jim E. Torgerson, Executive Vice President, QEP Energy
Christopher K. Woosley, Senior Vice President and General Counsel
Margo D. Fiala1, Vice President, Human Resources
Matthew T. Thompson, Former Vice President, Energy (departed September 15, 2017)

1Ms. Fiala will no longer be employed by the Company effective March 31, 2018.

Executive Summary

Company Overview, 2017 Business Highlights and 2018 Strategic Initiatives


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 almost 50% in 2017.

2017 Business Highlights

Our Company delivered significant results and accomplishments in 2017:

Generated net income of $269.3 million, or $1.12 per diluted share;
Recognized realized oil prices that were $6.07 per bbl, or 14% higher compared to 2016;
Delivered oil equivalent production of 53.1 MMboe;
Delivered crude oil production of 19.6 MMbbl, including a record 6.1 MMbbl in the Permian Basin;
Delivered natural gas production of 168.9 Bcf, including 72.9 Bcf in the Haynesville/Cotton Valley;
Reported record year-end total proved reserves of 684.7 MMboe, including record proved crude oil reserves of 320.5 MMbbl;
Divested Pinedale Anticline natural gas asset for net cash proceeds of $718.2 million;
Acquired approximately 15,100 net acres in the core of the northern Midland Basin;
Expanded our successful refracturing program in Haynesville/Cotton Valley and began refracturing wells in the Williston Basin; and
Issued $500.0 million of senior notes and repaid $445.7 million of senior notes, which were due in 2018, 2020 and 2021; paid fees and expenses associated with the repayment and used the remainder for general corporate purposes.

Our accomplishments in 2017 were significant, including the divestiture of our Pinedale Anticline natural gas asset and expansion of our tier one acreage position in the Permian Basin via a tax efficient acquisition. We continued to accelerate our development activity while actively enhancing our drilling and completion designs in the Permian Basin. We also had success with our refrac programs in both the Haynesville and the Williston Basin and we successfully completed our first long-lateral horizontal well utilizing state-of-the-art completion techniques in the Haynesville.

20



2018 Strategic and Financial Initiatives

In February 2018 we announced that our Board of Directors approved several strategic and financial initiatives to transition QEP to a pure-play Permian Basin company and to address the significant discount to net asset value reflected in the Company’s share price. These initiatives are as follows:

Strategic Initiatives

Engagement of 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
Marketing of remaining non-Permian assets, including the Haynesville/Cotton Valley (Haynesville), in the second half of 2018.

Financial Initiatives

Use of 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;
Approval of a $1.25 billion share repurchase program; and
Approval of a 2018 capital investment plan of approximately $1.075 billion, of which approximately 65% will be directed toward the Permian Basin.

These strategic and financial initiatives will allow us to simplify our portfolio, streamline our operations, and sharpen our focus on Permian Basin assets, quickly resulting in our Company becoming a pure-play Permian company. Today, our Permian Basin assets consist of approximately 44,000 net acres in the core of the northern Midland Basin. These assets delivered 8.2 MMboe of net production in 2017 with estimated total proved year-end 2017 reserves of 272.7 MMboe.

As a result of these initiatives, the Company's Board of Directors has implemented severance and retention programs to manage through this transition. Please see pages 52-53 of this proxy statement for more information. Additionally, for 2018 our top two executive officers will have specific annual incentive performance goals related to the execution of our new corporate strategy, including asset divestitures and Permian Basin operating and cost metrics.

Strong Say on Pay Results and Summary of 2017 Compensation Actions

Our shareholders have overwhelmingly approved our executive compensation programs in past say-on-pay votes (averaging 93% of the votes cast for the past six years). In light of industry considerations as well as feedback from our shareholder outreach program in the fall of 2016, our Compensation Committee took the following actions in early 2017 with respect to our 2017 executive compensation programs:

Kept our CEO's base salary unchanged for the third year in a row;
Incorporated new metrics in our 2017 Annual Incentive Plan (AIP), including:
Drilling Rate of Return to measure capital efficiency and capital allocation decisions, using full-cycle (e.g. acquisition) costs;
EBITDA per Barrel of Oil Equivalent (Boe) to ensure focus on high margins and avoid producing "at any cost;"
Gross Debt/EBITDA to ensure focus on a strong balance sheet and liquidity; and
Confirmation of Acquired Reserves to measure the value of our 2016 Permian Acquisition and our ability to grow the acquired assets organically;
Increased AIP targets as a percentage of base salary by an average of 7% for our top three NEOs to better align their short-term targets with those of individuals in comparable roles in our peer group;
Restored long-term incentive (LTI) awards after a 10% reduction in 2016 in recognition of the industry environment; and

21


Restored our use of stock options in our LTI award mix to 20% for all officers, resulting in an overall allocation of 70% performance-based LTI awards for our top three NEOs.

In addition, our Compensation Committee took the following actions in early 2018 based on performance through December 31, 2017:

Paid out the 2015 performance share unit (PSU) awards at 36% of grant date target based upon our relative total shareholder return (TSR) performance score of 85% from January 1, 2015 to December 31, 2017 and the absolute share price performance over the same period; and
Approved an overall 2017 AIP company score of 89.6% and further reduced the final awards for our top three NEOs based on stock price performance.

Response to 2017 Shareholder Feedback

We value ongoing dialogue with our shareholders regarding our executive compensation programs. During 2017, we continued our shareholder outreach efforts consistent with our approach in 2016, including contacting shareholders (including our larger shareholders' representatives), who collectively held more than 65% of our outstanding shares. The feedback we received had some consistent themes, and many of our shareholders expressed that their feedback was not specific to QEP, but applied to our industry peers as well. Our shareholders expressed support for the changes we made in 2017 as well as a desire to see metrics in our incentive plans that demonstrate a focus on returns, cost control and metrics that directly incent bottom line performance. Feedback from our shareholders was reviewed and discussed by the Compensation Committee and our Board of Directors at our October 2017 and early 2018 meetings.

The following table shows the actions our Compensation Committee took in February 2018 as it relates to our 2018 executive compensation programs in response to shareholder feedback:

What We Heard
Our Response
Focus on returns
Maintain Drilling Rate of Return metric in the 2018 AIP
Possibility of paying 200% on PSUs for relative TSR performance is not acceptable if absolute TSR is negative; consider additional metrics that management can more directly influence
Add absolute TSR cap/floor to TSR portion of 2018 PSU plan; explore additional metrics in 2018 for potential implementation in 2019
Several questions about discretion and how the Compensation Committee made compensation decisions
Remove the 25% Strategic Initiatives metric from 2018 AIP, although the Compensation Committee reserves overall discretion on year end plan results; improve disclosure of metrics and decisions
Lack of clarity as to how QEP's metrics actually incent executive actions/decisions that drive bottom-line performance
Do not adjust metrics for commodity price fluctuations. Add additional disclosure around the metrics and why they are used. Incorporate specific metrics for our top executives to support the successful execution of the Company's new business strategy.
Incorporate cost control metrics
Add Lease Operating Expense plus Transportation & Processing Expense per Boe metric to 2018 AIP
Desire to calculate incentive results directly from financial statements as much as possible
Three of our five 2018 AIP metrics can be calculated from our 10K disclosure: Adjusted EBITDA, Lease Operating Expense plus Transportation & Processing Expense, and Production


22


Realizable Pay Demonstrates Pay and Performance Alignment

Our pay programs are designed to align pay outcomes with both short-term and long-term company 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=12118128&doc=15

Grant Price is the fair market 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 value of LTI (PSUs, restricted stock and stock options).

Realizable Pay includes base salary, actual annual incentive paid, actual PSU performance for the 2015-2017 cycle and period-to-date PSU performance for the 2016-2018 and 2017-2019 performance periods as of December 31, 2017, and value of vested and unvested LTI at the current price ($9.57).

1 2015 pay excludes a one-time restricted stock award made in February 2015 to recognize the successful sale of the midstream business in late 2014 ($500k value at grant; $221k current value, three-year vest)
2 In 2016, the Compensation Committee reduced the CEO's annual LTI grant by 10% or $480,000, consistent with the decrease in LTI grants for all executives of the Company.

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, 73% of our CEO's 2017 target total pay is tied to stock price performance (PSUs, stock options and restricted stock) and 50% varies based on performance metrics (PSUs and Annual Incentive).
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12118128&doc=14
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.

23


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 Compensation Committee expects will result in strong positioning within our industry and greater shareholder value over time. 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 stockholder return, meaning that pay is realizable only as and when our stock performs. For example, with the decline in commodity prices in our industry and the resulting decline in our stock price since the end of 2014, all of our outstanding stock options are underwater (i.e. have exercise prices greater than the current market price for our common stock) as of December 31, 2017. Additionally, our total shareholder return was below the median of our peers (44th percentile) for the 2015-2017 performance cycle, and the value of the cash award delivered to our CEO was 36% of grant date target value.

Key Features of Our Executive Compensation Program 

Our Executive Compensation Practices
(What We Do)
ü     Pay for Performance – 87% of our CEO's target total compensation varies based on performance. Our annual cash incentive program is based on key strategic, financial and operational goals, and our LTI program aligns executive pay with shareholder interests. PSUs tied to relative shareholder return comprise a substantial portion of the LTI grants for our NEOs, including 50% of the LTI grants to our CEO, CFO and EVP.
ü     Responsive to Shareholder Feedback – We seek shareholder input on our pay practices and take action on feedback received.
ü     Double-Trigger Severance and LTI Award Vesting – Upon a change in control, LTI awards (made after November 2015) 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 annual 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.

24


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.

Pay for performance. Our executives should get paid more when the Company and our stock performs well and less when the Company and our stock is 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 our compensation is provided in the form of long-term equity incentives that tie executive pay to stock performance. In addition, we require each of our NEOs to meet 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 all LTI awards, and 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.


25


Compensation Elements

Our compensation program for NEOs aligns with our compensation philosophy and comprises 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 each specific section for more details on each program.
Compensation Element
Role in Total Compensation
Base Salary
• Provides fixed compensation based on an individual's skills, experience and proficiency, 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
• 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 Stock Options
w Restricted Stock
• 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 Benefits
w Executive Severance Plan
• Attracts and retains executive talent in a competitive and changing industry; and
• Ensures executives act in the best interests of shareholders in times of heightened uncertainty.

Base Salary

The Compensation Committee evaluated base salaries in February 2017 and made the following adjustments after a two-year salary freeze for the majority of our NEOs. Mr. Woosley's higher adjustment was in recognition of his promotion to Senior Vice President and to position him more closely to his industry peers.

Named Executive Officer
2016 Base Salary
2017 Base Salary
% Change
Mr. Stanley
$850,000
$850,000
0%
Mr. Doleshek
$563,000
$580,000
3%
Mr. Torgerson
$499,000
$515,000
3%
Mr. Woosley
$347,000
$383,000
10%
Ms. Fiala
$278,000
$288,000
4%
Mr. Thompson
$310,000
$320,000
3%


26


Annual Incentive Program

Our Compensation Committee approves annual cash awards pursuant to the AIP. As reflected in the table below, in 2017 the Compensation Committee made adjustments to AIP targets as appropriate to incorporate competitive benchmark data as well as reflect each executive's responsibilities and contributions relative to that of our other executives.
Named Executive Officer
2016 AIP Target
(% of Base Salary)
2017 AIP Target
 (% of Base Salary)
Mr. Stanley
100%
110%
Mr. Doleshek
90%
95%
Mr. Torgerson
90%
95%
Mr. Woosley
70%
75%
Ms. Fiala
60%
60%
Mr. Thompson
60%
60%

Our 2017 AIP consisted of key metrics used in prior years as well as four new metrics, based on shareholder feedback as well as the Compensation Committee's and management's assessment of what will drive success in a continued low commodity price environment. The table below summarizes the 2017 AIP metrics.
Metric
What It Is
Why We Use It
How We Set The Target
Operational Performance (25%)
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 is derived from our capital spending program and is a key component in our ability to deliver our targeted returns from capital investment.
Set based on Board approved 2017 Operating Plan.
AIP-Adjusted EBITDA per Barrel of Oil Equivalent (Boe) (NEW)
A ratio measuring the profitability per barrel of oil equivalent (Boe) of each unit of production.
Ensures focus on profitability and cost reductions and not just on production "at any cost."
Set based on Board approved 2017 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.
Set based on Bureau of Labor Statistics data as reported in American Petroleum Institute (API) Workplace Injuries and Illness Report.
Environmental Severity Rate (spills) (REVISED)
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.
Set 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/observations per 200,000 work hours.
This metric provides a leading indicator of safety awareness and safe behaviors which reduces incidents.
Set by Management and Board based on prior year results.
Financial Performance (25%)
Gross Debt/Adjusted EBITDA (NEW)
A ratio that measures our ability to cover our debt.
Ensures focus on a strong balance sheet and liquidity.
Set based on Board approved 2017 Operating Plan.
Drilling Rate of Return (RoR) (NEW)
Internal RoR for wells drilled Q4 2016 through Q3 2017. Measures estimated future cash flows based on individual well performance results.
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 its proportionate share of the acquisition costs, which exceeds our weighted average cost of capital.

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Metric
What It Is
Why We Use It
How We Set The Target
Oil and Gas Reserve Growth (25%)
Confirmation of Acquired Reserves (NEW)
Compares the reserves booked on a per well basis at December 31, 2017 for the assets acquired in the 2016 Permian Acquisition to the estimated reserves that informed the acquisition decision in 2016.
Measures the value of our 2016 Permian Basin Acquisition and our ability to grow the asset organically.
Set as 100% of reserves assumed upon acquisition in 2016.
Reserves Replacement Ratio
Quotient of adjusted net proved reserve additions and annual production.
In order to grow our business, we must replenish and increase our inventory by finding more reserves than we extract from the ground each year.
Set to replace at least 150% of production (100% would equal zero growth).
Strategic Initiatives (25%)
Strategic Initiatives
The Compensation Committee assesses performance on various strategic initiatives that position QEP for long-term success.
Some strategic goals are not quantifiable, especially in an extremely volatile market. This component allows the Compensation Committee to recognize performance at year end that proved critical to QEP's success, such as portfolio optimization, technical innovation, financial management and organizational development.
The Compensation Committee and Management set strategic goals at the beginning of the year. Additional goals were set as needed as the year progressed.

The Compensation Committee's assessment of 2017 performance is summarized in the following table:
Metric
Weight
Threshold
50%
Target
100%
Stretch
150%
Max
200%
Result
Score
(Payout %)
Operational Performance (25%)
 
Total Equivalent Production
8.3%
53.5
55.4
57.7
59.4
53.1
0%
Adjusted EBITDA per Boe1
8.3%
$12.80
$14.29
$15.60
$17.60
$15.10
131%
Health, Safety and Environment
8.3%
 
 
 
 
 
 
Total Recordable Incident Rate
 
1.30
1.00
0.85
0.60
0.65
200%
Environmental Severity Rate
 
40
30
20
9
23.8
190%
Hazard Identification Reporting Rate
 
180
200
220
245
292
131%
Financial Performance (25%)
 
Gross Debt to Adjusted EBITDA2
12.5%
2.65
2.50
2.30
2.00
2.97
0%
Drilling Rate of Return
12.5%
25%
35%
42.5%
55%
32%
85%
Oil and Gas Reserve Growth (25%)
 
Confirmation of Acquired Reserves
12.5%
90%
100%
110%
125%
100%
100%
Reserves replacement ratio3
12.5%
125%
150%
170%
200%
162%
130%
Strategic Initiatives - (25%)4
100%
100%
Total Score
 
89.6%

1 For purposes of this metric, our Compensation Committee makes adjustments to Adjusted EBITDA to eliminate the impact (both positive and negative) of changes in crude oil, NGL and natural gas prices and to exclude other extraordinary,

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unusual, non-recurring or non-comparable items, as determined by our Compensation Committee (AIP-Adjusted EBITDA). AIP-Adjusted EBITDA is a non-GAAP financial measure. For 2017, the Adjusted EBITDA reported on page 60 of our Annual Report on Form 10-K of $736.1 million was adjusted to determine AIP-Adjusted EBITDA by adding $66.5 million to eliminate the net effect of changes in commodity prices between the prices used by the Compensation Committee to set plan targets and the net realized prices for 2017, resulting in AIP-Adjusted EBITDA of $802.6 million.

AIP-Adjusted EBITDA per BOE was calculated as follows:
 
2017
AIP-Adjusted EBITDA (Millions)
$802.6

Production (MMBOE)
53.1

AIP-Adjusted EBITDA per BOE
$15.10


2 Gross debt to Adjusted EBITDA was calculated as follows:
 
2017
Long-Term Debt
$2,160.8
Plus: Unamortized discount and unamortized debt issuance costs
$27.5
Gross Debt
$2,188.3
Adjusted EBITDA
736.1(a)
Gross Debt to Adjusted EBITDA
2.97

(a)As reported on page 60 of the 2017 Form 10-K.

3 The reserve replacement ratio (non-GAAP) was 161.6% and was calculated as follows, with all reserve amounts expressed in MMBoe and adjusted to exclude the impacts of the purchase and sale of assets and price changes:
 
2017
Proved reserve balance as of January 1, 2017
564.3(a)

Proved reserve balance as of December 31, 2017
684.7(b)

Reserve additions
120.4

Less: purchase of reserves in place
64.7(c)

Less: impact of price-related revisions
32.0(b)

Plus: annual production
42.6(d)

Plus: sale of reserves in place
2.5(e)

Adjusted net proved reserve additions
68.8

Annual production
42.6(d)

Reserve replacement ratio
161.5
%


(a)
Beginning reserves differ from the proved reserve balance as of January 1, 2017, of 731.4 MMBoe reflected on page 120 of our 2017 Form 10-K, as it excludes 160.6 MMBoe and 6.5 MMBoe of reserves attributable to our Pinedale assets and certain Other Northern Properties, respectively, which were divested in September 2017 (Divested Assets).
(b)
See pages 120-121 of our 2017 Form 10-K.
(c)
Amount differs from the purchase of reserves in place for 2017 of 76.3 MMBoe reflected on page 120 of our 2017 Form 10-K, as it excludes 11.6 MMBoe of proved reserves primarily related to acreage with unproved reserves swapped by QEP for acreage with proved reserves.
(d)
Amount differs from 2017 production of 53.1 MMBoe reflected on page 120 of our 2017 Form 10‑K, as it excludes 10.5 MMBoe of production attributable to Divested Assets.
(e)
Amount differs from the sale of reserves in place for 2017 of 159.0 MMBoe reflected on page 120 of our 2017 Form10-K, as it excludes 156.5 MMBoe of proved reserves associated with the Divested Assets.

4 In assessing the performance score on the Strategic Initiatives component, the Compensation Committee considered the Company's achievements in the areas of technical innovation, financial management and portfolio optimization and awarded an at target amount. Under technical innovation, the creation and implementation of the tank-style development approach in the Permian basin provides a higher recovery of oil in place by maximizing stimulated rock volume while avoiding frac interference. This approach, combined with the simultaneous fracturing practices and conversion from oil-based mud to brine and Evolution drilling fluids have positioned QEP as an industry leader in this basin. In addition, the Company expanded its successful refracturing program, where existing wells are restimulated, to increase production and reserves. Under financial management, the Company amended and extended its revolving credit agreement and restructured its long-term debt portfolio. Finally, the Company increased its acreage position in the Permian Basin through the tax-efficient acquisition of over 15,100 acres in Martin County, Texas, while also completing the divestiture of our Pinedale Anticline natural gas asset.

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2017 AIP Payouts

In February 2018, our Compensation Committee determined 2017 AIP payouts for our NEOs based on Company performance (89.6% score result) as well as individual performance. For each of Mr. Stanley, Mr. Doleshek and Mr. Torgerson, the Compensation Committee reduced the final awards based on stock price performance. For Mr. Woosley, the Compensation Committee increased the final award based on his outstanding contributions and expanded role in 2017.

The following table shows the 2017 AIP payouts for our NEOs.
NEO
Target Award
Target Award Adjusted for Company Score
Final Award
Mr. Stanley
$935,000
$837,760
$670,208
Mr. Doleshek
$551,000
$493,696
$394,957
Mr. Torgerson
$489,250
$438,368
$350,694
Mr. Woosley
$287,250
$257,376
$386,064
Ms. Fiala
$172,800
$154,829
$154,829

Mr. Thompson did not receive an AIP payout, because his employment ended on September 15, 2017.

Looking Ahead to 2018:
Based on shareholder feedback and company strategic direction, our 2018 AIP performance goals will focus on execution and financial health with the following key metrics: Drilling Rate of Return, Lease Operating Expense plus Transportation & Processing Expense, Adjusted EBITDA, Production and Health, Safety and Environment. See "Response to 2017 Shareholder Feedback" section above for more information. Additionally, our top two executive officers will have specific performance goals related to the execution of our new company strategy announced on February 28, 2018, including asset divestitures and Permian Basin operating and cost metrics.

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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 making this determination for 2017, as reflected in the table below, our Compensation Committee decided to restore the total target LTI value for the majority of our officers to 2015 levels after having reduced grant values in 2016 by 10% in recognition of oil and gas industry conditions. Mr. Torgerson's grant was increased beyond 2015 levels to ensure competitiveness. Mr. Woosley's grant was increased beyond 2015 levels in recognition of his promotion to Senior Vice President and strong performance.
Named Executive Officer
2015 LTI Grant Value
2016 LTI Grant Value
2017 LTI Grant Value
Mr. Stanley
$4,800,000
$4,320,000
$4,800,000
Mr. Doleshek
$2,360,000
$2,124,000
$2,360,000
Mr. Torgerson
$2,000,000
$1,800,000
$2,200,000
Mr. Woosley
$900,000
$810,000
$1,000,000
Ms. Fiala
$475,000
$427,500
$475,000
Mr. Thompson
$470,000
$500,000
$500,000

Our Compensation Committee then determines how to deliver that value through a mix of three vehicles: PSUs, stock options and restricted stock. The following charts reflect the mix of LTI awards for our NEOs in 2017.

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12118128&doc=11 http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12118128&doc=12


Performance Share Units

PSUs utilize phantom shares of stock that track the value of QEP shares but are typically settled in cash. In 2017, 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.

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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 2017-2019 performance period, granted in February 2017, the peer group is outlined in the section titled "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
Payout Calculation
Cash payouts under the program at the end of the performance period are calculated using the following formula: Target # PSUs awarded X Performance Score X 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 awards granted since November 2015, shares automatically vest only upon an involuntary or constructive termination following a change in control (double trigger). For awards granted before November 2015, in the event of a change in control, unvested PSUs vest immediately based on performance through the change in control. The shares do not automatically vest upon any other termination circumstance. In the event of retirement, death 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.

Looking Ahead to 2018:
Based on shareholder feedback, for the 2018 grant we have added a cap and floor on TSR, such that 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%.

2015-2017 PSU Performance Period

The awards granted in February 2015 for the 2015-2017 performance period were eligible to vest upon the end of the performance period on December 31, 2017, subject to our relative TSR during the performance period as certified by our Compensation Committee. QEP's TSR ranked at the 44thpercentile of our peers, which resulted in a cash payout at 36% of grant date target value for each NEO who was employed as of the end of the performance period based on the vesting of 85% of the targeted number of PSUs. Our total shareholder return was just below the median of our peers, and the decline in absolute share price over the period decreased the value of the award further. The payout on the PSUs for the 2015-2017 performance period was as follows:
NEO
Target Award Value
Grant Price (2015)
Target PSUs
Vest Price (2017)
Cash Payout1
Cash Payout % of Target Award Value
Mr. Stanley
$1,920,020
$21.69
88,521

$9.06
$681,702
36%
Mr. Doleshek
$944,014
$21.69
43,523

$9.06
$335,175
36%
Mr. Torgerson
$800,014
$21.69
36,884

$9.06
$284,049
36%
Mr. Woosley
$225,012
$21.69
10,374

$9.06
$79,891
36%
Ms. Fiala
$118,750
$21.69
5,475

$9.06
$42,165
36%

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).

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Upon his departure on September 15, 2017, Mr. Thompson forfeited 451 PSUs, 8,234 PSUs and 8,834 PSUs granted in 2015, 2016 and 2017, respectively. He received a cash payout of $38,251 for the remaining (vested) 2015 PSUs at the same cash payout percentage as the other NEOs in February 2018.

Stock Options

Stock options align our executive compensation directly with the Company's market value (or stock price) as the stock price must increase for any value to be realized. The 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 awards granted since November 2015, all unvested options automatically vest only upon an involuntary or constructive termination following a change in control (double trigger) or upon death or disability. For awards granted before November 2015, in the event of a change in control, death or disability, all unvested options vest immediately. Unvested options are forfeited upon any other termination circumstance.
Other
The Long Term Stock Incentive Plan does not permit backdating, discounting or repricing of stock options without shareholder approval.


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. 
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 awards granted since November 2015, all unvested shares automatically vest only upon an involuntary or constructive termination following a change in control (double trigger) or upon death or disability. For awards granted before November 2015, in the event of a change in control, death or disability, all unvested shares vest immediately. Unvested shares are forfeited upon any other termination circumstance.


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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 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, including the CEO;
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 Mr. Stanley, which is approved by all of the independent directors except Mr. Baker. Mr. Baker does not participate in the setting of the CEO'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 but not limited to, stock ownership levels and calculations of potential payments upon various termination events.


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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 Mr. Stanley'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;
Its 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.

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 2017 did not create any conflicts of interest and that the Consultant remains independent.


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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 peer group is used for determining relative TSR performance under the PSU program, and as noted below, a subset of this peer group is used for benchmarking executive compensation.

The Compensation Committee referenced compensation data gathered from industry peers in 2016 in connection with its executive compensation decisions made in early 2017. The companies below were used in the 2017 PSU grant, with the only change from the prior year being the removal of Ultra Petroleum Corp. due to bankruptcy. A subset of these companies, in bold font below, was used for executive compensation benchmarking.

Antero Resources Corp.
Diamondback Energy Inc.
Oasis Petroleum Inc.
Cabot Oil & Gas Corp.
Encana Corp.
Range Resources Corp.
Carrizo Oil & Gas Inc.
Energen Corp.
Rice Energy Inc.
Chesapeake Energy Corp.
EP Energy Corp.
SM Energy Co.
Cimarex Energy Co.
EQT Corp.
Southwestern Energy Co.
Concho Resources Inc.
Gulfport Energy Corp.
Whiting Petroleum Corp.
Continental Resources Inc.
Laredo Petroleum Inc.
WPX Energy Inc.
Denbury Resources Inc.
Newfield Exploration Co.
 

Looking Ahead to 2018:
In July of 2017 our Compensation Committee reevaluated the peer group based on current industry dynamics and removed the following companies: 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. We have historically used a subset of the relative TSR peer group to benchmark executive compensation to better reflect QEP's size in benchmarking compensation levels. However, the reconstituted peer group does not have companies significantly larger than QEP, so two groups are no longer necessary. The peer group below was used for benchmarking compensation for 2018 and for our 2018 TSR awards, with new companies denoted with an asterisk*.

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.*
 
 


36


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

For additional details regarding this plan, see the section below titled "Compensation Tables – Potential Payments Upon Termination or Change in Control."

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 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 and PSUs, but exclude stock options.

The ownership guidelines for our NEOs are currently established at the following minimum levels:
Named Executive Officer
Guideline
Ownership Status
as of 12/31/17
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
Ms. Fiala
2x base salary
In compliance

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 individual that has ever been listed in the Summary Compensation Table, unless the compensation is (i) paid to the CFO on or prior to December 31, 2017, (ii) paid to an NEO who terminated employment prior to December 31, 2017, or (iii) "performance-based compensation" paid on or prior to December 31, 2017 or payable after such date but pursuant to a written contract in existence on or prior to November 2, 2017. Our policy is primarily to design and administer compensation plans that support

37


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, 2017, only outstanding awards under our CIP (i.e., our AIP awards and PSUs) can constitute performance-based compensation, although there is no requirement or guarantee that such awards will, in fact, qualify as performance-based compensation. Equity incentive awards under our LTSIP will not constitute performance-based compensation, as the LTSIP has not been approved by our shareholders subsequent to the spin-off of the Company from Questar Corporation in 2010.

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

Fair Value of Stock-Based Payments – Awards of stock options and restricted stock under the LTSIP and awards of performance share units under the CIP are accounted for under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (FASB ASC Topic 718), formerly referred to as SFAS No. 123(R). FASB ASC Topic 718 requires the recognition of expense for the fair value of stock-based compensation, 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:
 
An appropriate balance of strategic, operating and financial performance measures, including 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 section below titled "Clawback of Compensation");
An appropriate balance of fixed and Company performance-related compensation components;
A mix of cash and equity, with significant weight placed on long-term incentive 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.


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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 as well as 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.

39


COMPENSATION TABLES

Summary Compensation Table

The following table summarizes the total compensation paid to our NEOs for services rendered during the fiscal years ended 2017, 2016 and 2015, except that (i) only 2017 compensation is summarized for Ms. Fiala, as she was not an NEO in 2015 and 2016, and (ii) only 2016 and 2017 compensation is summarized for Mr. Thompson, as he was not an NEO in 2015:
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
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

2015
850,000

 

4,486,966

 
859,218

 
680,000

 
543,636

145,180

7,565,000

Richard J. Doleshek
Executive Vice President, CFO
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

2015
563,000

 

2,498,059

 
422,451

 
405,360

 
322,467

93,355

4,304,692

Jim E. Torgerson
Executive Vice President, QEP Energy
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

2015
499,000

 

1,600,028

 
358,009

 
359,280

 

108,779

2,925,096

Christopher K. Woosley
Senior Vice President and General Counsel
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

2015
347,000

 

975,031

 
201,381

 
194,320

 

68,906

1,786,638

Margo D. Fiala7
Vice President, Human Resources
2017
285,917

 

380,012

 
86,273

 
154,829

 

55,249

962,280

2016

 


 

 

 



2015

 


 

 

 



Matthew T. Thompson
Vice President, Energy
2017
244,070

8 


575,734

9 
98,349

10 

 

479,862

1,398,015

2016
305,625

 

437,508

 
61,844

 
241,800

 

43,631

1,090,408

2015

 


 

 

 




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 2017
Name
Performance Share Unitsa,b
($)
Restricted Stockb
($)
Mr. Stanley
2,400,004

1,440,006

Mr. Doleshek
1,180,008

708,015

Mr. Torgerson
1,100,015

660,013

Mr. Woosley
400,015

400,015

Ms. Fiala
190,006

190,006

Mr. Thompsonc
241,521

334,213


a.
The maximum grant date values of the PSUs (based upon QEP's common stock price on the date of issuance, and assuming that each individual ultimately earns 200% of the total number of PSUs granted) are as follows: Mr. Stanley, $4,800,008; Mr. Doleshek, $2,360,016; Mr. Torgerson, $2,200,030; Mr. Woosley, $800,030; Ms. Fiala $380,012; and Mr. Thompson $483,042.
b.
The grant date fair values for the 2017 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.

40


c.
In connection with Mr. Thompson's departure on September 15, 2017, the Compensation Committee amended the vesting of a prorated portion of the unvested PSUs and restricted stock held by Mr. Thompson as of that date, which resulted in a modification of the vesting of 19,441 PSUs and 16,860 shares of restricted stock. See Footnotes 8 and 9, below, for further details.

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, 2016, and 2015:
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
2/12/2015
36.8
4.5
1.4
0.37

a.
The Board suspended dividends in early 2016.

3.
Amounts in column (g) reflect the annual cash incentive awards under our CIP for 2017, which were determined by the Compensation Committee and paid out on March 1, 2018.
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 2017 Pension Benefit Table, which are consistent with those used in QEP's consolidated financial statements (except for pre-retirement decrements). The increase in the estimated actuarial present value for Messrs. Stanley and Doleshek reflect an increase in value due to an additional year of service, compensation increases, and changes in mortality rate and discount rate assumptions used for computing the value. Mr. Torgerson, Mr. Woosley, and Ms. Fiala are not, and Mr. Thompson 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 the Nonqualified Deferred Compensation table column (d), do not consist of any above-market or preferential earnings.
5.
Items included in column (i) as All Other Compensation are detailed below.
Name
Employer Match to Savings Plans
($)
Reimbursement of Taxes for Payroll Correctiona
($)
Officer Allowanceb
($)
Severance and Other Payments on Terminationc ($)
Total
($)
Mr. Stanley
117,300

27,673

9,730

 
154,703

Mr. Doleshek
78,062

16,560

10,350

 
104,972

Mr. Torgerson
87,640

13,891

10,000

 
111,531

Mr. Woosley
55,302

8,672

9,250

 
73,224

Ms. Fiala
40,221

4,028

11,000

 
55,249

Mr. Thompson
38,377

4,017

8,800

428,668

479,862


a.
Due to a payroll coding error with respect to deferred compensation under our Deferred Compensation Plan, certain federal employment taxes were not withheld with respect to the employees' deferred compensation from 2011 through 2016. During 2017, QEP paid the employee and employer shares of such employment taxes for outstanding tax years 2013-2016, along with related interest charges and an additional amount to account for income taxes for all impacted employees resulting from the Company's payment of the employee portion of the employment taxes to the IRS and the Company's reimbursement of expenses for the preparation of amended tax returns discussed below.
b.
Amount shown includes (i) an $8,500 lump sum allowance based on current market practices to offset the cost of tax preparation, financial planning, and other expenses, which was not grossed up to account for income taxes, and (ii) reimbursement of expenses for preparation of amended tax returns for 2013-2016 related to the payroll coding error described above.
c.
Amount includes $40,768 of accrued vacation, which was payable upon Mr. Thompson's departure, and $387,900 of cash severance.

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
2017
11.8%
2016
12.0%
2015
11.2%
Mr. Doleshek
2017
14.8%
2016
14.6%
2015
13.1%

41


Name
Year
Percentage of Total Compensation
Mr. Torgerson
2017
16.3%
2016
16.9%
2015
17.1%
Mr. Woosley
2017
20.7%
2016
22.8%
2015
19.4%
Ms. Fiala
2017
29.7%
Mr. Thompson
2017
16.1%
2016
28.0%

7.
Ms. Fiala will no longer be employed by the Company effective March 31, 2018.
8.
Salary for Mr. Thompson includes $6,154 of vacation sold in 2017.
9.
In connection with Mr. Thompson's departure on September 15, 2017, the Compensation Committee amended the vesting of a prorated portion of the unvested PSUs and restricted stock held by Mr. Thompson as of that date, which resulted in the modification of the vesting of 19,441 PSUs and 16,860 shares of restricted stock. The amendment of the unvested PSUs and restricted stock requires the presentation of the fair value of the modified awards on September 15, 2017, as "new" grants in the table. Accordingly, the amounts shown in the Stock Awards column includes (i) the grant date fair value of the 11,779 PSUs granted on February 13, 2017 ($200,007 as of the day of the grant), (ii) the fair value of 2,945 of those same 11,779 PSUs and of 16,496 PSUs granted in prior years, to reflect the modifications on September 15, 2017 ($41,514 as of the date of the modification), which fair value is based on the probable outcome of the performance conditions as of the date of modification (i.e., probable payout on 0% of the 2,945 PSUs for the 2017-2019 performance period, 0% of the 11,529 PSUs for the 2016-2018 performance period and 105% of the 4,967 PSUs for the 2015-2017 performance period); (iii) the grant date fair value of the 11,779 shares of restricted stock granted on February 13, 2017 ($200,007 as of the day of the grant), and (iv) the fair value of 3,827 of those same 11,779 shares of restricted stock and of 13,033 shares of restricted stock granted in prior years, to reflect the modifications on September 15, 2017 ($134,206 as of the date of the modification).
10.
In connection with Mr. Thompson's departure on September 15, 2017, the Compensation Committee accelerated the vesting of options to purchase 15,861 shares of common stock, which represented a prorated portion of the unvested options held by Mr. Thompson as of that date. The amendment of the options requires the presentation of the fair value of the modified options on September 15, 2017, as "new" grants in the table. Accordingly, the amount shown in the Option Awards column for 2017 includes the grant date fair value of the option granted February 13, 2017, to purchase 13,928 shares of common stock, as well as the fair value of the option to purchase 4,524 of those same 13,928 shares of common stock together with previously granted options to purchase 11,337 shares of common stock, as modified. The assumptions used to calculate the aggregate fair value of option awards modified for Mr. Thompson on September 15, 2017, were as follows:
Modification Date
Assumptions

Volatility
(%)
Expected Lifea
(Years)
Risk-Free
Interest Rate
(%)
Dividend Yieldb
(%)
9/15/2017
50.1
1
1.3
0

a.
The amended options expire one year from the date of modification.
b.
The Board suspended dividends in early 2016.

CEO Pay Ratio


As a result of recently adopted rules under the Dodd-Frank Act, the SEC now requires disclosure of the CEO to median employee pay ratio. Mr. Stanley had 2017 total compensation of $7,231,169 as reported in the Summary Compensation Table. Our median employee's total compensation for 2017 was $136,327. As a result, Mr. Stanley's 2017 total compensation for 2017 was approximately 53 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 our median employee based on our employee population (including part-time employees) as of December 1, 2017, which is within the last three months of our fiscal year.

42


Grants of Plan-Based Awards for 2017

This table sets forth the plan-based awards granted to the NEOs during 2017. 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 or options granted and the grant date fair values of those awards.
Name
Grant Date
Estimated Future Payouts Under
Non-Equity 
Incentive Plan Awards
1
Estimated Future Payouts 
Under
Equity Incentive Plan Awards
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
All Other
Option
Awards:
Number
of
Securities
Under-
lying
Options
(#)
Exercise
or Base
Price of
Option
Awards
6
($/share)
Grant Date
Fair Value
of Stock
and Option
Awards
($)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Charles B.
Stanley
2/13/17
AIP
1,2 
-
935,000

1,870,000

 
 
 
 
 
 
 
2/13/17
PSU
3 
 

 
70,672

141,343

282,686

 
 
 
2,400,004

2/13/17
SO
4 



 
 
 
 
133,705

16.98

871,757

2/13/17
RS
5 






84,806

 
 
1,440,006

Richard J.
Doleshek
2/13/17
AIP
1,2 
-
551,000

1,102,000

 
 
 
 
 
 
 
2/13/17
PSU
3 
 

 
34,747

69,494

138,988

 
 
 
1,180,008

2/13/17
SO
4 



 
 
 
 
65,739

16.98

428,618

2/13/17
RS
5 






41,697

 
 
708,015

Jim E.
Torgerson
2/13/17
AIP
1,2 
-
489,250

978,500

 
 
 
 
 
 
 
2/13/17
PSU
3 
 

 
32,392

64,783

129,566

 
 
 
1,100,015

2/13/17
SO
4 







 
61,282

16.98

399,559

2/13/17
RS
5 


 
 
 
 
38,870

 
 
660,013

Christopher K. Woosley
2/13/17
AIP
1,2 
-
287,250

574,500




 
 
 
 
2/13/17
PSU
3 
 

 
11,779

23,558

47,116

 
 
 
400,015

2/13/17
SO
4 






 
27,856

16.98

181,621

2/13/17
RS
5 






23,558

 
 
400,015

Margo D. Fiala
2/13/17
AIP
1,2 
-
172,800

345,600

 
 
 
 
 
 
 
2/13/17
PSU
3 
 
 
 
5,595

11,190

22,380

 
 
 
190,006

2/13/17
SO
4 
 
 
 
 
 
 
 
13,232

16.98

86,273

2/13/17
RS
5 
 
 
 
 
 
 
11,190

 
 
190,006

Matthew T. Thompson
2/13/17
AIP
1,2 
-
192,000

384,000





 
 
 
 
2/13/17
PSU
3 





5,890

11,779

23,558

 
 
 
200,007

2/13/17
SO
4 









 
13,928

16.98

90,811

2/13/17
RS
5 









11,779

 
 
200,007

9/15/17
SO
7 










4,339

21.69 8

260

9/15/17
SO
7 










6,998

10.12 8

6,508

9/15/17
SO
7 










4,524

16.98 8

769

9/15/17
RS
7 









16,860



134,206

9/15/17
PSU
7 





2,484

4,967

9,934




41,514

9/15/17
PSU
7 





5,765

11,529

23,058





9/15/17
PSU
7 





1,473

2,945

5,890






1.
The amounts included in these columns reflect estimated future cash payouts under the annual incentive program of our CIP based on a targeted percentage of actual base salaries for 2017. Actual incentive payouts earned in 2017 are reflected in the Non-Equity Incentive Plan Compensation column (g) of the Summary Compensation Table.
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 2017. Payment for earned awards is made in cash or shares after the end of the three-year performance period ending December 31, 2019. If threshold levels of performance are not met, then actual payout will be zero.
4.
This row sets forth options granted pursuant to our LTSIP during 2017.
5.
This row sets forth the annual grants of restricted stock pursuant to our LTSIP during 2017.
6.
The exercise price represents the closing price per share of QEP common stock on grant date.
7.
As noted in footnotes 8 and 9 of the Summary Compensation Table, the Compensation Committee amended the terms of Mr. Thompson's (i) performance share unit agreements under the CIP to modify the vesting of 19,441 PSUs, (ii) restricted stock agreements under the LTSIP to accelerate the vesting of 16,860 shares of restricted stock, and (iii) stock option agreements under the LTSIP to accelerate the vesting of stock options to purchase 15,861 shares of common stock, all effective September 15, 2017. Without such amendments, all awards would have been forfeited. The modification of the awards requires the presentation of the amended awards as "new" grants in this table.
8.
The exercise price represents the closing price per share of QEP common stock on the original grant date. The exercise price was not modified when the stock option was accelerated in connection with Mr. Thompson's departure.

43


Outstanding Equity Awards at Fiscal Year-End 2017

This table shows outstanding equity awards for the NEOs. All values shown are as of December 31, 2017.
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
63,588
 


39.07
2/25/2018
37,191
1 
355,918
213,439
4 
2,042,611
90,350
 


30.90
2/13/2019
106,720
2 
1,021,310
141,343
5 
1,352,653
100,088
 


30.12
2/13/2020
84,806
3 
811,593



87,194
 


31.74
2/13/2021






83,990
 
41,995
1 
21.69
2/12/2022






47,369
 
94,737
2 
10.12
2/16/2023