UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Securities Exchange Act of 1934
(Amendment (Amendment No. )
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Definitive Proxy Statement | ||||
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PIONEER ENERGY SERVICES CORP.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant))
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PIONEER DRILLING COMPANYENERGY SERVICES CORP.
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
April 10, 201212, 2013
Dear Fellow Shareholder:
On behalf of the board of directors, we invite you to attend the 20122013 Annual Meeting of Shareholders of Pioneer Drilling Company.Energy Services Corp. We will hold the meeting at 1:00 p.m., Central time,Time, on Thursday,Wednesday, May 10, 2012,15, 2013, at the Petroleum Club of San Antonio, 7th7th Floor of the Energy Plaza Building, 8620 N. New Braunfels Street, San Antonio, Texas.Texas 78217.
On the following pagesAs you review this year’s proxy statement, you will findnotice several changes in the Noticeformat and presentation of Annual Meetinginformation. The changes to this year’s proxy statement are a reflection of Shareholdersour continued commitment to effective communication with you. In an effort to simplify and Proxy Statement giving information concerningmore effectively explain the matters to be actedaddressed at our annual meeting, we have included a Proxy Summary starting on atpage 6 that highlights certain information contained elsewhere in the meeting. Our Annual Reportproxy statement. We have also included a Table of Contents and made enhancements in how we present information about our Board of Directors, corporate governance practices and executive compensation matters. We feel it is important to Shareholders describingprovide you with information about Pioneer Drilling Company’s operations during the fiscal year ended December 31, 2011,in a way that is enclosed.easy to understand.
We hope you will be able to attend the meeting in person. Whether or not you plan to attend, please take the time to vote either by Internet using your computer or by completing and returning your proxy card in the enclosed envelope before the meeting. If you attend the meeting, you may, if you wish, revoke your proxy and vote in person.
Thank you for your interest in Pioneer Drilling Company.Energy Services Corp.
Sincerely,
Dean A. Burkhardt | Wm. Stacy Locke | |
Chairman | President and Chief Executive Officer |
PIONEER DRILLING COMPANYENERGY SERVICES CORP.
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice of Annual Meeting of Shareholders |
Wednesday, May 15, 2013
To the Shareholders of Pioneer Drilling Company:
The 2012 Annual Meeting of Shareholders of Pioneer Drilling Company will be held on Thursday, May 10, 2012, at ">1:00 p.m., Central time, at the Time
To the Shareholders of Pioneer Energy Services Corp.:
The 2013 Annual Meeting of Shareholders of Pioneer Energy Services Corp. will be held on Wednesday, May 15, 2013, at 1:00 p.m., Central Time, at the Petroleum Club of San Antonio, 7th Floor of the Energy Plaza Building, 8620 N. New Braunfels Street, San Antonio, Texas 78217. At the meeting, we will ask you to consider and take action on the following:
(1)
elect John Michael Rauh, who has been nominated by the board of directors, as a Class III director of the board of directors of Pioneer Energy Services Corp., to serve until our 2016 Annual Meeting of Shareholders or until his successor has been duly elected and qualified (Proposal 1);
(2)
approve an amendment and restatement of the Pioneer Energy Services Corp. Amended and Restated 2007 Incentive Plan (Proposal 2);
(3)
conduct an advisory vote to approve the compensation of the named executive officers (Proposal 3);
(4)
ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 (Proposal 4); and
(5)
transact any other business that may properly come before the annual meeting or any adjournment or postponement of the meeting.
This notice and the attached proxy statement are first being mailed to our shareholders on or about April 10, 2012.12, 2013. Our board of directors has set the close of business on March 22, 2012,27, 2013, as the record date for determining shareholders entitled to receive notice of and vote at the annual meeting. A list of all shareholders entitled to vote is available for inspection during normal business hours at our principal executive offices at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209. This list will also be available at the meeting.
Important notice regarding the availability of proxy materials for the shareholder meeting to be held on Thursday,Wednesday, May 10, 2012.15, 2013. The proxy statement, andthe 2012 annual report to shareholders and any other additional soliciting materials are available at www.pioneerproxy.com.
Your vote is very important. Whether or not you plan to attend the annual meeting, we encourage you to read the proxy statement. Further, to be sure your vote counts and to assure a quorum, please vote by Internet or sign, date and return the enclosed proxy card, whether or not you plan to attend the meeting.
San Antonio, Texas | |
By Order of the Board of Directors | |
| |
Carlos R. Peña | |
Senior Vice President, General Counsel, Secretary and Compliance Officer |
San Antonio, Texas
Table of Contents
PARTICIPATE IN THE FUTURE OF PIONEER ENERGY SERVICES CAST YOUR VOTE RIGHT AWAY |
INFORMATION CONCERNING MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS |
Code of Business Conduct and Ethics and Corporate Governance Guidelines |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 2007 INCENTIVE PLAN |
RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Proxy Summary
April 10,This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information in this proxy statement.
Eligibility to Vote (page 10)
You can vote if you were a shareholder of record at the close of business on March 27, 2013.
How to Cast Your Vote (page 10)
You can vote by any of the following methods:
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Internet (www.voteproxy.com) until May 14, 2013;
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Completing, signing and returning your proxy or voting instruction card before May 6, 2013; or
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In person, at the annual meeting. If your shares are held in the name of a broker, nominee or other intermediary, you must bring with you to the meeting proof of ownership and the legal proxy card you received from your intermediary.
Business Highlights
(For more detail, please see our Form 10-K for the year ended December 31, 2012,
as filed with the SEC on February 13, 2013.)Early in 2012, our board of directors approved a business plan that reflected very aggressive goals for earnings per share (“EPS”), Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), return on capital employed (“ROCE”) and safety. These goals served as targets for our annual cash incentive plan. Despite our strong performance in 2012, we did not achieve some of the challenging goals set out for us in our annual cash incentive plan. However, the Compensation Committee believes that management performed very well during 2012 and delivered strong results for all of the 2012 Team Goals. Key highlights of our 2012 performance include the following:
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Grew each of our core businesses resulting in increased revenues, Adjusted EBITDA, and margin;
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Deployed seven new-build drilling rigs, 15 wireline units, 19 well servicing rigs, and three coiled tubing units;
•
Rebranded and changed our name to Pioneer Energy Services Corp.;
•
Integrated our new coiled tubing business;
•
Maintained high utilization of our drilling, well servicing, and wireline fleets;
•
Improved profitability in Colombia and ended the year with 100% utilization in December;
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Achieved excellent safety results, with the lowest recordable incident rate in the history of the company;
•
Launched a cross-selling campaign to further capture synergistic gains;
•
Selected an electronic preventative maintenance system now in development with expected launch in 2013; and
•
Added a VP of Drilling to our core management team.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 6
Board Nominees (page 14)
Name Age Director since Experience/ Qualification Independent Committee Memberships John Michael Rauh 63 2008 • Financial and accounting expertise • Experienced with Sarbanes-Oxley 404 compliance • 25 years of experience in various financial capacities including several senior financial positions at a global oil and gas company and another 8 years of audit and accounting experience at a large public accounting firm Yes • Audit Committee (chair) • Compensation Committee • Nominating and Governance Committee
Governance of the Company (pages 19-24)
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Director Meetings
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Independent Chairman of the Board
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Committees of the Board of Directors
•
Director Resignation Policy
•
Director Recommendations from Shareholders
•
Code of Business Conduct and Ethics and Corporate Governance Guidelines
•
Risk – Related Compensation Policies and Practices
•
Communications with the Board
•
Director Compensation
•
Stock Ownership Guidelines
Executive Officers (page 27)
Name | Age | Position | Joined Pioneer | Experience |
Wm. Stacy Locke | 57 | President, Chief Executive Officer and Director | 1995 | Mr. Locke has over 30 years of industry and management experience. He has served as our President since May 1995. Prior to joining Pioneer, Mr. Locke worked in investment banking for seven years, and as a geologist for seven years. |
Lorne E. Phillips | 42 | Executive Vice President and Chief Financial Officer | 2009 | Prior to joining Pioneer in 2009, Mr. Phillips worked 10 years at Cameron International Corporation in several senior financial roles as well as in business development, marketing, and mergers and acquisitions. Before joining Cameron, Mr. Phillips worked in investment banking. |
Franklin C. West | 73 | Executive Vice President and President of Drilling Services Segment | 2002 | Mr. West has over 50 years of industry experience. Prior to joining Pioneer in 2002, Mr. West served as the Vice President of an on-shore oil and gas drilling contractor. |
Joseph B. Eustace | 58 | Executive Vice President and President of Production Services Segment | 2008 | Mr. Eustace has over 30 years of industry experience. Prior to joining Pioneer in 2008, Mr. Eustace served as President of WEDGE Oil and Gas Services beginning in 2004, prior to which he served as a Vice President of a production services company. |
Carlos R. Peña | 46 | Senior Vice President, General Counsel, Secretary and Compliance Officer | 2008 | Mr. Peña has practiced law since 1992 and has extensive experience providing both outside corporate and securities counsel and in-house M&A counsel. |
Executive Compensation (pages 28-48)
Compensation Goals and Objectives (page 30)
The Compensation Committee designs our executive compensation program with goals and objectives to:
•
Provide a compensation structure that is consistent with competitive pay practices;
•
Attract, motivate and retain executives necessary to our success;
•
Reward executives for building shareholder value; and
•
Encourage attainment of strategic business objectives with pay-for-performance principles.
PIONEER DRILLING COMPANYENERGY SERVICES CORP. – 2013 Proxy Statement 7
PROXY STATEMENT2012 Executive Total Compensation Mix (page 29)
FOR
2012 ANNUAL MEETINGExecutive Compensation Summary (page 39)
Name and Principal Position | Year | Salary | Bonus | Option Awards | Stock Awards | Non-Equity Incentive Plan Compensation | All Other Compensation | Total | |||||||
Wm. Stacy Locke Director, President and Chief Executive Officer | 2012 | $ | 655,385 | $ | 117,000 | $ | 1,021,745 | $ | 715,258 | $ | 572,303 | $ | 23,545 | $ | 3,105,236 |
Lorne E. Phillips Executive Vice President and Chief Financial Officer | 2012 | $ | 343,231 | $ | 44,750 | $ | 288,630 | $ | 202,053 | $ | 175,713 | $ | 22,350 | $ | 1,076,727 |
Franklin C. West Executive Vice President and President of Drilling Services Segment | 2012 | $ | 413,462 | $ | 60,500 | - | $ | 222,255 | $ | 220,231 | $ | 23,606 | $ | 940,054 | |
Joseph B. Eustace Executive Vice President and President of Production Services Segment | 2012 | $ | 314,846 | $ | 34,250 | $ | 265,535 | $ | 185,889 | $ | 153,296 | $ | 23,512 | $ | 977,328 |
Carlos R. Peña Senior Vice President, General Counsel and Secretary | 2012 | $ | 306,769 | $ | 31,000 | $ | 259,763 | $ | 181,851 | $ | 157,047 | $ | 20,925 | $ | 957,355 |
Auditors (page 59)
As a matter of good corporate governance, we are asking our shareholders to ratify the appointment of KPMG LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2013.
Voting matters (page 9)
Board Recommendation | More Information | ||
PROPOSAL 1 | Election of the director nominee | FOR | Page 13 |
PROPOSAL 2 | Approval of an amendment and restatement of the 2007 Incentive Plan | FOR | Page 50 |
PROPOSAL 3 | Approval, on an advisory basis, of the compensation paid to our named executive officers | FOR | Page 57 |
PROPOSAL 4 | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 | FOR | Page 59 |
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 8
PARTICIPATE IN THE FUTURE OF SHAREHOLDERSPIONEER ENERGY SERVICES CAST YOUR VOTE RIGHT AWAY
It is very important that you vote to play a part in the future of Pioneer Energy Services. NYSE rules mean that if your shares are held through a broker, bank or other nominee, they cannot vote on your behalf on non-discretionary matters.
Please cast your vote right away on all of the proposals listed below to ensure that your shares are represented.
Proposals which require your vote
More Information | Board Recommendation | Abstentions | Broker Non-Votes | Votes Required for Approval | ||
PROPOSAL 1 | Election of the director nominee | Page 13 | FOR | No effect | No effect | Plurality |
PROPOSAL 2 | Approval of an amendment and restatement of the 2007 Incentive Plan | Page 50 | FOR | Vote against | No effect | Majority |
PROPOSAL 3 | Approval, on an advisory basis, of the compensation paid to our named executive officers | Page 57 | FOR | Vote against | No effect | Majority |
PROPOSAL 4 | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 | Page 59 | FOR | Vote against | N/A | Majority |
Vote right away
Even if you plan to attend our Annual Meeting in person, please read this Proxy Statement with care and vote right away using any of the following methods. In all cases, have your proxy card or voting instruction form in hand and follow the instructions.
By internet using your computer | By mailing your proxy card |
Visit 24/7 | Cast your ballot, sign your proxy card and send by freepost |
Visit our Annual Meeting website
www.pioneerproxy.com | • Review and download interactive versions of this Proxy Statement and our Annual Report | ||
Visit 24/7 |
Attend our 2013 Annual Meeting of Shareholders
Date: Time: | May 15, 2013 1:00 p.m. (Central Time) | |
|
7th Floor of the Energy Plaza Building 8620 N. New Braunfels Street San Antonio, TX 78217 |
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 9
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
Q: When and where is the annual meeting of shareholders?
A:
The 2013 Annual Meeting of Shareholders of Pioneer Energy Services Corp. will be held on Wednesday, May 15, 2013, at 1:00 p.m., Central Time, at the electionPetroleum Club of Wm, Stacy Locke and C.San Antonio, 7th Floor of the Energy Plaza Building, 8620 N. New Braunfels Street, San Antonio, Texas 78217.
Q: Who is soliciting my proxy?
A:
Pioneer is soliciting your proxy on behalf of its board of directors.
Q: What am I being asked to vote on?
A:
We are asking you to take action on the following:
–
to elect John Thompson (asMichael Rauh, who has been nominated by the board of directors, as a Class II directors) as membersIII director of the board of directors of Pioneer Drilling Company,Energy Service Corp., to serve until our 20152016 Annual Meeting of Shareholders or until their successors havehis successor has been duly elected and qualified;
–
to approve an amendment to our Restated Articlesand restatement of Incorporation to change the Company’s name from “Pioneer Drilling Company” to “PioneerPioneer Energy Services Corp.”;
advisory vote to approve named executive officer compensation;
the reapproval of the material terms of performance-based awards under our Amended and Restated 2007 Incentive Plan as required(the “2007 Incentive Plan”) to (i) increase the number of authorized shares that can be awarded under the plan by Section 162(m)1,350,000 shares, (ii) add a fungible share pool provision, (iii) delete the provision providing that no more than 2,100,000 shares of common stock shall be available under the plan for awards other than stock options and SARs, and (iv) extend the expiration date of the Internal Revenue Code;plan to May 15, 2023;
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to conduct an advisory vote to approve the ratificationcompensation of the named executive officers;
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to ratify the appointment of KPMG LLP as our independent auditorsregistered public accounting firm for the fiscal year ending December 31, 2012;2013; and
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the transaction ofto transact any other business that may properly come before the annual meeting or any adjournment or postponement of the meeting.
Q: Who may vote?
A:
All shareholders of record as of the close of business on March 27, 2013, the record date, are entitled to vote. Shareholders are entitled to one vote per share of common stock held. As of March 27, 2013, there were 62,167,426 shares of our common stock outstanding.
Q: What is the difference between holding shares as a shareholder of record and as a beneficial owner?
A:
If your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer & Trust Company, LLC, you are considered a shareholder of record with respect to those shares. If your shares are held in a brokerage account or bank, you are considered the “beneficial owner” of those shares.
Q: Who may attend the meeting?
A:
All shareholders as of the record date, or their duly appointed proxies, may attend the meeting. You will need to bring a photo ID to gain admission to the annual meeting.
Q: How do I vote?
A:
If you are a shareholder of record, you may vote in three ways:
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you may come to the annual meeting and cast your vote in person;
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you may vote online by visiting www.voteproxy.com; or
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you may vote by completing, signing and returning the enclosed proxy card. If you return a completed and signed proxy card, the persons named on the card will vote your shares in the manner you indicate.
If you are a beneficial owner of shares, your broker, bank or other intermediary will advise you on the methods of voting your shares. Your intermediary has enclosed with this Proxy Statement a voting instruction card for you to use in directing the intermediary on how to vote your shares. The instructions from your intermediary will indicate if Internet or telephone voting is available and, if so, will provide details regarding how to use those systems.
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A.
1If you are the beneficial owner of shares, you may only vote these shares in person at the annual meeting if you have requested and received a legal proxy from your broker, bank or other intermediary (the stockholder of record) giving you the right to vote the shares at the annual meeting, complete such legal proxy, and present it at the annual meeting.
Q: When did Pioneer first distribute this proxy statement and the accompanying form of proxy to its shareholders?
A:
We first distributed this proxy statement and the accompanying form of proxy to our shareholders on or about April 12, 2013.
Q: What happens if I am a shareholder of record and do not indicate how I wish to vote on one or more of the proposals?
A:
If you return your signed proxy card but do not indicate how you wish to vote, the persons named as proxies will vote your shares as follows: FOR election of the director nominee (Proposal 1); FOR approval of the amendment and restatement of the 2007 Incentive Plan (Proposal 2); FOR the approval, on an advisory basis, of the compensation paid to our named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K (Proposal 3); and FOR ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 (Proposal 4). We are not aware of any other matters that may properly come before the annual meeting. If other matters are properly brought before the annual meeting, the proxy holders will vote your shares in accordance with their discretion.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 10
Q. What happens if I am a beneficial owner of shares and do not indicate how I wish to vote on one or more of the proposals?
A:
As a beneficial owner of shares, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your broker, bank or other intermediary by the deadline provided in the materials you receive from your broker, bank or other intermediary. If you do not provide voting instructions to your broker, bank or intermediary, whether your shares can be voted by such person depends on the type of items being considered for vote.
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Non-Discretionary Items. The election of director, the approval of the amendment and restatement of the 2007 Incentive Plan, and the advisory vote to approve executive compensation are non-discretionary items and may not be voted on by brokers, banks or other intermediaries who have not received specific voting instructions from the beneficial owners (i.e., referred to as a broker non-vote).
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Discretionary Items. The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 is a discretionary item. Generally, brokers, banks and intermediaries that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion.
Q: What if I vote by proxy and then change my mind?
A:
If you are a shareholder of record, you can revoke your proxy at any time prior to the vote at the annual meeting by:
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timely providing written notice of the revocation of your proxy to our Corporate Secretary at our principal executive offices at the mailing address indicated below;
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timely delivering a properly executed proxy dated after the date of the proxy you want to revoke;
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timely submitting a later-dated vote via the Internet (which automatically revokes the earlier proxy); or
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attending the annual meeting and casting your vote in person.
If you are a beneficial owner of shares, you may revoke your proxy by:
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timely submitting new voting instructions to your broker, bank or other intermediary in accordance with their voting instructions; or
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if you have obtained a legal proxy from your intermediary giving you the right to vote your shares, by attending the annual meeting, presenting the completed legal proxy to the Company, and voting in person.
You should be aware that simply attending the annual meeting will not in and of itself constitute a revocation of your proxy.
Q: What constitutes a quorum?
A:
The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of capital stock of Pioneer entitled to vote at the meeting constitutes a quorum. We need a quorum of shareholders to hold a valid annual meeting. If you properly sign and return your proxy card, you will be considered part of the quorum.
We will count abstentions and broker non-votes as present for the purpose of establishing a quorum. A broker “non-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular proposal and has not received instructions from the beneficial owner. If a quorum is not present, a majority in interest of those present or represented at the annual meeting may adjourn the meeting, without notice other than an announcement at the meeting, until a quorum is present or represented.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 11
2
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of our common stock as of March 15, 2012 by (1) each person (or group of affiliated persons) who is known by us to beneficially own more than 5% of our common stock, (2) each of our directors and nominees, (3) each of the named executive officers listed in the summary compensation table in this proxy statement and (4) all our directors and executive officers as a group. As of March 15, 2012, we were not aware of any person beneficially owning more than 5% of the outstanding shares of our common stock other than those listed below. Unless otherwise indicated below, all shareholders have the same principal business address as Pioneer. All persons listed in the table below have sole votingentitled to vote on, and investment powerthat voted for or against or expressly abstained with respect to their shares unless otherwise indicated. Asthis proposal; provided that the minimum vote that will constitute shareholder approval for NYSE listing purposes is (i) the approval of March 15, 2012, there were 61,880,310a majority of the votes cast on this proposal and (ii) the total vote cast on this proposal represents over 50% of our outstanding shares of common stock. An abstention will have the effect of a vote against this proposal. A broker non-vote will not have any effect on the vote of this proposal; provided that a broker non-vote could prevent the total votes cast on this proposal from representing over 50% of our outstanding shares of common stock.
Advisory Vote on Executive Compensation. The advisory vote to approve executive compensation requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding.entitled to vote on, and that voted for or against or expressly abstained with respect to this proposal. An abstention will have the effect of a vote against this proposal and a broker non-vote will not have any effect on the vote of this proposal.
Ratification of KPMG as our Independent Registered Public Accounting Firm. The ratification of KPMG as our independent registered public accounting firm requires the affirmative vote of the holders of a majority of the shares of our common stock entitled to vote on, and that voted for or against or expressly abstained with respect to this proposal. An abstention will have the effect of a vote against this proposal.
Shares of Common Stock Beneficially Owned | ||||||||
Name of Beneficial Owner | Number | Percent of Class (1) | ||||||
BlackRock Inc. | ||||||||
40 East 52nd Street | ||||||||
New York, NY 10022 | 8,483,038 | (2) | 13.71 | % | ||||
Dimensional Fund Advisors LP | ||||||||
Palisades West, Building One | ||||||||
6300 Bee Cave Road | ||||||||
Austin, TX 78746 | 4,495,212 | (3) | 7.26 | % | ||||
The Vanguard Group, Inc. | ||||||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 | 3,265,579 | (4) | 5.28 | % | ||||
Wm. Stacy Locke | 1,409,874 | (5) | 2.24 | % | ||||
Franklin C. West | 903,848 | (6) | 1.44 | % | ||||
Lorne E. Phillips | 346,581 | (7) | * | |||||
Joseph B. Eustace | 293,614 | (8) | * | |||||
Carlos R. Peña | 147,846 | (9) | * | |||||
Dean A. Burkhardt | 73,266 | (10) | * | |||||
John Michael Rauh | 57,408 | (10) | * | |||||
Scott D. Urban | 52,408 | (10) | * | |||||
C. John Thompson | 35,048 | (10) | * | |||||
All directors and executive officers as a group (9 persons) | 3,319,893 | (11) | 5.15 | % |
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A:
4Representatives of American Stock Transfer & Trust Company, LLC (“AST”), the transfer agent for our common stock, will tabulate the votes.
Q: What shares are included on the proxy card?
The shares listed on your card represent all the shares of our common stock held in your name (as distinguished from shares held by a broker intermediary, bank or other intermediary). You will receive a separate proxy card from your intermediary if your intermediary holds shares for you.
Q: What does it mean if I receive more than one proxy card?
5A:
It indicates that your shares are held in more than one account, such as two brokerage accounts, and are registered in different names. You should vote each of the proxy cards to ensure that all your shares are voted.
Q: What is Pioneer’s mailing address?
A:
Our mailing address is Pioneer Energy Services Corp., 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 12
PROPOSAL 1
ELECTION OF DIRECTORS Election of Directors
Our board of directors currently consists of five directors. The Board has determined that all of the directors are independent directors, as defined by the rules of the NYSE, other than Mr. Locke who, as President and Chief Executive Officer, is an employee of Pioneer. There are no family relationships of first cousin or closer among our directors or officer by blood, marriage or adoption. Our board of directors is divided into three separate classes (Class I, Class II and Class III) with staggered terms. The current term of office for our Class II directorsIII director will expire at the annual meeting.
Our board of directors has nominated Wm. Stacy Locke and C. John Thompson,Michael Rauh, who currently serveserves on the board of directors, as the nomineesdirector nominee for election as a Class III director at the annual meeting as Class II directors.meeting. Mr. LockeRauh has served as one of our directors since May 1995 and Mr. Thompson has served as one of our directors since May 2001.October 2008.
Assuming the presence of a quorum, directorsthe Class III director will be elected by a plurality of the votes cast by the holders of shares of capitalcommon stock of Pioneer entitled to vote on the election of directors at the annual meeting.meeting, subject to terms of the Director Resignation Policy discussed below in the section titled “Information Concerning Meetings and Committees of the Board of Directors – Director Resignation Policy”. Any abstentions or broker non-votes will not affect the vote.If you properly sign and return the enclosed proxy, unless you withhold authority to vote for the nominees,director nominee, the persons named as proxies will vote FOR the election of the nomineesdirector nominee listed below. Each ofon the nomineesfollowing page.
The director nominee has agreedconsented to serve if elected, however, if any of the nominees becomes unable or unwillingbe named as a director nominee in this proxy statement and has agreed to serve as a director if elected. If the personsdirector nominee becomes unavailable for election, which is not anticipated, the named as proxies intend towill vote the proxy shares for the election of anysuch other person as the board of directors may designate.
Nominees
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Wm. Stacy Locke has served as onenominate, unless the board of our directors as well as Presidentresolves to reduce the number of the Company since May 1995, when he joined Pioneer. In December 2003, Mr. Locke was appointed Chief Executive Officer. In additiondirectors to his continuous role as President, Mr. Locke has also served as Chief Financial Officer and Chief Operating Officer. Prior to joining Pioneer, Mr. Locke was in investment banking with Arneson, Kercheville, Ehrenberg & Associates from 1993 to 1995 and Chemical Banking Corporation from 1988 to 1992. Mr. Locke worked for Valero Energy Corporation, Huffco Petroleum Corporation and Tesoro Petroleum Corporation as a geologist from 1979 to 1986. Mr. Locke received a Bachelor’s Degree in geology from the University of California Santa Barbara and a Master of Business Administration Degree from Southern Methodist University.
Mr. Locke’s seventeen years of experience at Pioneer, including his service as Chief Executive Officer for nine years, gives him unique knowledge of the opportunities and challenges associated with our business. Mr. Locke’s familiarity with all aspects of Pioneer’s business and his historical understanding of its operations, combined with his understanding of the oil and gas industry, geology and investment banking makes him uniquely qualified to adviseserve on the board of directors and thereby reduce the number of directors to lead Pioneer as Chief Executive Officer.be elected at the annual meeting.
PIONEER ENERGY SERVICES CORP. – C. John Thompson2013 Proxy Statement has served as one of our directors since May 2001. Mr. Thompson currently serves as Chairman13
Director Nominee
John Michael Rauh | ||
Class III Director Nominee for Election to a Term Expiring at the 2016 Annual Meeting Director since: 2008 Age: 63 | Acquired expertise of particular relevance to Pioneer: Financial and accounting expertise Experienced with Sarbanes-Oxley 404 compliance 25 years of experience in various financial capacities including several senior financial positions at a global oil and gas company and another 8 years of audit and accounting experience at a large public accounting firm |
Professional Experience
Firm | Kerr-McGee Corporation | Arthur Young & Company |
Date | 1981 – 2006 | 1973-1981 |
Positions Held | Vice President and Controller; Vice President and Treasurer | Audit Manager |
Education
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Bachelor’s Degree in Accounting and Chief Executive Officer of Ventana Capital Advisors, Inc., a capital advisory company he founded in June 2004. Mr. Thompson has over 30 years experience in the energy capital business. Mr. Thompson has worked as a business consultant, in the energy capital business with Enron, the investment banking services business with a company he co-founded, Sagestone Capital Partners, and as the manager of the energy commercial banking business with InterFirst Bank in Houston.Economics from Northwestern Oklahoma State University
As one of Pioneer’s longest-serving non-executive directors, Mr. Thompson brings an important institutional knowledge to the board of directors. His work as an executive in the oil and gas industry, and his
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experience in the energy capital business including more than ten years in energy commercial banking, provides him with insights relating to many of the same issues facing our business, including markets, operational, regulatory, technological, and financial. Mr. Thompson also serves as a member of the Audit Committee and qualifies as an “audit committee financial expert.” Mr. Thompson holds a Master’s Degree in Business Administration with an emphasis in financeAccounting from Oklahoma State University
Other Relevant Qualifications and accounting from the University of Texas at Austin, which enables him to provide guidance to the Board on finance and accounting-related matters. Mr. Thompson’s experience as founder of a capital advisory company and as a consultant provides the board of directors with a unique perspective into different industries and an understanding of various capital strategies.Experience
Our board of directors unanimously recommends a vote “FOR” the election of Wm. Stacy Locke and C. John Thompson as Class II Directors.•
DIRECTORS WITH A TERM EXPIRING IN 2013
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John Michael Rauhhas served as one of our directors since October 2008. Mr. Rauh served in various financial capacities including Vice President and Controller and Vice President and Treasurer during his career at Kerr-McGee Corporation from 1981 until his retirement in 2006. Prior to joining Kerr-McGee, Mr. Rauh was an auditor with Arthur Young & Company, which merged with Ernst & Whinney in 1989 to form Ernst & Young. He received a Master’s Degree in accounting from Oklahoma State University and a Bachelor’s Degree in accounting and economics from Northwestern Oklahoma State University. Mr. Rauh was elected in 2010 and currently serves as a director on the Northwestern Oklahoma State University Foundation Board of Directors. Mr. Rauh served as a director of Tronox, Inc. from 2005 to 2006.
Mr. Rauh, as well as other Tronox, Inc. and Kerr-McGee Corp. officers and directors, has beenwas named as a defendant in a Complaintcomplaint filed in the United States District Court for the Southern District of New York, asserting securities law violations. TheOn June 28, 2010, the Court has dismissed the allegations that Mr. Rauh violated Section 10(b) of the Securities Exchange Act.Act, but permitted plaintiffs to proceed with the allegation that Mr. Rauh currently remains in the case only with respect to allegations that he washad been a “control person” of Tronox under Section 20 of the Securities Exchange Act for an approximately a four-month period. There are no current allegations that Mr. Rauh directly violated any securities laws. Mr. Rauh plans to defend againstOn August 3, 2012, the control person allegations asparties filed a Stipulation and Agreement of Settlement, and on November 26, 2012, the litigation continues.Court entered a final judgment approving the settlement.
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Mr. Rauh’s expertise in a variety of financial and accounting matters, experience in Sarbanes-Oxley 404 compliance and service with a global oil and gas business make him a valuable member of the board of directors and enhances the value of his service as a member of the Audit Committee, where he also qualifies as an “audit committee financial expert.” Mr. Rauh’s Bachelor’s and Master’s Degrees in accounting enable him to advise the Boardboard on accounting-related matters. Mr. Rauh’s experience at a global oil and gas company provideprovides him with insights relating to many of the same issues we face in our business, including markets, operational, regulatory, technological, and financial. Mr. Rauh’s significant experience in several senior financial positions at Kerr-McGee, as well as his previous service as an auditor with an accounting firm, provides a solid platform for him to advise and consult with the board of directors on financial and audit-related matters.
DIRECTORS WITH A TERM EXPIRING INOur board of directors unanimously recommends a vote “FOR” the election of John Michael Rauh as a Class III Director.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 14
Directors with a term expiring in 2014
Dean A. Burkhardt | ||||||||||
Class I Directors Whose Term Expires at the 2014 Annual Meeting Board member since: 2001 Chairman since: 2008 Age: 62 | ||||||||||
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| Over 10 years of experience as our board member Financial and accounting expertise |
Professional Experience
Firm | Consultant | Applied Petroleum Software | Seismic Products | Cliff Mock, Inc. | Tescorp, Inc. | Tescorp Energy Services | Cheyenne Services, Inc. | Cheyenne Services, Inc. |
Date | 1997-Present | 1983-1985 | 1982 | 1982 | 1982 | 1981-1982 | 1979-1989 | 1979-1981 |
Positions Held | Consultant in the energy services industry | Co-founder, President and CEO | President and CEO | President and CEO | President and COO | President and CEO | Director | Co-Founder, Executive Vice President of Sales and Operations |
Education
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7Bachelor of Arts Degree from the University of Houston
Master’s Degree in International Management from the American Graduate School of International Management
Other Relevant Qualifications and Experience
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Dean A. Burkhardt has served as one of our directors since October 26, 2001 and as Chairman of the Board since May 2008. In addition to his role as a horse and cattle rancher,He has been active in the energy industry for 34 years. Mr. Burkhardt has been a consultant toconsulted with the energy services industry since 1997, with a special emphasis infocus on oil and gas projects in emerging markets, workover services, fuel cells and engineering and quality management services. He also served aswas co-founder, President and CEO (1983-1985) of Applied Petroleum Software, a provider of production engineering software for optimizing oil and gas well completions;completions (1983-1985); President and CEO of Seismic Products, a provider of seismic cable (1982), Cliff Mock, Inc., a provider of oilfield valves (1982) and Tescorp Energy Services, a provider of coiled tubing, hydraulics and fishing and rental tools (1981-1982) as well as President and COO of Tescorp, Inc. (1982); was a co-founder (1979), Executive Vice President of Sales and Operations (1979-1981) and a director (1979-1989) of Cheyenne Services, Inc., a provider of oilfield tubular makeup, tubular inspection and third party quality assurance services.
As Mr. Burkhardt is also a result of Mr. Burkhardt’s service as a directorcattle and horse rancher, and currently serves on the Executive Committee of the CompanyBoard of Directors of the American Brahman Breeders Association. He also serves on the Executive Committee of the Board of Directors of Inprint, a non-profit literary organization supporting the creative writing program at the University of Houston. Mr. Burkhardt is also the Treasurer of Inprint and chairs its Finance Committee.
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Having served on the Company’s board of directors for over nineten years, he has becomeMr. Burkhardt is very familiar with ourknowledgeable about the Company’s business and the important issues facing the Company. Mr. Burkhardt’s experiencethat it faces. In addition to serving as a consultant in the energy services industry makes him a valuable member of the board of directors. Mr. Burkhardt serves asChairman, he is currently a member of the Audit Committee and qualifies as an SEC “audit committee financial expert.” He has also previously chaired the Company’s Audit, Compensation, and Nominating and Governance Committees. Mr. Burkhardt’s extensive service in the energy services industry enables him to advise and consult with the board of directors on the many issues that the Company faces, including oil and gas projects in emerging markets, workover services, fuel cells and engineering and quality management services. Mr. Burkhardt also holds a Master’s Degree in international management with an emphasis in marketing and accounting from the American Graduate School of International Management, where his studies emphasized international marketing and accounting. He has obtained a certificate as a Board Governance Fellow from the National Association of Corporate Directors (NACD) and regularly attends continuing education seminars on accounting and financial matters presented by the NACD, and other professional organizations, which enables him to provide guidance to the board of directors related to the Company’s international development and accounting-related matters. Mr. Burkhardt’s significant experience with several companies involved
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 15
Scott D. Urban | ||
Class I Directors Whose Term Expires at the 2014 Annual Meeting Director since: 2008 Age: 59 | Acquired expertise of particular relevance to Pioneer 35 years of energy industry experience Significant and varied management experience at multiple global oil and gas companies Mr. Urban’s background in geology gives him a deeper understanding of our business and the challenges we face |
Professional Experience
Firm | Edgewater Energy | BP PLC | Amoco Corporation |
Date | 2008-Present | 1999-2005 | 1977-1999 |
Positions Held | Managing Director; Lead Partner | Group Vice President - Upstream | Group Vice President - Worldwide Exploration; Upstream Business Manager - China |
Education
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Bachelor’s Degree in the oilEarth Science from Bowling Green State University
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Master’s Degree in Geology from Bowling Green State University
Other Relevant Qualifications and gas industry gives him insights relating to many of the same issues we face in our business and provides a solid platform for him to advise and consult with the board of directors on such issues, including oil and gas projects in emerging markets, workover services, fuel cells and engineering and quality management services.Experience
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Scott D. Urban has served as one of our directors since October 2008. Mr. Urban is a partner in Edgewater Energy, a consulting and investment firm focused on the oil and gas exploration and production industry and assisting private equity firms with upstream investments. Mr. Urban served as Group Vice President - Upstream for BP PLC from 1999 to 2005 and served as BP’s Group Vice President, with responsibility for several profit centers including the North Sea, Atlantic,Alaska, North American Onshore, Egypt and Middle East. Prior to joining BP, Mr. Urban held a variety of management positions with Amoco Corporation, including Group Vice President - Worldwide Exploration and Upstream Business Unit Manager - China. Mr. Urban received a Master’s Degree in geology and a Bachelor’s Degree in earth science from Bowling Green State University. Mr. Urban currently serves on the board of directors of Noble Energy, Inc. and has served as a board member of the UK Offshore Operators Association, the Business Council for International Understanding and the Netherlands Oil and Gas Exploration and Production Association.
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Mr. Urban’s expertise as a consultant in the oil and gas exploration and production industry makes him a valuable member of the board of directors. Mr. Urban’s significant experience at multiple global oil and gas companies provides him with insights relating to many of the same issues we face in our business, including markets, operational, regulatory, technological, and financial. Mr. Urban’s Master’s Degree in geology gives him a deep understanding of, and enables him to advise the board of directors on, many matters relating to oil and gas drilling. Mr. Urban’s service as a member of the board of directors of Noble Energy, Inc. gives him valuable experience in managing the issues that face a publicly held oil and gas company with international operations and allows him to share best practices with our board of directors.
There are no family relations
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 16
Directors with a term expiring in 2015
Wm. Stacy Locke | ||
Class II Directors Whose Term Expires at the 2015 Annual Meeting President, Chief Executive Officer and Director since: 1995 Age: 57 | Acquired expertise of particular relevance to Pioneer Over 30 years of industry experience 18 years of experience at Pioneer Mr. Locke’s varied work experience from geology to investment banking and multiple management roles has provided him with a wide skill set that uniquely benefits Pioneer |
Professional Experience
Firm | Pioneer Energy Services Corp. | Arneson, Kercheville, Ehrenberg & Associates | Chemical Banking Corporation | Valero Energy Corporation, Huffco Petroleum Corporation, Tesoro Petroleum Corporation |
Date | 1995-Present | 1993-1995 | 1988-1992 | 1979-1986 |
Positions Held | Currently President & CEO | Investment Banker | Investment Banker | Geologist |
Education
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Bachelor’s Degree in Geology from University of first cousin or closer among our directors or executive officers by blood, marriage or adoption. The boardCalifornia Santa Barbara
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Master Business Administration Degree from the Southern Methodist University
Other Relevant Qualifications and Experience
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Wm. Stacy Locke has determined that allserved as one of our directors are independent directors, as defined by the ruleswell as President of the NYSE Amex, other thanCompany since May 1995, when he joined Pioneer. In December 2003, Mr. Locke who,was appointed Chief Executive Officer. In addition to his continuous role as President, Mr. Locke has also served as our Chief Financial Officer and Chief Operating Officer. Prior to joining Pioneer, Mr. Locke was in investment banking with Arneson, Kercheville, Ehrenberg & Associates from 1993 to 1995 and Chemical Banking Corporation from 1988 to 1992. Mr. Locke worked for Valero Energy Corporation, Huffco Petroleum Corporation and Tesoro Petroleum Corporation as a geologist from 1979 to 1986. Mr. Locke received a Bachelor’s Degree in geology from the University of California Santa Barbara and a Master of Business Administration Degree from Southern Methodist University.
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Mr. Locke’s 18 years of experience at Pioneer, including his service as Chief Executive Officer for nine years, gives him unique knowledge of the opportunities and challenges associated with our business. Mr. Locke’s familiarity with all aspects of Pioneer’s business and his historical understanding of its operations, combined with his understanding of the oil and gas industry, geology and investment banking makes him uniquely qualified to advise the board of directors and to lead Pioneer as Chief Executive Officer.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 17
C. John Thompson | ||
Class II Directors Whose Term Expires at the 2015 Annual Meeting Age: 60 Director since: 2001 | Acquired expertise of particular relevance to Pioneer Over 35 years experience in the energy capital business One of Pioneer’s longest-serving non-executive directors Deep institutional knowledge with experience as an executive in the oil and gas industry |
Professional Experience
Firm | Ventana Capital Advisors, Inc. | Enron | Sagestone Capital Partners | InterFirst Bank |
Date | 2004-Present | 1990-1997; 2000-2001 | 1997-2000 | 1979-1987 |
Positions Held | President and CEO | Vice President | Co-Founder; Managing Partner | Senior Vice President |
Education
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Bachelor’s Degree in Business Administration from Texas Tech University
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Master’s Degree in Business Administration from the University of Texas at Austin
Other Relevant Qualifications and Experience
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C. John Thompson has served as one of our directors since May 2001. Mr. Thompson currently serves as Chairman and Chief Executive Officer isof Ventana Capital Advisors, Inc., a capital advisory company he founded in June 2004. Mr. Thompson has over 35 years experience in the energy capital business. Mr. Thompson has worked as a business consultant, in the energy capital business with Enron, the investment banking services business with a company he co-founded, Sagestone Capital Partners, and as the manager of the energy commercial banking business with InterFirst Bank in Houston.
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As one of Pioneer’s longest-serving non-executive directors, Mr. Thompson brings an employeeimportant institutional knowledge to the board of Pioneer.
8PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 18
INFORMATION CONCERNING MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
Director Meetings
Our board of directors held eight meetings and acted by written consent seven times during the fiscal year ended December 31, 2011.2012. The board has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. During the fiscal year ended December 31, 2011,2012, all of the directors attended 100% of the total number of meetings of the board and any committee on which each served. In addition, the independent directors/non-management directors also held regular meetings consisting solely of independent directors/non-management directors during the fiscal year ended December 31, 2011.2012.
Independent Chairman of the Board
Our board of directors has separated the roles of Chairman and Chief Executive Officer. The separation of roles was implemented to allow our Chief Executive Officer, Mr. Locke, to focus on the management of the Company and our independent Chairman to focus on the continued development of a high-performing board of directors, including (i) developing board agendas, (ii) working with Company management to ensuredirectors. We believe separation of the boardroles of directors has timelyChairman and adequate information, (iii) coordinating board committee activities, (iv) supporting and mentoring the Chief Executive Officer helps preserve our board’s independence and (v) ensuring effective stakeholder communications.objectivity and provides an appropriate division of labor between our Chairman and Chief Executive Officer. Among the duties and responsibilities of our independent Chairman are the following:
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presiding at all meetingsapproving an appropriate schedule of Board meetings;
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establishing, with the assistance of the board, including executive sessionsCEO and the Chief Financial Officer, the agendas for Board meetings;
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advising the chairperson of each Board committee with respect to agendas and information needs relating to committee meetings;
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reviewing information sent to the Board;
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retaining and terminating outside consultants and advisors that report directly to the Board, as appropriate;
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assisting management in establishing the strategic direction of the independent directorsCompany;
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coordinating with the CEO and non-management directors;
assisting in the preparation of agendasBoard to develop succession procedures and schedules, including agenda items and time allocations, for all meetingsarrangements;
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establishing, with the assistance of the boardCorporate Secretary, procedures for Shareholders and other interested parties to communicate with the Board, any Board committee, the independent or non-management directors, or any other individual director;
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performing or exercising such additional duties and powers as may be conferred upon the Chairman by resolution of directorsthe Board; and its committees;
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promoting an environment of open, transparent, two-way communications between the board and senior management;
communicating with senior management to align board of directors and management priorities;
promoting an active, on-going succession process for the board of directors and senior management positions;
promoting, with senior management, the enterprise risk management process;oversight process.
supporting senior management in promoting high ethical standards in all Company and board of directors dealings; and
overseeing the implementationCommittees of the strategic planning processes.
Audit CommitteeBoard of Directors
The members of our audit committee during the fiscal year ended December 31, 2011 were Messrs. Burkhardt, Thompson, Rauh (chairman) and Mr. Urban. Mr. Rauh served as the chairmanEach of the audit committee during the fiscal year ended December 31, 2011. The audit committee met five times during the fiscal year ended December 31, 2011. The audit committee is governed by a charter that the board of directors amended and restated on December 11, 2008. You can obtain a copy of that charter by going to our Web site atwww.pioneerdrlg.com.
Our common stock is listed on the NYSE Amex. As such, we have agreed to comply with the listing standards of the NYSE Amex, which require that we have at least three members of the audit committee, each of whom is independent. Each of our audit committeecommittees’ members is independent, as defined by the rules of the NYSE Amex andNYSE. Each of the members of the Audit Committee is also independent as defined by the rules and regulations of the SEC. In addition, the board has determined thatSEC and each member of the audit committeeAudit Committee is an “audit committee financial expert” as defined by the SEC. The experience
During 2012, each of the members of each membercommittee attended 100% of the audit committee is described inmeetings held by the biographies under the heading “Proposal 1—Election of Directors.”
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The audit committee’s role is one of financial oversight. Our management is responsible for preparing our financial statements, and our independent auditors are responsible for auditing those financial statements. The audit committee is not providing any expert or special assurance as to our financial statements or any professional certification as to the independent auditors’ work. The following functions are the key responsibilitiescommittee. Each of the audit committee in carrying out its oversight:
appointing, compensating, retaining and overseeing our independent registered public accounting firm and overseeing the qualifications and independence of such firm;
overseeing our accounting and financial reporting processes and the audits of our financial statements;
overseeing the performance of our internal audit function;
overseeing our compliance with legal and regulatory requirements;
preparing a report for inclusion in our proxy statement of its review of our audited financial statements;
pre-approving audit, review or attest services and permitted non-audit services (including the terms and fees thereof) to be performed by our independent registered public accounting firm; and
reviewing and assessing, on an annual basis, the adequacy of the audit committee’s charter and recommending revisions to the board.
The audit committee meets separately from the whole board with the independent auditors to provide an open avenue of communication. The audit committee is ultimately responsible for the selection, evaluation and replacement of our independent auditors.
Compensation Committee
The members of our compensation committee during the fiscal year ended December 31, 2011 were Messrs. Burkhardt, Thompson, Urban (chairman) and Mr. Rauh. Mr. Urban served as chairman of the compensation committee during the fiscal year ended December 31, 2011.The compensation committee met four times and acted by written consent ten times during the fiscal year ended December 31, 2011. In addition, the compensation committee also held meetings with our compensation consultant during the fiscal year ended December 31, 2011. Each of our compensation committee members is independent, as defined by the rules of the NYSE Amex. The compensation committeecommittees is governed by a written charter, that the board amendedwhich you may access and restated on December 11, 2008. You can obtain a copy of that charter by goingprint from our website at www.pioneeres.com.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 19
approving and overseeing our compensation policies, objectives and programs for our executive officers and directors;
annually reviewing and approving corporate goals, objectives and other key measures relevant to the compensation of Pioneer’s executive officers and other key employees;
reviewing and approving all formal employment or other contracts between Pioneer and our executive officers and other key employees;
administering and reviewing Pioneer’s incentive-compensation plans, equity-based plans and other compensation and benefit plans, and authorizing the issuance of stock of Pioneer pursuant to such plans; and
retaining a compensation consultant to assist the committee and approving such consultant’s fees and other retention terms.
Except as described in the Compensation Discussion and Analysis section of this proxy statement, at this time, the compensation committee does not intend to delegate its powers and authority to any subcommittee or other persons. For additional information concerning the compensation committee, see “Compensation Discussion and Analysis” and “Report of the Compensation Committee.”
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Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee during the fiscal year ended December 31, 2011 were Messrs. Burkhardt, Thompson (chairman), Urban and Mr. Rauh. Mr. Thompson served as chairman of the nominating and corporate governance committee during the fiscal year ended December 31, 2011. The nominating and corporate governance committee held two meetings during fiscal year ended December 31, 2011. Each of our nominating and corporate governance committee members is independent, as defined by the rules of the NYSE Amex.
Name and Members Independent Committee Members Primary Responsibilities Meetings and Attendance Audit Committee John Michael Rauh (Chair) Dean A. Burkhardt C. John Thompson Scott D. Urban • ALL • Appointing, compensating, retaining and overseeing our independent registered public accounting firm and overseeing the qualifications and independence of such firm; • Overseeing our accounting and financial reporting processes and the audits of our financial statements; • Overseeing the performance of our internal audit function; • Overseeing our compliance with legal and regulatory requirements; • Preparing a report for inclusion in our proxy statement of its review of our audited financial statements; • Pre-approving audit, review or attest services and permitted non-audit services (including the terms and fees thereof) to be performed by our independent registered public accounting firm; and • Reviewing and assessing, on an annual basis, the adequacy of the audit committee’s charter and recommending revisions to the board. • 5 meetings in person - 100% attendance Compensation Committee Scott D. Urban (Chair) Dean A. Burkhardt John Michael Rauh C. John Thompson • ALL • Annually reviewing and approving corporate goals, objectives and other key measures relevant to the compensation of Pioneer’s executive officers and other key employees; • Reviewing and approving all formal employment or other contracts between Pioneer and our executive officers and other key employees; • Administering and reviewing Pioneer’s incentive-compensation plans, equity-based plans and other compensation and benefit plans, and authorizing the issuance of stock of Pioneer pursuant to such plans; and • Appointing, compensating, retaining and overseeing a compensation consultant and other advisors to assist the committee. • 3 meetings in person - 100% attendance • 2 actions by unanimous written consent Nominating and Corporate Governance Committee C. John Thompson (Chair) Dean A. Burkhardt John Michael Rauh Scott D. Urban • ALL • Responsible for seeking, evaluating and recommending qualified individuals to become directors and serve on committees of the board of directors; • Periodically reviewing and assessing the adequacy of our corporate governance policies and procedures and recommending proposed changes to the board; • Periodically assessing the performance of the board of directors. • 2 meetings in person - 100% attendanceThe nominating and corporate governance committee is responsible
Director Resignation Policy
In an uncontested election of directors, any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will, within five business days following the certification of the shareholder vote, tender his or her written resignation to the Chairman of the Board for consideration by the board of directors. A director whose resignation is under consideration shall abstain from participating in any recommendation or decision regarding that resignation, but shall otherwise remain active and engaged in all board activities, deliberations, and decisions during this board process.
The committee is also responsible for periodically reviewing and assessing the adequacy of our corporate governance policies and procedures and recommending proposed changesboard shall promptly make a determination whether to accept, reject, or otherwise act with respect to the board.tendered resignation. In addition,making this determination, the committee periodically assessesboard may consider all factors that it deems relevant, including, without limitation, the performanceunderlying reasons why shareholders “withheld” votes for election from such director (if ascertainable), the length of service and qualifications of the director whose resignation has been tendered, the director’s contributions to the Company, whether by accepting such resignation the Company will no longer be in compliance with any applicable law, rule, regulation (including, without limitation, any listing or governance requirement of the NYSE) or governing document, and whether or not accepting the resignation is in the best interests of the Company and its shareholders. The board may also consider a range of directors. The nominatingpossible alternatives concerning the director’s tendered resignation, including, without limitation, acceptance of the resignation, rejection of the resignation, or rejection of the resignation coupled with a commitment to seek to address and corporate governance committee is governedcure the underlying reasons reasonably believed by a charter that the board amendedto have substantially resulted in the “withheld” votes.
The board shall act on the tendered resignation and restated on December 11, 2008. You can obtain a copyshall publicly disclose its decision regarding the resignation within one hundred twenty (120) days after the results of that charter by goingthe election are certified. If the board does not accept the resignation, the director shall continue to our website atwww.pioneerdrlg.com.serve until the end of his or her term and until the director’s successor is elected and qualified, or until his or her earlier resignation or removal.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 20
Director NominationsRecommendations from Shareholders
The nominating and corporate governance committee considers candidates for board membership suggested by its members and other board members, as well as by management and shareholders. The committee may also retain a third-party executive search firm to identify candidates from time to time. Shareholders wishing to suggest a qualified candidate should submit the recommendation in writing to the nominating and corporate governance committee in care of our Corporate Secretary at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209. Any shareholder wishing to submit a director candidate for consideration should send the following information to the Corporate Secretary:
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the name, age and business address of that person;the director candidate;
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the principal occupation or employment of that person;the director candidate;
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the class or series and number of shares of capital stock of Pioneer which that person ownsthe shareholder recommending the director candidate, as well as the director candidate, beneficially or of record;owns; and
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all other information, if any, relating to that personthe shareholder recommending the director candidate and the director candidate which Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder would require Pioneer or thatsuch shareholder to disclose in a proxy statement or in any other filing in connection with solicitations of proxies for an election of directors.
Once a prospective director candidate has been identified, the nominating and corporate governance committee makes the initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on the information provided to the committee with the recommendation of the prospective director candidate, as well as the committee’s own knowledge of the prospective director candidate, which may be supplemented by inquiries to the person making the recommendation or others. If the committee determines that additional consideration is warranted, it may ask a third-party search firm to gather additional information about the candidate’s background and experience and to report its findings to the committee. The committee then evaluates the prospective director candidate by considering, in addition to the criteria set forth in our bylaws, each nominee’scandidate’s personal and professional integrity, experience, skills, ability and willingness to devote the time and effort necessary to be an effective board member, and commitment to acting in our shareholders’ and our best interests. Consideration is also given to members of the board of directors having an appropriate mix of background and skills. Although we do not have a formal diversity policy in place for the director nomination process, an important factor in our nominating and corporate governance committee’s consideration and assessment of a director candidate is the diversity of the candidate’s background, viewpoints, training, professional experience, education and skill set. The nominating and corporate governance committee strives to nominate director candidates with a variety of complementary skills so that, as a group, the board of directors will possess the appropriate talent, skills, and expertise to oversee the Company’s business.
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The same criteria apply with respect to the nominating and corporate governance committee’s evaluation of all candidates for membership to our board, including candidates recommended by shareholders. However, additional procedures will apply, as provided in our bylaws, if a shareholder wishes to submit at an annual meeting a director candidate who is not approved by our nominating and corporate governance committee or our board of directors.
Any shareholder desiring to nominate a director at our 20132014 Annual Meeting of Shareholders without including such nomination in our proxy materials for that meeting must provide timely notice to the Company of such nomination in the form provided by our bylaws. See our bylaws for a description of the required form and content of this notice. To be timely, such notice must ordinarily be delivered to our principal executive offices (Attention: Corporate Secretary), at the address set forth above, no later than the close of business on the 90th90th day nor earlier than the 180th180th day prior to the first anniversary date of the preceding year’s annual shareholder meeting (i.e., nominations for director for inclusion in the 20132014 Annual Meeting of Shareholders must be delivered to our principal executive offices no earlier than the close of business on November 9, 2012,16, 2013, and no later than the close of business on February 11, 2013)14, 2014), or such proposal will be considered untimely. However, in the event that the date of the pending annual meeting of shareholders is more than 30 days before or more than 60 days after the first anniversary of the previous year’s annual meeting of shareholders, then such notice must be received not later than the later to occur of the close of business on the 90th90th day prior to the pending annual meeting of shareholders or the 10th10th day following the day on which public announcement of the date of such annual meeting of shareholders is first made by the Company. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority.
Any shareholder desiring a copy of our bylaws will be furnished one without charge upon written request to the Corporate Secretary at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209.
Code of Business Conduct and Ethics and Corporate Governance Guidelines
We have adopted a Code of Business Conduct and Ethics that satisfies the SEC’s definition of a “Code of Ethics” and applies to all employees, including our principal executive officer, principal financial officer, and principal accounting officer.officer, and controller. As part of our continuing efforts to improve our corporate governance principles and practices, we have also adopted Corporate Governance Guidelines that conform to the NYSE corporate governance listing standards and SEC rules.standards. All of the Company’s corporate governance materials, including the Code of Business Conduct and Ethics, the Corporate Governance Guidelines, and our committee charters are posted on the Company’s website atwww.pioneerdrlg.comwww.pioneeres.com and are also available without charge upon request to the Company’s Corporate Secretary. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, and principal accounting officer.officer, controller or persons performing similar functions.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 21
Board’s Role in Risk Oversight
Our board of directors is responsible for the Company’s risk-oversight function. The board of directors, with the assistance of its standing committees, our Chief Executive Officer, our Chief Financial Officer, our General Counsel, and our DirectorManager of Corporate Development, identifies, evaluates and discusses the material enterprise risks that could impact the Company’s operations and tactical and strategic decisions. These enterprise risks include operational, financial, legal, regulatory, market, and reputational risks. In addition, the board of directors reviews the risks associated with the Company’s strategic plan at an annual strategic planning session and periodically throughout the year as part of its consideration of the strategic direction of the Company. Each board committee also oversees the management of the Company’s risks that fall within each committee’s areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors.
Risk–Risk – Related Compensation Policies and Practices
The compensation committee has undertaken an assessment of the risk profile of its executive and non-executive compensation programs. With the assistance of our Chief Executive Officer, our Chief Financial
12
Officer, our General Counsel, our Vice President Global Human Resources and Pearl Meyer & Partners, our independent compensation consultant, the compensation committee has developed a framework to assist the compensation committeeit in ascertaining any potential material risks associated with its executive compensation program,programs, policies and procedures, including: external market reference; pay mix; range and sensitivity of performance-based variable plans; selection of performance metrics; goal-setting process; and the Company’s checks and balances on the payment of compensation. This process enables the compensation committee to consider if any of the Company’s current compensation programs, practices or procedures should be altered in order to ensure that an appropriate balance between competitive pay and prudent risk is maintained. As a result of this analysis, the compensation committee has identified the following risk mitigating factors:
•
the pay mix including fixed and variable compensation, including the use of fixed cash and variable cash and the use of long-term equity as variable compensation;
•
limits on annual cash bonus awards;
•
the use of varied performance goals;
•
after several years of use, there appears to be no evidence that the performance goals encourage unnecessary or excessive risk taking;
��•
stock ownership guidelines;
•
the oversight of incentive compensation plans by our compensation committee; and
•
the high level of board involvement in approving material investments and capital expenditures.
As a result of the above assessment, the compensation committee believes that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Communications with the Board
Shareholders and all other interested parties may communicate with the board of directors, any board committee, the independent or non-management directors, each as a group, and individual directors by submitting their communications in writing to the attention of the Corporate Secretary. All communications must identify the recipient, author, state whether the author is a shareholder of the Company, and be forwarded to the following address:
13Pioneer Energy Services Corp.
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
The directors of the Company, including the non-management directors, have directed the Corporate Secretary not to forward to the intended recipient any communications that are reasonably determined in good faith by the Corporate Secretary to relate to improper or irrelevant topics or are substantially incomplete.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 22
Director Compensation
During 2011,2012, we paid to each of our non-employee directors fees for service on our board of directors or committees of our board as follows, and approved compensation for our non-employee directors for 2013 services as follows:
Compensation Paid in 2012 |
| Compensation Approved for 2013 | |||||||
Board Member Fees: |
|
|
|
|
| ||||
Chairman’s annual retainer | $ | 75,000 | $ | 75,000 |
| $ | 77,500 | ||
Member’s annual retainer | $ | 30,000 | $ | 30,000 |
| $ | 45,000 | ||
Each meeting attended in person | $ | 1,500 | $ | 1,500 |
| $ | 1,500 | ||
Each meeting attended by telephone | $ | 1,000 | $ | 1,000 |
| $ | 1,000 | ||
Audit Committee Fees: |
|
|
|
|
| ||||
Chairman’s annual retainer | $ | 15,000 | $ | 15,000 |
| $ | 15,000 | ||
Member’s annual retainer | $ | 5,000 | $ | 5,000 |
| $ | 5,000 | ||
Each meeting attended in person | $ | 1,500 | $ | 1,500 |
| $ | 1,500 | ||
Each meeting attended by telephone | $ | 1,000 | $ | 1,000 |
| $ | 1,000 | ||
Compensation Committee Fees | |||||||||
Compensation Committee Fees: |
|
|
|
|
| ||||
Chairman’s annual retainer | $ | 10,000 | $ | 10,000 |
| $ | 10,000 | ||
Member’s annual retainer | $ | 1,750 | $ | 1,750 |
| $ | 1,750 | ||
Each meeting attended in person | $ | 1,500 | $ | 1,500 |
| $ | 1,500 | ||
Each meeting attended by telephone | $ | 1,000 | $ | 1,000 |
| $ | 1,000 | ||
Nominating and Corporate | |||||||||
Governance Committee Fees: | |||||||||
Nominating and Corporate Governance Committee Fees: |
|
|
|
|
| ||||
Chairman’s annual retainer | $ | 10,000 | $ | 10,000 |
| $ | 10,000 | ||
Member’s annual retainer | $ | 1,750 | $ | 1,750 |
| $ | 1,750 | ||
Each meeting attended in person | $ | 1,500 | $ | 1,500 |
| $ | 1,500 | ||
Each meeting attended by telephone | $ | 1,000 | $ | 1,000 |
| $ | 1,000 | ||
Special Committee Fees | |||||||||
Special Committee Fees: |
|
|
|
|
| ||||
Each meeting attended in person | $ | 1,250 | $ | 1,250 |
| $ | 1,250 | ||
Each meeting attended by telephone | $ | 1,000 | $ | 1,000 |
| $ | 1,000 |
During 2011,2012, the Compensation Committee granted a restricted stock award under the 2007 Incentive Plan that will vest over three years with a grant date fair market value of approximately $100,000 to each non-employee member of the board of directors. In addition, we reimburse the directors for reasonable out-of-pocket expenses they incur in connection with attending meetings of the board of directors and board committees or otherwise in their capacity as directors. Our executive officers do not make recommendations regarding the non-employee directors’ compensation.
We expect each director to make every effort to attend each meeting of the board of directors, each meeting of any board committee on which he sitsserves and the annual meeting of shareholders. Attendance in person at board and committee meetings is preferred but not required; attendance by teleconference is permitted, if necessary. All of our directors attended last year’s annual meeting of shareholders.
2011 Non-Employee Director Compensation
The following table summarizes the compensation we paid each of our non-employee directors during 2011:2012:
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Total | |||
Dean A. Burkhardt | $ | 110,004 | $ | 99,993 | $ | 209,997 |
C. John Thompson | $ | 73,252 | $ | 99,993 | $ | 173,245 |
John Michael Rauh | $ | 75,004 | $ | 99,993 | $ | 174,997 |
Scott D. Urban | $ | 73,252 | $ | 99,993 | $ | 173,245 |
(1) The amounts reflected in this column consist of the board member and committee member annual retainers and meeting attendance fees. (2) The amounts included in the “Stock Awards” column represent the aggregate grant date fair value of the restricted stock awards granted to directors during the fiscal year ended December 31, 2012, computed in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation, except that no assumption for forfeitures was included. Each director was granted 12,437 shares of restricted stock under the 2007 Incentive Plan on May 11, 2012, based on the closing price ($8.04) of our common stock on the grant date. For a discussion of valuation assumptions, see Note 8 to our consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended December 31, 2012. |
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 23
Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Total | |||||||||
Dean A. Burkhardt | $ | 116,004 | $ | 99,992 | $ | 215,996 | ||||||
C. John Thompson | $ | 79,252 | $ | 99,992 | $ | 179,244 | ||||||
John Michael Rauh | $ | 81,004 | $ | 99,992 | $ | 180,996 | ||||||
Scott D. Urban | $ | 79,252 | $ | 99,992 | $ | 179,244 |
|
14
The following table provides information on the outstanding equity awards for each of our non-employee directors as of December 31, 2011:2012:
Name | Option Awards |
| Stock Awards | |||||||
Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares of Stock That Have Not Vested |
| Market Value of Shares of Stock That Have Not Vested(4) | ||||
Dean A. Burkhardt | - | - | - | - | 5,519 | (1) | $ | 40,068 | ||
- | - | - | - | 5,394 | (2) | $ | 39,160 | |||
- | - | - | - | 12,437 | (3) | $ | 90,293 | |||
C. John Thompson | - | - | - | - | 5,519 | (1) | $ | 40,068 | ||
- | - | - | - | 5,394 | (2) | $ | 39,160 | |||
- | - | - | - | 12,437 | (3) | $ | 90,293 | |||
John Michael Rauh | 10,000 | - | $ | 10.32 | 10/05/18 | - |
| - | ||
- | - | - | - | 5,519 | (1) | $ | 40,068 | |||
- | - | - | - | 5,394 | (2) | $ | 39,160 | |||
- | - | - | - | 12,437 | (3) | $ | 90,293 | |||
Scott D. Urban | 10,000 | - | $ | 10.32 | 10/05/18 | - |
| - | ||
- | - | - | - | 5,519 | (1) | $ | 40,068 | |||
- | - | - | - | 5,394 | (2) | $ | 39,160 | |||
- | - | - | - | 12,437 | (3) | $ | 90,293 | |||
(1) The indicated shares of restricted stock are scheduled to vest on May 15, 2013. (2) The indicated shares of restricted stock are scheduled to vest in equal installments of 2,697 shares each on May 13, 2013 and May 13, 2014, respectively. (3) Of the indicated shares of restricted stock, 4,145 shares are scheduled to vest on May 11, 2013, and installments of 4,146 shares each are scheduled to vest on May 11, 2014 and May 11, 2015. (4) The market value of the shares of restricted stock that have not vested is based on the closing price of our common stock on December 31, 2012, of $7.26 per share. |
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares of Stock That Have Not Vested | Market Value of Shares of Stock That Have Not Vested (4) | ||||||||||||||||||
Dean A. Burkhardt | 10,000 | — | $ | 14.98 | 6/14/2012 | — | — | |||||||||||||||||
— | — | — | — | 5,920 | (1) | $ | 57,306 | |||||||||||||||||
— | — | — | — | 11,038 | (2) | $ | 106,848 | |||||||||||||||||
— | — | — | — | 8,090 | (3) | $ | 78,311 | |||||||||||||||||
C. John Thompson | 10,000 | — | $ | 14.98 | 6/14/2012 | — | — | |||||||||||||||||
— | — | — | — | 5,920 | (1) | $ | 57,306 | |||||||||||||||||
— | — | — | — | 11,038 | (2) | $ | 106,848 | |||||||||||||||||
— | — | — | — | 8,090 | (3) | $ | 78,311 | |||||||||||||||||
John Michael Rauh | 10,000 | — | $ | 10.32 | 10/5/2018 | — | — | |||||||||||||||||
— | — | — | — | 5,920 | (1) | $ | 57,306 | |||||||||||||||||
— | — | — | — | 11,038 | (2) | $ | 106,848 | |||||||||||||||||
— | — | — | — | 8,090 | (3) | $ | 78,311 | |||||||||||||||||
Scott D. Urban | 10,000 | — | $ | 10.32 | 10/5/2018 | — | — | |||||||||||||||||
— | — | — | — | 5,920 | (1) | $ | 57,306 | |||||||||||||||||
— | — | — | — | 11,038 | (2) | $ | 106,848 | |||||||||||||||||
— | — | — | — | 8,090 | (3) | $ | 78,311 |
Stock Ownership Guidelines
In order to encourage the acquisition and retention of our common stock by our directors and to further align their economic interests with those of our shareholders and to focus our directors on the long-term sustained appreciation of our common stock, our compensation committee and our board of directors have adopted guidelines generally requiring each of our directors to own an amount of our common stock equal to the value of three times such director’seach board member’s annual cash retainer.retainer fee. The ownership target is to be acquired no later than the December 31 following the fifth anniversary of the director’s initial appointment or election to the board of directors, or by December 31, 2013 for any director serving on the board of directors as of May 17, 2008. For purposes of this calculation, unvested restricted stock and restricted stock units may be counted toward the applicable ownership requirement. As of March 15, 2012,27, 2013, all directors have fully met their stock ownership requirements.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 24
15
EXECUTIVE OFFICERSBack to Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information aboutshows the beneficial ownership of our current executive officers (ages arecommon stock as of March 31, 2012):27, 2013 by (1) each person (or group of affiliated persons) who is known by us to beneficially own more than 5% of our common stock, (2) each of our directors and nominees, (3) each of the named executive officers listed in the summary compensation table in this proxy statement and (4) all our directors and executive officers as a group. As of March 27, 2013, we were not aware of any person beneficially owning more than 5% of the outstanding shares of our common stock, other than those listed below. Unless otherwise indicated below, all shareholders have the same principal business address as Pioneer. All persons listed in the table below have sole voting and investment power with respect to their shares unless otherwise indicated. As of March 27, 2013, there were 62,167,426 shares of common stock outstanding.
Name of Beneficial Owner | Shares of Common Stock Beneficially Owned | |||
Number |
| Percent of Class(1) |
| |
BlackRock Inc. 40 East 52nd Street New York, NY 10022 | 6,562,637 | (2) | 10.56 | % |
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746 | 4,613,983 | (3) | 7.42 | % |
Third Avenue Management LLC 622 Third Avenue, 32nd Floor New York, NY 10017 | 2,517,001 | (4) | 4.05 | % |
The Vanguard Group, Inc. 100 Vanguard Blvd Malvern, PA 19355 | 3,452,475 | (5) | 5.55 | % |
Wm. Stacy Locke | 1,711,346 | (6) | 2.70 | % |
Franklin C. West | 959,806 | (7) | 1.53 | % |
Lorne E. Phillips | 411,320 | (8) | * | |
Joseph B. Eustace | 349,596 | (9) | * | |
Carlos R. Peña | 196,853 | (10) | * | |
Dean A. Burkhardt | 80,703 | (11) | * | |
John Michael Rauh | 69,845 | (12) | * | |
Scott D. Urban | 64,845 | (13) | * | |
C. John Thompson | 23,350 | (11) | * | |
All directors and executive officers as a group (9 persons) | 3,867,664 | (14) | 5.94 | % |
* Less than 1% (1) In accordance with the rules of the Securities and Exchange Commission (the “SEC”), the amounts shown for the number of shares and percentage ownership for each person listed include (1) any shares that may be acquired pursuant to options exercisable within 60 days of March 27, 2013, (2) any shares that may be acquired pursuant to the vesting of long-term incentive restricted stock awards within 60 days of March 27, 2013, and (3) unvested restricted stock. These shares are also deemed outstanding for the purpose of computing the percentage of outstanding shares owned by the person; however, these shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The amounts shown for the number of shares and percentage ownership for all executive officers and directors as a group include (1) any shares that may be acquired pursuant to options held by members of the group and exercisable within 60 days of March 27, 2013, (2) any shares that may be acquired by members of the group pursuant to the vesting of long-term incentive restricted stock awards within 60 days of March 27, 2013, and (3) unvested restricted stock held by members of the group. Holders of unvested restricted stock have voting rights with respect to such shares. Holders of stock options do not have voting rights with respect to the shares subject to such options. (2) Based on a Schedule 13G filed with the SEC by BlackRock Inc. on January 11, 2013. Blackrock Inc. has sole voting and dispositive power with respect to these shares. (3) Based on a Schedule 13G filed with the SEC by Dimensional Fund Advisors LP (“Dimensional”) on February 11, 2013. Dimensional furnishes investment advice to four investment companies and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are referred to herein as the “Funds.” In certain cases, subsidiaries of Dimensional may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, neither Dimensional or its subsidiaries possesses voting and/or investment power over the securities of the issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the issuer held by the Funds. Dimensional disclaims beneficial ownership of such securities. With respect to these reported shares, Dimensional has sole dispositive power with regard to 4,613,983 shares and sole voting power with regard to 4,532,700 shares. |
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 25
|
(5) Based on a Schedule 13G filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 11, 2013. Vanguard has sole voting power with regard to 89,019 shares, sole dispositive power with regard to 3,364,956 shares, and shared dispositive power with regard to 87,519 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly owned subsidiary of Vanguard, is the beneficial owner of 87,519 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 1,500 shares as a result of its serving as investment manager of Australian investment offerings. (6) Includes options to purchase 1,183,645 shares of common stock and 12,401 shares of unvested restricted stock. Mr. Locke’s common stock holdings include 180,334 shares held in the Locke Children’s Trust. (7) Includes options to purchase 759,313 shares of common stock and 6,360 shares of unvested restricted stock. (8) Includes options to purchase 326,560 shares of common stock and 5,146 shares of unvested restricted stock. (9) Includes options to purchase 308,871 shares of common stock and 3,672 shares of unvested restricted stock. (10) Includes options to purchase 179,349 shares of common stock and 3,614 shares of unvested restricted stock. (11) Includes 23,350 shares of unvested restricted stock. (12) Includes options to purchase 10,000 shares of common stock and 23,350 shares of unvested restricted stock. Mr. Rauh’s common stock holdings include 5,000 shares held in the Rauh Trust. (13) Includes options to purchase 10,000 shares of common stock and 23,350 shares of unvested restricted stock. (14) The amount indicated includes options to purchase 2,777,738 shares of common stock and 124,593 shares of unvested restricted stock. | |||||||||
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 26
EXECUTIVE OFFICERS
Our current named executive officers are:
Wm. Stacy Locke
President, Chief Executive Officer and Director
Age: 57
Wm. Stacy Locke has served as President of the Company since May 1995, when he joined Pioneer. In December 2003, Mr. Locke was appointed Chief Executive Officer. In addition to his continuous role as President, Mr. Locke has also served as our Chief Financial Officer and Chief Operating Officer. Prior to joining Pioneer, Mr. Locke was in investment banking with Arneson, Kercheville, Ehrenberg & Associates from 1993 to 1995 and Chemical Banking Corporation from 1988 to 1992. Mr. Locke worked for Valero Energy Corporation, Huffco Petroleum Corporation and Tesoro Petroleum Corporation as a geologist from 1979 to 1986. Mr. Locke received a Bachelor’s Degree in geology from the University of California Santa Barbara and a Master of Business Administration Degree from Southern Methodist University.
Lorne E. Phillips
Executive Vice President and Chief Financial Officer
Age: 42
Lorne E. Phillips
Franklin C. West
Joseph B. Eustace
Carlos R. Peña
For a description of the business background of Mr. Locke, see “Class II Director Nominees for Election to a Term Expiring at the 2015 Annual Meeting” above.
Lorne E. Phillips was appointed Executive Vice President and Chief Financial Officer effective February 1, 2009. Prior to joining Pioneer, Drilling Company, Mr. Phillips worked the last 10 years at Cameron International Corporation, serving most recently as Vice President and Treasurer. Prior to that, he was General Manager of Cameron’s Canadian valves operations, Vice President of Marketing and M&A for the valves division, and Business Development Manager for Cameron. Before joining Cameron, he was a Financial Analyst for SCF Partners, a provider of equity capital to energy service and equipment companies, and for Simmons & Company International, an investment bank focused on the energy industry.
Franklin C. West
Executive Vice President and President of Drilling Services Segment
Age: 73
Franklin C. West currently serves as Executive Vice President and President of our Drilling Services Division.Segment. Prior to his appointment as President of our Drilling Services DivisionSegment on March 1, 2008, Mr. West served as our Chief Operating Officer beginning in January 2002. Prior to joining Pioneer, he was Vice President for Flournoy Drilling Company from 1967 until it was acquired by Grey Wolf, Inc. in 1997, and he continued in the same capacity for Grey Wolf, Inc., an on-shore oil and gas drilling contractor, until December 2001.
Joseph B. Eustace
Executive Vice President and President of Production Services Segment
Age: 58
Joseph B. Eustace was appointed as Executive Vice President and President of our Production Services DivisionSegment on March 1, 2008. Prior to joining Pioneer, Drilling Company, Mr. Eustace served as President of WEDGE Oil and Gas Services beginning in 2004. Prior to 2004, Mr. Eustace served as Group Vice President for Key Energy Services from 1998 to 2004, and as Vice President of Operations for Dawson Production Services from 1982 until Key Energy Services acquired Dawson Production Services in 1998.
Carlos R. Peña
Senior Vice President, General Counsel, Secretary and Compliance Officer
Age: 46
Carlos R. Peña was appointed Senior Vice President, General Counsel, Secretary and Compliance Officer effective October 27, 2008. Mr. Peña has practiced law since 1992 and has experience providing both outside corporate and securities counsel and in-house M&A counsel. Prior to joining Pioneer Drilling in October 2008, he worked for AT&T, Inc. in the M&A legal group. From 1996 to 2007, he focused on securities and corporate finance, M&A, venture capital, and corporate governance at Fulbright & Jaworski L.L.P., Cox Smith Matthews Incorporated, and Vinson & Elkins L.L.P.
16PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 27
COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and analysis provides information regarding our executive compensation program in 20112012 for the following executive officers of the Company (collectively, the “named executive officers”):
•
Wm. Stacy Locke, our Director, President and Chief Executive Officer;
•
Lorne E. Phillips, our Executive Vice President and Chief Financial Officer;
•
Franklin C. West, our Executive Vice President and President of Drilling Services Division;Segment;
•
Joseph B. Eustace, our Executive Vice President and President of Production Services Division;Segment; and
•
Carlos R. Peña, our Senior Vice President, General Counsel, Secretary and Secretary.Compliance Officer.
Executive Summary
Throughout 2011, demandEarly in 2012, our board of directors approved a business plan that reflected very aggressive goals for earnings per share (“EPS”), Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), return on capital employed (“ROCE”) and safety. These goals served as targets for our equipment and services continued to grow, driving a 47% increaseannual cash incentive plan. Despite our strong performance in annual revenue. Operationally,2012, we exceeded the level of overall performance that we had targeted for 2011, which is reflected indid not achieve some of the compensation decisions reached bychallenging goals set out for us in our annual cash incentive plan. However, the Compensation Committee.Committee believes that management performed very well during 2012 and delivered strong results for all of the 2012 Team Goals. Key highlights of our 20112012 performance include the following:
•
Grew each of our core businesses:
2011 | 2010 | % Change | ||||||||||
Annual Revenues | $ | 715,941 | $ | 487,210 | 47 | % | ||||||
Adjusted EBITDA | $ | 183,870 | $ | 103,151 | 78 | % | ||||||
Combined Margin | $ | 259,017 | $ | 154,779 | 67 | % |
Created two new-build rig designsbusinesses resulting in increased revenues, Adjusted EBITDA, and secured 10 multi-year contracts for ourmargin;
•
Deployed seven new-build drilling rigs;rigs, 15 wireline units, 19 well servicing rigs, and three coiled tubing units;
•
EstablishedRebranded and changed our name to Pioneer Energy Services Corp.;
•
Integrated our new coiled tubing business;
•
Maintained high utilization of our drilling, operationswell servicing, and wireline fleets;
•
Improved profitability in West Texas, finishingColombia and ended the year with 16 rigs operating;100% utilization in December;
•
Achieved excellent safety results, with the lowest recordable incident rate in the history of the company;
•
Launched a cross-selling campaign to further capture synergistic gains;
•
Selected an electronic preventative maintenance system now in development with expected launch in 2013; and
•
Added 15 well service rigs and 21 wireline unitsa VP of Drilling to our production services fleet;core management team.
Launched a company-wide safety initiative and achieved safety performance approaching the best in the industry across all divisions; and
Acquired Go-Coil, LLC adding a new service offering to our Production Services Division with 10 coiled tubing units.
The Compensation Committee took the following key actions with respect to the compensation of the named executive officers in 2011:2012:
• |
|
|
|
|
Increased Base Salaries. Each of Messrs. Locke, Phillips, West, Eustace, and Peña received an increase in their respective base salary ranging from 1% to 16%, primarily to better align their salaries with the current market;
17•
Awarded Short-Term Cash Incentive Awards. Based on pre-established Company performance measures and team performance goals, each of the named executive officers earned a cash incentive award below their target level; and
•
Awarded Long-Term Performance-Based Equity Awards and a Long-term Cash Incentive Award. All of the named executive officers were awarded long-term incentive awards, which were allocated approximately 60% to stock options and 40% to performance-based restricted stock units (“RSUs”), except for Mr. West, who was awarded a long-term time-based cash award in lieu of stock options. The number of performance-based RSU awards that each named executive officer may earn is based on our relative EBITDA growth, EBITDA return on capital employed, and total shareholder return (“TSR”) growth versus a defined group of seven peer companies over a three-year performance period.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 28
We believe that our 20112012 executive compensation program is reasonable, competitive and strongly aligned with pay-for-performance principles. Consistent with prior practice, in 20112012 the Compensation Committee emphasized compensation opportunities that reward our named executive officers when they deliver targeted financial and operational results. Accordingly, a significant percentage of the named executive officers’ compensation that was granted in 20112012 was “at-risk,”performance-linked, as the following graph illustrates:
2011 Shareholder Advisory Vote on Executive Compensation
We conducted our firstan advisory vote on executive compensation last year at our 20112012 Annual Meeting of Shareholders. While this vote wasis not binding on the Compensation Committee, the Board of Directors or us, the Compensation Committee values the opinions of our shareholders on executive compensation matters.
The Compensation Committee reviewed the voting results from our 2011 advisory vote on executive compensation. Based upon the Inspector of Election’s report, the advisory vote on executive compensation received the favorable support of 95%96% of the votes cast thereon. The Compensation Committee determined thatevaluated the voting results reflect strong shareholder support forof the 2012 advisory vote together with the other factors and data discussed in this Compensation Discussion and Analysis in determining our 20112012 executive compensation program.
In 2012, the The Compensation Committee continued to emphasize pay for performance principles by increasingconsidered the allocationvote results and, in light of the namedstrong stockholder support, did not make any changes to our executive officers’ long-term incentive compensation to provide for more performance-based RSU awards and less stock options. Accordingly, the Compensation Committee changed the allocationsprogram solely as a result of the named executive officers’ performance-based RSU awards to 40% (from 30%) and stock options to 60% (from 70%) to better align the named executive officer’s long-term incentive compensation with our shareholders’ interests.2012 advisory vote.
Additionally, inIn response to the majority of the votes cast for an advisory vote on executive compensation every year at our 2011 Annual Meeting of Stockholders,Shareholders, we have determined that the advisory vote on executive compensation will be conducted every year, until we hold the next advisory vote on the frequency of advisory votes on executive compensation.compensation at our 2014 Annual meeting of Shareholders.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 29
Compensation PhilosophyGoals and Objectives
The Compensation Committee designs our executive compensation programsprogram with the goals and objectives to:
•
Provide an executive compensation structure that is consistent with competitive pay practices;
•
Attract, motivate and retain key personnelexecutives necessary to our success;
•
Reward senior and key employeesexecutives for building long-term shareholder value; and
•
Encourage attainment of strategic business objectives with pay-for-performance principles.
What We Do | What We Don’t Do | |||
The majority of our executive pay is performance-linked | No personal aircraft | |||
Apply shareholder aligned performance objectives for our executives | No re-pricing of underwater stock options | |||
Use an independent compensation consultant | No country club memberships for personal use | |||
Evaluate our executive compensation against our industry peers | No tax gross ups for anyone becoming a participant in our Key Employee Severance Plan after March 2011 | |||
Apply share ownership guidelines for named executive officers | ||||
Consider risk in our executive compensation program • A significant portion of our executive compensation is tied to long-term performance • We use diversified performance metrics, including TSR growth, ROCE, ROCE growth, EBITDA, EPS, safety, etc. |
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Compensation Committee
The Compensation Committee administers our executive compensation program and is responsible for establishing appropriate compensation for our named executive officers. The duties of the Compensation Committee include:
•
Approving and overseeing our compensation policies, objectives and programs for executive officers;
•
Reviewing and approving all formal employment or other contracts between us and our executive officers;
•
Annually reviewing and approving corporate goals, objectives and other key measures relevant to the compensation of our executive officers; and
•
Evaluating the performance of our executive officers.officers; and
•
Appointing, compensating, retaining and overseeing the compensation committee’s consultant and other advisors.
Except as disclosed in this Compensation Discussion and Analysis, at this time, the Compensation Committee does not intend to delegate its powers and authority to any subcommittee or other persons.
Role of Management
The Compensation Committee believes that even the best advice of a compensation consultant or other outside advisors must be combined with the input from senior management and the Compensation Committee’s own individual experiences and judgment to arrive at the proper alignment of compensation philosophy, objectives, and programs. In 2011,2012, the Chief Executive Officer, Chief Financial Officer, Vice President Global Human Resources, and General Counsel worked closely with the Compensation Committee in formulating award designs, performance measures, and performance levels (i.e., threshold, target, and above expectation) necessary to align the executive compensation program with our objectives and strategies.strategic business objectives.
Generally, the Chief Executive Officer reviews with the Compensation Committee his performance evaluations of the other named executive officers and his recommendations regarding base salary adjustments, cash incentive awards, and long-term equityincentive awards for the other named executive officers to ensure alignment with pay-for-performance principles. However, all final decisions regarding the compensation of the named executive officers are made by the Compensation Committee.
The Board and Compensation Committee conduct their own performance assessment of the Chief Executive Officer and no management recommendation is made with regard to his compensation.
While certain members of management attended the Compensation Committee’s meetings in 20112012 upon invitation, they did not attend either private sessions or portions of any other meetings of the Compensation Committee where executive compensation determinations were made by the Compensation Committee.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 30
Assessment of Team Performance
The named executive officers’ compensation is impacted by their individual contributions to team goals, as well as their overall performance as a team. For purposes of setting compensation, theThe Compensation Committee annually conducts a subjective assessment of the named executive officers’ accomplishments as a team and not as individuals with respect to goals and strategies that are established at the beginning of each year. The Compensation Committee believes that focusing on team performance, rather than individual performance, emphasizes the importance of team work among the named executive officers.
The 20112012 team goals included the following (collectively, the “2011“2012 Team Goals”):
•
Grow our core businesses;
•
Establish drilling operations in West Texas;
Continue marketing our new-buildSuccessfully deploy newbuild drilling rigs and other fleet additions;
•
Rebrand the company;
•
Integrate our new coiled tubing business;
•
Maintain high asset utilization;
•
Improve profitability in Colombia;
•
Maintain strong safety results;
•
Increase cross-selling efforts; and
•
Leverage IT resources to secure long-term contracts;
Establish more customer contacts in the U.S. and Colombia;
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Continue to developbenefit our engineering department to assist in new-build rig design and construction;operations.
Add six new well service rigs and fourteen new wireline units to our production services fleet; and
Launch a new safety/leadership training initiative.
The Compensation Committee subjectively determined that the named executive officers successfully accomplished each of the 20112012 Team Goals during 2011.2012.
Role of Compensation Consultant
During 2011,2012, the Compensation Committee retained Pearl Meyer & Partners (“Pearl Meyer”) as its independent compensation consultant to obtain objective, expert advice on executive compensation. Pearl Meyer advised the Compensation Committee on a variety of compensation related issues in 2011,2012, including:
•
Competitive pay analysis on executive compensation;
•
Pay levels of the named executive officers; and
•
Our executive compensation program design, including short-term incentive plan design, long-term incentive plan design, and pay mix.
In the course of conducting its activities, Pearl Meyer attended meetings of the Compensation Committee and presented its findings and recommendations for discussion. During 2011,2012, Pearl Meyer also met with certain senior management to obtain and validate data and review materials.
The compensation consultant also provides the Compensation Committee with an analysis of director compensation every other year. The Compensation Committee reviews the analysis and determines whether to recommend a compensation increase for non-employee directors. The executive officers do not play a role in determining or recommending the amount or form of director compensation.
In 2012, Pearl Meyer did not provide any services to the Company, or receive any payments from the Company, other than in its capacity as a consultant to the Compensation Committee. The Compensation Committee has assessed whether the services provided by Pearl Meyer raised any conflicts of interest pursuant to the SEC rules, and has concluded that no such conflicts of interest existed during 2012.
Competitive Pay Analysis
Each year the Compensation Committee evaluates how our pay practices and the named executive officers’ compensation levels compare to the competitive market for executive talent.
To evaluate the competitiveness of the named executive officers’ base salary, target total cash compensation (i.e., base salary plus target short-term cash incentive award), target long-term equity incentive awards, and total direct compensation (i.e. base salary, target short-term cash incentive award, and target long-term equity incentive awards) for 2011,2012, Pearl Meyer provided the Compensation Committee competitive pay information derived from a custom peer group (the “Custom Peer Group”) and the following industry specific surveys (collectively, the “Industry Survey Data”):
•
Pearl Meyers Oilfield Services Benchmark Survey;
•
Pearl Meyers Drilling Management Survey;
•
Watson Wyatt Top Management; and
•
William M. Mercer-Energy.
The companies comprising the Custom Peer Group for 20112012 compensation included:
Custom Peer Group | Primary SIC (Standard Industrial Classification) Description | |
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| |
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| |
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| |
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| |
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| |
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| Drilling Oil & Gas Wells | |
Newpark Resources | Scrap & Waste Materials | |
Oil States International | Oil & Gas Field Machinery, Equipment |
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 31
Custom Peer Group | Primary SIC (Standard Industrial Classification) Description |
Parker Drilling | Drilling Oil & Gas Wells |
Patterson-UTI Energy | Drilling Oil & Gas Wells |
RPC Inc. | Oil & Gas Field Services |
Superior Energy Services | Oil & Gas Field Services |
Unit Corp | Crude Petroleum & Natural Gas |
The Compensation Committee, with the assistance of compensation consultant, annually reviews the companies comprising the Custom Peer Group in order to maintain its appropriateness for the competitive pay analysis. These companies were generally selected based upon their (i) classification as “oilfield services” companies,Primary SIC Description, (ii) annual revenues (the Custom Peer Group’s
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trailing twelve months (“TTM”) of(roughly 1.0x to 4.7x our revenues), and (iii) market capitalization (roughly 0.7x to 7.8x our market capitalization). Information regarding our and our peer companies’ annual revenues and market capitalization is based on publicly available information as of June 30, 2010 was approximately $751 million, as compared2011 and August 31, 2011, respectively. There were no changes to our TTMthe composition of revenues as of June 30, 2010 of $359 million), and (iii) market capitalization. Additionally, the Compensation Committee believes that we compete for employee talent with each of these companies. Based on input from Pearl Meyers, the 2011 Custom Peer Group includes several peer companiesfrom 2011 to 2012, except that were not included in the 2010 Custom Peer Group (Hercules Offshore, Helix Energy Resources, Oil States International and Newpark Drilling). Additionally, Allis ChalmersBronco Drilling Company was removed from the 2011 Custom Peer Group due to its acquisition. These changes reflectThe Compensation Committee believes the Custom Peer Group reflects our continued growth and current competitors for employee talent soand that it provides an appropriate peer set for the Compensation Committee can continue to evaluatepurposes of evaluating the named executive officers’ pay levels versus an appropriate peer set.levels.
Pearl Meyer developed a “market consensus” for each named executive officer’s 20112012 base salary, target total cash compensation, target long-term equity incentive awards and total direct compensation by subjectively prioritizing the data derived from the Custom Peer Group and the Industry Survey Data, where appropriate, to provide representative market pricing comparisons.
The Compensation Committee uses the competitive pay information as a “market check” to ensure, in its subjective judgment, that the named executive officers’ base salary, target total cash compensation, target long-term equity incentive awards and total direct compensation remain fair and competitive. The Compensation Committee does not target any individual pay component to fall within a specific range or percentile of the competitive pay information. While the competitive pay information is important to the Compensation Committee’s approval process, it is just one of several factors considered by the Compensation Committee in approving executive compensation and the Compensation Committee has discretion in determining the nature and extent of its use.
Elements of Compensation
Base Salary
We provide the named executive officers with a base level of monthly income for the expertise, skills, knowledge and experience they offer to our management team. The Compensation Committee generally reviews each named executive officer’s base salary on an annual basis.
The named executive officers’ annual base salary as of December 31, 20102012 and December 31, 2011 were as follows:
Name and Position | Annual Base Salary as of | % Change(1) |
| |||
December 31, 2012 | December 31, 2011 | |||||
Wm. Stacy Locke, Director, President and Chief Executive Officer | $ | 680,000 | $ | 600,000 | 13 | % |
Lorne E. Phillips, Executive Vice President and Chief Financial Officer | $ | 350,000 | $ | 328,000 | 7 | % |
Franklin C. West, Executive Vice President and President of Drilling Services Segment | $ | 415,000 | $ | 410,000 | 1 | % |
Joseph B. Eustace, Executive Vice President and President of Production Services Segment | $ | 325,000 | $ | 292,000 | 11 | % |
Carlos R. Peña, Senior Vice President, General Counsel, Secretary and Compliance Officer | $ | 320,000 | $ | 277,000 | 16 | % |
(1) The base salary increases were effective as of April 10, 2012. |
Annual Base Salary as of | ||||||||||||
Name and Position | December 31, 2010 | December 31, 2011 | % Change (1) | |||||||||
Wm. Stacy Locke, | ||||||||||||
Director, President and Chief Executive Officer | $ | 550,000 | $ | 600,000 | 9 | % | ||||||
Lorne E. Phillips, | ||||||||||||
Executive Vice President and Chief Financial Officer | $ | 320,000 | $ | 328,000 | 3 | % | ||||||
Franklin C. West, | ||||||||||||
Executive Vice President and President of Drilling Services Division | $ | 395,000 | $ | 410,000 | 4 | % | ||||||
Joseph B. Eustace, | ||||||||||||
Executive Vice President and President of Production Services Division | $ | 280,000 | $ | 292,000 | 4 | % | ||||||
Carlos R. Peña, | ||||||||||||
Senior Vice President, General Counsel and Secretary | $ | 265,000 | $ | 277,000 | 5 | % |
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In 2011, Mr. Locke received a 9% increase in his base salary in order to increase the competitiveness of his base salary, as this was his first increase in approximately three years, and in recognition of his contributions toward the accomplishment of the 2011 Team Goals.
In 2011, Messrs. Phillips, West, Eustace and Peña each received a merit increase in their respective base salary ranging from 3% to 5% based upon their contributions toward the accomplishment of the 2011 Team Goals.
As a “market check,” the Compensation Committee also reviewed the competitive pay information in setting the named executive officers’ base salaries in 2011.2012. Before the increases in salaries during 2012, Messrs. Locke’s, Phillips’s, Eustace’s and Peña’s base salary fell below the 25th percentile, Mr. Phillips’s base salary fell between the 25th and 50th percentiles, and Mr. West’s base salary fell slightly above the 50th percentile of the competitive pay information.
Each of the named executive officers received an increase in their base salary during 2012 in order to increase the competitiveness of their respective base salary. Following their base salary increase, the respective base salaries of Messrs. Phillips, Eustace and Peña still remained below the 50th percentile of the competitive pay information that was derived by Pearl Meyer, while Mr. Locke’s base salary was roughly equal to the 50th percentile and Mr. West’s remained above the 50th percentile.
While the Compensation Committee reviewed the competitive pay information in connection with setting their base salary adjustments, together with their contributions toward the team goals, the Compensation Committee did not target their respective base salary to fall within a specific range or percentile of the competitive pay information.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 32
Annual Cash Incentive Compensation
Each year, the named executive officers are eligible to earn a cash incentive award under our 2007 Incentive Plan. The annual cash incentive award is designedintended to motivate and reward the named executive officers for their contributions in achieving certain strategic business goalsobjectives that we believe create shareholder value.
Each named executive officer has a target annual cash incentive award opportunity expressed as a percentage of their annual base salary paid. Subject to performance, the payout of the annual cash incentive award can range from zero to two times the target award opportunity.
The threshold, target and maximum opportunity levels, expressed as a percentage of each named executive officer’s respective base salary that was actually paid in 2011,2012, are as follows:
Award Opportunity (as % of Salary Paid) | Award Opportunity ($) | |||||||||||||||||||||||||||||||||||||||
Name | Award Opportunity (as % of Salary Paid) |
|
| Award Opportunity ($) | ||||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold |
| Target |
| Maximum |
| Threshold | Target | Maximum | ||||||||||||||||||||||||||
Wm. Stacy Locke | 27 | % | 90 | % | 180 | % | $ | 154,731 | $ | 515,769 | $ | 1,031,539 | 30 | % |
| 100 | % |
| 200 | % |
| $ | 196,616 | $ | 655,385 | $ | 1,310,770 | |||||||||||||
Lorne E. Phillips | 18 | % | 60 | % | 120 | % | $ | 58,265 | $ | 194,215 | $ | 388,430 | 18 | % |
| 60 | % |
| 120 | % |
| $ | 61,782 | $ | 205,939 | $ | 411,877 | |||||||||||||
Franklin C. West | 18 | % | 60 | % | 120 | % | $ | 72,346 | $ | 241,154 | $ | 482,308 | 18 | % |
| 60 | % |
| 120 | % |
| $ | 74,423 | $ | 248,077 | $ | 496,154 | |||||||||||||
Joseph B Eustace | 18 | % | 60 | % | 120 | % | $ | 51,397 | $ | 171,323 | $ | 342,646 | 18 | % |
| 60 | % |
| 120 | % |
| $ | 56,672 | $ | 188,908 | $ | 377,815 | |||||||||||||
Carlos R. Peña | 18 | % | 60 | % | 120 | % | $ | 48,697 | $ | 162,323 | $ | 324,646 | 18 | % |
| 60 | % |
| 120 | % |
| $ | 55,218 | $ | 184,061 | $ | 368,123 |
The amount of the cash incentive award is determined by comparing our actual performance against a scorecard of specific performance measures and associated performance levels approved by the Compensation Committee each year. The results of this comparison dictate the ultimate amount of each named executive officer’s annual cash incentive award. The Compensation Committee designed the cash incentive award to reward exceptional performance by providing for progressively increasing payments as our performance exceeds the target level, and correspondingly providing for no payment unless a threshold level of performance is achieved. If the Company’s performance falls between the threshold, target or above expectation performance levels, the cash incentive award opportunity is linearly interpolated to determine the actual payout.
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Accordingly, in February 2011,January 2012, the Compensation Committee reviewed and approved the following performance measures and associated performance levels for the 20112012 annual cash incentive awards. These performance measures and associated performance levels were designed to be in alignment with the Company’s strategic plans and the 20112012 budget (which was approved by the Board)board).
Performance Levels | ||||||||||||||||||
Threshold | Target | Above Expectation | Actual Performance | Measurement Indicator | ||||||||||||||
Diluted Earnings (Loss) Per Share | ($ | 0.08 | ) | ($ | 0.06 | ) | ($ | 0.04 | ) | $ | 0.21 | Represents bottom line performance | ||||||
Consolidated Adjusted EBITDA* (1) | $ | 112,277 | $ | 149,703 | $ | 194,614 | $ | 183,579 | Indicates consolidated operating cash flow for the Company | |||||||||
Drilling Services Division Adjusted EBITDA* (1) | $ | 75,620 | $ | 100,827 | $ | 131,075 | $ | 116,971 | Indicates operating cash flow for the Drilling Services Division | |||||||||
Production Services Division Adjusted EBITDA* (1) | $ | 48,559 | $ | 64,746 | $ | 84,169 | $ | 86,094 | Indicates operating cash flow for the Production Services Division | |||||||||
Consolidated Adjusted EBITDA ROCE (1) | 16.3% | 21.7% | 28.2% | 22.8% | Indicates the profitability of our assets | |||||||||||||
Consolidated Safety Record (Recordable Incident Rate) | 2.3 | 1.84 | 1.288 | 1.09 | A cultural measurement important to management, our customers and the families of our employees | |||||||||||||
Individual Performance | NA | NA | NA | NA | Emphasizes the importance of consistent, personal performance and contribution to the Company |
| Performance Levels | Actual Performance |
| Measurement Indicator | |||||||||
Threshold |
| Target |
| Above Expectation |
| ||||||||
Diluted Earnings Per Share | $ | 0.69 |
| $ | 0.92 | $ | 1.20 | $ | 0.49 | Representation of bottom line performance | |||
Consolidated Adjusted EBITDA*(1) | $ | 215,157 |
| $ | 286,876 | $ | 372,938 | $ | 249,283 | Indicator of consolidated operating performance of the Company | |||
Drilling Services Segment Adjusted EBITDA*(1) | $ | 123,053 |
| $ | 164,070 | $ | 213,291 | $ | 147,627 | Indicator of operating performance of the Drilling Services Segment | |||
Production Services Segment Adjusted EBITDA*(1) | $ | 108,674 |
| $ | 144,898 | $ | 188,368 | $ | 123,590 | Indicator of operating performance of the Production Services Segment | |||
Consolidated Adjusted EBITDA ROCE | 22% |
|
| 29% |
| 37% |
| 25% |
| Indicator of the profitability of our assets | |||
Consolidated Safety Record (Recordable Incident Rate) | 2.2 |
| 1.7 | 1.2 | 1.0 | A cultural measurement important to management, our customers and the families of our employees | |||||||
Individual Performance | NA |
| NA | NA | NA | Emphasizes the importance of consistent, personal performance and contribution to the Company | |||||||
* In Thousands (1) “Adjusted EBITDA” is defined as the Company’s earnings before interest, income taxes, depreciation, amortization, and impairments. For 2012, Adjusted EBITDA was adjusted to eliminate $1.1 million of impairment of equipment. |
In order to align the Company’s performance and the named executive officers’ performance with the interests of our shareholders, the Compensation Committee subjectively weighted each of the above performance measures relative to its potential impact on the Company’s performance and creation of shareholder value. In establishing the performance goals for Messrs. West and Eustace, the Compensation Committee included both Company-wide and divisional-widesegment-wide performance goals to provide them incentives to drive the operational results of the respective divisionsegment they oversee, while ensuring their overall accountability to corporate performance. Accordingly, each named executive officer’s annual cash incentive award is derived from our actual performance with respect to the measures above, on a weighted basis.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 33
The weighting of the performance measures for the named executive officers’ target annual cash incentive award for 20112012 was as follows:
Weighting of Performance Measures (at Target Level) (1) | ||||||||||||||||||||||||
Diluted Earnings Per Share | Consolidated Adjusted EBITDA | Division Level Adjusted EBITDA | Consolidated Adjusted EBITDA ROCE | Consolidated or Division Level Safety Record | Individual Performance | |||||||||||||||||||
Wm. Stacy Locke | 20% | 25% | NA | 15% | 20% | 20% | ||||||||||||||||||
Lorne E. Phillips | 20% | 25% | NA | 15% | 20% | 20% | ||||||||||||||||||
Franklin C. West | 20% | NA | 40% | NA | 20% | 20% | ||||||||||||||||||
Joseph B. Eustace | 20% | NA | 40% | NA | 20% | 20% | ||||||||||||||||||
Carlos R. Peña | 20% | 25% | NA | 15% | 20% | 20% |
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| Weighting of Performance Measures (at Target Level)(1) |
| |||||||||||||
Diluted Earnings Per Share |
| Consolidated Adjusted EBITDA |
| Segment Level Adjusted EBITDA |
| Consolidated Adjusted EBITDA ROCE |
| Consolidated or Segment Level Safety Record |
| Individual Performance |
| ||||
Wm. Stacy Locke | 20 | % |
| 25% |
| NA |
| 15% |
| 20 | % |
| 20 | % |
|
Lorne E. Phillips | 20 | % |
| 25% |
| NA |
| 15% |
| 20 | % |
| 20 | % |
|
Franklin C. West | 20 | % |
| NA |
| 40% |
| NA |
| 20 | % |
| 20 | % |
|
Joseph B. Eustace | 20 | % |
| NA |
| 40% |
| NA |
| 20 | % |
| 20 | % |
|
Carlos R. Peña | 20 | % |
| 25% |
| NA |
| 15% |
| 20 | % |
| 20 | % |
|
(1) The weights set forth in the above table are based upon target performance. Consequently, if our performance falls below or above target with respect to a specific performance goal, the weighting of such performance goal will correspondingly increase or decrease, as the case may be. |
|
In assessing individual performance, the Compensation Committee considered the named executive officers’ achievement, as a team, of the 20112012 Team Goals discussed previously.
At the end of 2011,2012, the Compensation Committee completed the evaluation of our results and the weighing of the performance measures to ensure that the cash incentive award determinations were appropriate and aligned with pay-for-performance principles. The Compensation Committee made the following annual cash incentive award determinations for our named executive officers for 2011:2012:
Award Achievement Levels by Performance Measure | Award Achievement Levels by Performance Measure | 2012 Cash Incentive Award |
| ||||||||||||||||||||||||||||||||||||||||||||||
Diluted Earnings Per Share | Consolidated Adjusted EBITDA | Division Level Adjusted EBITDA | Consolidated Adjusted EBITDA ROCE | Consolidated or Division Level Safety Record | Individual Performance | 2011 Cash Incentive Award | Diluted Earnings Per Share |
| Consolidated Adjusted EBITDA |
| Segment Level Adjusted EBITDA |
| Consolidated Adjusted EBITDA ROCE |
| Consolidated or Segment Level Safety Record |
| Individual Performance |
| |||||||||||||||||||||||||||||||
Wm. Stacy Locke | |||||||||||||||||||||||||||||||||||||||||||||||||
Award Achieved ($) | $ | 206,308 | $ | 226,203 | NA | $ | 91,104 | $ | 206,308 | $ | 185,677 | $ | 915,600 | $ | 0 | $ | 103,728 | NA | $ | 62,236 | $ | 262,154 | $ | 144,185 | $ | 572,303 | |||||||||||||||||||||||
Award Achieved (% of Salary Paid) | 36% | 39% | NA | 16% | 36% | 32% | 159% | 0 | % | 16 | % | NA | 9 | % | 40 | % | 22 | % | 87 | % | |||||||||||||||||||||||||||||
Lorne E. Phillips | |||||||||||||||||||||||||||||||||||||||||||||||||
Award Achieved ($) | $ | 77,686 | $ | 85,178 | NA | $ | 34,305 | $ | 77,686 | $ | 67,975 | $ | 342,830 | $ | 0 | $ | 32,594 | NA | $ | 19,556 | $ | 82,375 | $ | 41,188 | $ | 175,713 | |||||||||||||||||||||||
Award Achieved (% of Salary Paid) | 24% | 26% | NA | 11% | 24% | 21% | 106% | 0 | % | 9 | % | NA | 6 | % | 24 | % | 12 | % | 51 | % | |||||||||||||||||||||||||||||
Franklin C. West | |||||||||||||||||||||||||||||||||||||||||||||||||
Award Achieved ($) | $ | 96,462 | NA | $ | 147,945 | NA | $ | 96,462 | $ | 84,404 | $ | 425,273 | $ | 0 | NA | $ | 71,385 | NA | $ | 99,231 | $ | 49,615 | $ | 220,231 | |||||||||||||||||||||||||
Award Achieved (% of Salary Paid) | 24% | NA | 37% | NA | 24% | 21% | 106% | 0 | % | NA | 17 | % | NA | 24 | % | 12 | % | 53 | % | ||||||||||||||||||||||||||||||
Joseph B. Eustace | |||||||||||||||||||||||||||||||||||||||||||||||||
Award Achieved ($) | $ | 68,529 | NA | $ | 137,058 | NA | $ | 66,245 | $ | 59,963 | $ | 331,795 | $ | 0 | NA | $ | 44,449 | NA | $ | 71,065 | $ | 37,782 | $ | 153,296 | |||||||||||||||||||||||||
Award Achieved (% of Salary Paid) | 24% | NA | 48% | NA | 23% | 21% | 116% | 0 | % | NA | 14 | % | NA | 23 | % | 12 | % | 49 | % | ||||||||||||||||||||||||||||||
Carlos R. Peña | |||||||||||||||||||||||||||||||||||||||||||||||||
Award Achieved ($) | $ | 64,929 | $ | 71,191 | NA | $ | 28,672 | $ | 64,929 | $ | 56,813 | $ | 286,534 | $ | 0 | $ | 29,132 | NA | $ | 17,478 | $ | 73,625 | $ | 36,812 | $ | 157,047 | |||||||||||||||||||||||
Award Achieved (% of Salary Paid) | 24% | 26% | NA | 11% | 24% | 21% | 106% | 0 | % | 9 | % | NA | 6 | % | 24 | % | 12 | % | 51 | % |
The named executive officers’ 20112012 cash incentive awards are reported in the “Non-Equity Incentive Plan Compensation” column of the 20112012 Summary Compensation Table below.Table.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 34
Long-Term Equity Incentive Compensation
For 2010, 2011, and 2011,2012, the Compensation Committee granted each of the named executive officers time-vested stock options and performance-based RSU awards under our 2007 Incentive Plan.Plan, except for Mr. West, who received a long-term cash incentive award in 2012 in lieu of stock options. These awards are intended to instill a sense of ownership in our named executive officers, incentivize them to have a long-term focus of our business, and reward them when value is created for our shareholders, and align their successful efforts.financial interests with that of our shareholders.
Stock Options and Performance-Based RSU Awards
In formulating the target value of each named executive officer’s 20112012 long-term equity awards, the Compensation Committee conducted an assessment of the competitive pay information derived by Pearl Meyer to subjectively develop a competitive aggregate grant date fair value for such awards. The Compensation Committee then converted the competitive aggregate grant date fair value into shares of our common stock (the “Target Shares”) by using a representative “stock price” for our common stock. The Compensation Committee determined the representative “stock price” by using the average of the closing prices of our common stock from December 31, 201030, 2011 to January 21, 2011,20, 2012, which was $8.54$9.75 per share. The Compensation Committee then allocated the Target Shares among stock options and performance-based RSU awards using an approximate 70%60% and 30%40% split, respectively.respectively, except for Mr. West, who received a long-term cash incentive award in lieu of stock options.
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In 2011,2012, the Compensation Committee granted the named executive officers the following stock options and target performance-based RSU awards:
Name | Stock Options (#) | Target Performance-Based RSU Awards (#) | Aggregate Grant Date Fair Value ($)(1) | |||||||||
Wm. Stacy Locke | 155,919 | 37,676 | $ | 1,116,421 | ||||||||
Lorne E. Phillips | 64,665 | 15,625 | $ | 463,013 | ||||||||
Franklin C. West | 79,820 | 19,287 | $ | 571,526 | ||||||||
Joseph B. Eustace | 45,998 | 11,115 | $ | 329,359 | ||||||||
Carlos R. Peña | 48,157 | 11,636 | $ | 344,811 |
Name | Stock Options (#) | Target Performance- Based RSU Awards (#) | Aggregate Grant Date Fair Value ($)(1) | |
Wm. Stacy Locke | 191,697 | 72,615 | $ | 1,737,003 |
Lorne E. Phillips | 54,152 | 20,513 | $ | 490,683 |
Franklin C. West | - | 22,564 | $ | 222,255 |
Joseph B. Eustace | 49,819 | 18,872 | $ | 451,424 |
Carlos R. Peña | 48,736 | 18,462 | $ | 441,614 |
(1) The amounts reflect the aggregate grant date fair value of the stock options and target performance-based RSU awards granted in 2012 to the named executive officers, as applicable, computed in accordance with ASC 718, except no assumptions for forfeitures were included. A discussion of the assumptions used in calculating the grant date fair value is set forth in Note 8 of the Notes to Consolidated Financial Statements of our 2012 Annual Report on Form 10-K filed with the SEC on February 13, 2013. |
The number of performance-based RSU awards set forth in the above table reflects the target number of RSU awards to be earned by each named executive officer following a three-year performance period (January 1, 20112012 to December 31, 2013)2014). The actual number of RSU awards that each named executive officer may earn, which may be greater or less than his respective target number, will be based on the average of our relative EBITDA growth, EBITDA return on capital employed (“EBITDA ROCE”), and total shareholder return (“TSR”) growth versus a defined group of eightseven peer companies (the “Special“Performance Peer Group”) over the three-year performance period.
Accordingly, the actual number of RSU awards that each named executive officer may earn at the end of the three-year performance period may vary from zero to 200% of his respective target amount, as shown in the following table:
Our performance relative (on average) to the EBITDA growth; EBITDA ROCE; and TSR growth of the | Percentage of Target RSU Awards that | |||
< | 0 | % | ||
| 25 | % | ||
| 100 | % | ||
| 200 | % |
(1) | If our performance falls between performance levels, the earned percentage will be interpolated. |
Following the three-year performance period, the Compensation Committee will compare our performance in each of the three performance measures (i.e., EBITDA growth, EBITDA ROCE, and TSR growth) relative to the performance of the SpecialPerformance Peer Group, and assign the applicable earning percentage (i.e., 0% to 200%) to each such performance measure. Each named executive officer’s final RSU award is equal to the product of (i) the average of the three earning percentages and (ii) his respective target number of RSU awards.
Following the end of the three-year performance period, the Compensation Committee will approve the final RSU awards that each named executive officer earned and such RSU awards will then convert to restricted stock, for which the restricted stock will cliff vest in April 2013.2015.
The SpecialPerformance Peer Group consisted of Nabors Industries, Helmerich & Payne, Patterson-UTI Energy, Union Drilling, Parker Drilling, Superior Energy Services, Key Energy Services, and Basic Energy Services, all of which the Compensation Committee beleives we compete with for business on a daily basis. Because the SpecialPerformance Peer Group are direct business competitors, the Compensation Committee subjectively determined that these companies provide a better comparison for EBITDA growth, EBITDA ROCE and TSR growth than the Custom Peer Group, which consists of a broader group of companies with which we compete for employee talent.
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The aggregate grant date fair value of the named executive officer’s stock options and target performance-based RSU awards, as applicable, are reported in the “Option Awards” column and “Stock Awards” column, respectively, of the 20112012 Summary Compensation table below.
We do not have a program, plan or practice to time our long-term equity incentive awards in coordination with the release of material, non-public information. In the event that material non-public information becomes known to the Compensation Committee prior to granting long-term equity incentive awards, the Compensation Committee will take the existence of such information under advisement and make an assessment in its business judgment whether to delay the grant of the long-term equity incentive award in order to avoid any impropriety.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 35
2012 Long-Term Cash Incentive Award
In 2012, we adopted a policy that allows any employee, including any named executive officer, who has attained (i) normal retirement age of 65, or (ii) at least the age of 60 with 5 or more years of service with the Company, to receive a long-term cash incentive award in lieu of their annual time-vested stock options. The Compensation Committee adopted this policy to provide strong retention incentives for employees close to retirement.
In accordance with the above policy, the Compensation Committee awarded Mr. West a $330,000 long-term cash incentive award in lieu of his annual time-vested stock options in 2012. This cash award vests in one-third increments on each of April 30, 2013, 2014, and 2015, assuming Mr. West provides continuous service through the applicable vesting date. Any portion of the cash award that vests will be paid to Mr. West as soon as possible following the vesting date; provided that, at the Compensation Committee’s sole discretion, up to 50% of any such payment may be paid in shares of the Company’s common stock instead of in cash. Notwithstanding the above, this cash award will automatically vest in the event of Mr. West’s death or disability or a change in control of the Company.
2009 Long-Term Cash Incentive Award
In 2009, the Compensation Committee granted a one-time, long-term cash incentive award (the “2009 Long-Term Cash Incentive Award”) to the named executive officers under the 2007 Incentive Plan. Because the 2009 long-term cash incentive award was granted during the 2009 fiscal year, the Company considers it part of 2009 compensation. However, we are including a description of the 2009 Long-Term Cash Incentive Award below because part of the time-based portion of the 2009 Long-Term Incentive Award was earned in 20112012 and is reported in the “Bonus” column of the 20112012 Summary Compensation Table. The Compensation Committee did not grant long-term cash incentive awards to the named executive officers in 2010, 2011 or 2011.2012, except for Mr. West who received a long-term cash incentive award in 2012 in lieu of stock options.
The 2009 Long-Term Cash Incentive Award was composed of two components; the first component was performance-based and the second component was time-based.
Each named executive officer fully earned his respective performance-based component of the award as of December 31, 2010 which was reported in the “Non-Equity Incentive Plan Compensation” column of the 2010 Summary Compensation Table in last year’sthe 2010 proxy statement.
Under the time-based component of the 2009 Long-Term Cash Incentive Award, each of the named executive officers was eligible to earn an aggregate cash payout, with 50% of the cash payout being paid in April 2011 and with the remaining 50% of the cash payout being paid in April 2012, assuming the named executive officer continuescontinued employment with the Company through the respective payment date. Each named executive officer earned 50% of his respective time-based component of the award in April 2011, which was reported in the “Bonus” column of the 2011 Summary Compensation Table in last year’s proxy statement. Each named executive officer earned 50% of his respective time-based component of the award in April 2012, which is reported in the “Bonus” column of the 20112012 Summary Compensation Table.
The following table further describes the performance-based and time-based components of the 2009 Long-Term Cash Incentive Award:
Name | Performance-Based Component |
| Time-Based Component | Total 2009 Long-Term Cash Incentive Award | |||||||
Target Performance- Based Cash Payout | Average Achievement Level in the Three Performance Measures |
| Earned Performance-Based Cash Payout | Aggregate Time-Based Component Cash Payout | |||||||
Wm. Stacy Locke | $ | 234,000 | 70 | % | $ | 163,800 | $ | 234,000 | $ | 397,800 | |
Lorne E. Phillips | $ | 89,500 | 70 | % | $ | 62,650 | $ | 89,500 | $ | 152,150 | |
Franklin C. West | $ | 121,000 | 70 | % | $ | 84,700 | $ | 121,000 | $ | 205,700 | |
Joseph B. Eustace | $ | 68,500 | 70 | % | $ | 47,950 | $ | 68,500 | $ | 116,450 | |
Carlos R. Peña | $ | 62,000 | 70 | % | $ | 43,400 | $ | 62,000 | $ | 105,400 |
Performance-Based Component | Time-Based Component | |||||||||||||||||||
Name | Target Performance- Based Cash Payout | Average Achievement Level in the Three Performance Measures | Earned Performance- Based Cash Payout | Aggregate Time-Based Component Cash Payout | Total 2009 Long-Term Cash Incentive Award | |||||||||||||||
Wm. Stacy Locke | $ | 234,000 | 70 | % | $ | 163,800 | $ | 234,000 | $ | 397,800 | ||||||||||
Lorne E. Phillips | $ | 89,500 | 70 | % | $ | 62,650 | $ | 89,500 | $ | 152,150 | ||||||||||
Franklin C. West | $ | 121,000 | 70 | % | $ | 84,700 | $ | 121,000 | $ | 205,700 | ||||||||||
Joseph B. Eustace | $ | 68,500 | 70 | % | $ | 47,950 | $ | 68,500 | $ | 116,450 | ||||||||||
Carlos R. Peña | $ | 62,000 | 70 | % | $ | 43,400 | $ | 62,000 | $ | 105,400 |
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 36
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2011Back to Contents
2012 Total Direct Compensation
Based upon the most recent competitive pay information received fromderived by Pearl Meyer, the Compensation Committee believes that our 20112012 executive compensation program provided target total direct compensation (i.e., base salary, target totalshort-term cash compensationincentive award and target long-term equity incentive awards) that was reasonablecompetitive and competitive but not excessive,aligned with the market for which we believe we compete for employee talent, as the following table illustrates.
Additional Information
Health, Welfare and Retirement Benefits
We offer a standard range of health and welfare benefits to substantially all of our U.S. employees, including the named executive officers. These benefits include medical, prescription drug and dental coverage, life and accidental death and dismemberment insurance, vacation, sick leave and other paid holidays. In addition, long-term disability insurance benefits and optional short-term coverage is available to all of our employees. These benefits are intended to aid in the health and well-being of our employees, as well as contribute directly to a productive and successful work life, which we believethe Compensation Committee believes will enhance the financial results for us and our shareholders.
We also offer all of our U.S. employees the opportunity to participate in our defined contribution 401(k) plan. Under the plan, we make matching contributions equal to 50% of the participant’s contributions on the first 6%8% of compensation deferred under the plan. Under this matching scheme, employees become fully vested in our matching contributions after five years of employment. The 20112012 Summary Compensation Table reflects our contributions to the 401(k) plan for each named executive officer in 2011.2012.
Perquisites
We provide a limited number of perquisites to the named executive officers, including a car allowance, payment of life insurance premiums and Petroleum Club dues. The life insurance policy pays the beneficiary an amount equal to the applicable named executive officer’s annual salary up to a maximum of $300,000.
Effective December 31, 2010, the Compensation Committee adopted a policy prohibiting the payment of country club memberships for any of the named executive officers.
The All Other Compensation column of the 20112012 Summary Compensation Table shows the value of perquisites we provided to the named executive officers in 2011.2012.
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Stock Ownership Guidelines
In order to strengthen the alignment of the interests of the name executive officers and shareholders and to increase visibility of the named executive officers’ and directors’ stock ownership, we adoptedhave the following stock ownership guidelines:
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 37 The ownership target must be obtained no later than the December 31 following the fifth anniversary of the officer’s commencement of employment with the Company, or by December 31, 2013 for any officer employed as of May 17, 2008. For purposes of the above calculation, unvested restricted stock and RSUs may be counted toward the applicable ownership requirement. As of March Compliance With Internal Revenue Code Section 162(m) Section 162(m) of the Internal Revenue Code of 1986 2013 COMPENSATION ACTIONS On January 29, 2013, the Compensation Committee approved the Pioneer Energy Services Corp. Nonqualified Retirement Savings and Investment Plan, an unfunded nonqualified deferred compensation plan for a select group of management or highly compensated employees, and our non-employee directors. The plan will be effective on April 1, 2013. Under the plan, unless otherwise determined by the committee administering the plan, eligible employees may irrevocably elect to defer up to 80% of their base salary, up to 100% of their bonuses, or up to 100% of their restricted stock units, and non-employee directors may irrevocably elect to defer up to 100% of their director fees or 100% of their restricted stock units. However, at this time, all of our named executive officers and our non-employee directors have elected not to enroll in the plan. A participant’s deferrals will be credited to an account under the plan and that account will be credited (or debited) with earnings and loses based on the actual rate of return of hypothetical investments. Participants are fully A majority of our peers, as well as a prevalence of Fortune 1000 companies, offer a nonqualified deferred compensation plan. Therefore, the Compensation Committee believes the implementation of this plan will increase the competitiveness of our executive compensation program and serve as an important tool for attracting and retaining high performing executives.
REPORT OF THE COMPENSATION COMMITTEE The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with the management of Pioneer The Compensation Committee Dean A. Burkhardt John Michael Rauh C. John Thompson Scott D. Urban, Chairman The information above in the Report of the Compensation Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates the information by reference. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 38
EXECUTIVE COMPENSATION
The following table presents information concerning compensation for all services rendered to us in all capacities during the fiscal years ended December 31, 2012, 2011,
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 39
(4)
For
(5) The amounts shown in the
2012 Grants of Plan-Based Awards
The following table summarizes information concerning plan-based awards to the named executive officers during the fiscal year ended December 31,
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 40
The following table provides information concerning stock options, restricted stock and unearned RSUs held by the named executive officers which were outstanding as of December 31,
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 41
The following table provides additional information about stock option exercises and shares acquired upon the vesting of stock awards, including the value realized, during
POTENTIAL PAYMENTS UNDER TERMINATION OR CHANGE OF CONTROL The Compensation Committee views change in control and non-change in control severance protection for officers as a necessary part of compensation to remain competitive in the market. A substantial portion of oilfield service companies provide such benefits. While the Compensation Committee recognizes there are variation in types, amounts, eligibility requirements and other terms and conditions among companies, the Compensation Committee believes that the aggregate potential value remains competitive and does not significantly vary from similar programs at peer group companies. In 2009, the Company adopted a new Long-Term Disability Plan. This plan is available to all U.S. salaried employees and other full-time active employees and does not discriminate in scope, terms or operation, in favor of the named executive officers. In the event an employee has been disabled for more than 180 days, the Long-Term Disability Plan generally provides for payment of 60% of an employee’s base salary up to a maximum monthly benefit of $7,000 until the earlier of the employee reaching standard retirement age as determined by the Social Security Administration or the employee’s death. Key Executive Severance Plan The following is a brief description of the material terms and conditions of our Key Executive Severance Plan (the “KESP”). Participation in the KESP is limited to our key executives who are considered to be senior management employees by the Compensation Committee and who are designated by the Compensation Committee, in its sole discretion, as participants in the KESP. The Compensation Committee, upon twelve months’ written notice, may also terminate an employee’s participation in the KESP; however, an individual participating immediately prior to a change in control may not be removed from participation in the KESP prior to the date which is two years following the date of the “change in control” of Pioneer (as defined below). Participants in the KESP will be designated by the Compensation Committee as either “Level I,” “Level II” or “Level III” participants, or as other participants. With regard to our named executive officers, Mr. Locke is designated as a Level I participant, In the event of an “involuntary termination” prior to a change in control of Pioneer and subject to certain conditions, including the requirement that a KESP participant execute an acceptable waiver and release of claims, a Level I or Level II participant will receive (1) a lump-sum cash payment equal to 200% of the participant’s annual base salary and annual target bonus, (2) accelerated vesting of stock options and other equity-based awards held on the date of termination of employment, but only to the extent such stock options or other equity-based awards would otherwise have vested within twelve months, and (3) continued life insurance and medical benefits coverage at active employee rates for twelve months. A Level III participant will receive (1) a lump-sum cash payment equal to 100% of the participant’s annual base salary, (2) accelerated vesting of stock options and other equity-based awards held on the date of termination of employment, but only to the extent such stock options or other equity-based awards would otherwise have vested within twelve months, and (3) continued life insurance and medical benefits coverage at active employee rates for twelve months. Other participants will receive (1) a lump-sum cash payment equal to 50% of the participant’s annual base salary, (2) accelerated vesting of stock options and other equity-based awards held on the date of termination of employment, but only to the extent such stock options or other equity-based awards would otherwise have vested within six months, and (3) continued life insurance and medical benefits coverage for six months. An “involuntary termination” means the termination of the participant’s employment (1) for any reason other than cause, death or disability or (2) by the participant for good reason, as defined in the KESP. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 42 “Cause” means (1) with respect to any Level I or Level II Participant, that participant’s (A) commission of any act or omission constituting fraud under any law of the State of Texas, (B) conviction of, or a plea of nolo contendere to, a felony, (C) embezzlement or theft of property or funds of Pioneer or any of its affiliates or
(D) refusal to perform his or her duties, as specified in any written agreement between the participant and Pioneer or in any specific directive adopted by a majority of the members of the board of directors at a meeting of the board of directors that is consistent with the participant’s status as an executive officer of the Company; and (2) with respect to any Level III or other participant, that participant’s (A) commission of any act or omission constituting fraud under any law of the State of Texas, (B) conviction of, or a plea of nolo contendere to, a felony, (C) embezzlement or theft of property or funds of Pioneer or any of its affiliates, (D) failure to follow the instructions of the board of directors (in either case, as approved by a majority of the members of such board of directors at a meeting of such board of directors) or any supervising or executive officer of Pioneer or any of its affiliates or (E) unacceptable performance, gross negligence or willful misconduct with respect to his or her duties to Pioneer or any of its affiliates. “Good reason” for the participant to terminate his or her employment means, prior to the effective date of a change in control, the occurrence (without the participant’s written consent) of any of the following: (1) a reduction in the participant’s base salary or total compensation except for an across-the-board reduction similarly affecting all senior executives of Pioneer and all senior executives of any person in control of Pioneer; (2) failure by Pioneer to pay any portion of the participant’s compensation within fourteen days of the date it is due or any other material breach of a contract with the participant by Pioneer which is not remedied by Pioneer within 5 business days after the participant’s written notice to Pioneer of such breach; or (3) Pioneer’s failure to maintain a participant’s employment without material diminution in the participant’s duties and responsibilities, and such failure is not cured by Pioneer within 5 business days after the participant’s written notice to Pioneer of such failure. After the effective date of a change in control, “good reason” shall also include any of (4)-(9) below unless, in the case of any of (5), (7), (8), or (9), such act or failure is corrected within five business days following the giving of written notice of good reason by the participant, and in the case of (6) below, such act is not objected to in writing by the participant within fourteen days after notification thereof: (4) after a change in control, the determination by the participant, in his or her sole and absolute discretion, that the business philosophy or policies of Pioneer or its successor or the implementation thereof is not compatible with those of the participant; (5) the assignment to the participant of duties inconsistent with his or her status as an executive officer of Pioneer or a meaningful alteration, adverse to the participant, in the nature or status of his or her responsibilities (other than reporting responsibilities) from those in effect immediately prior to a change in control, including, without limitation, a material reduction in the budget for which the participant is responsible; (6) failure by Pioneer to continue in effect any compensation plan in which the participant participates immediately prior to a change in control that is material to the participant’s compensation, unless an equitable arrangement has been made with the participant with respect to such plan; (7) failure by Pioneer to continue the participant’s participation in a plan described in (6) above or a substitute or alternative plan on a basis not materially less favorable to the participant than as existed at the time of a change in control; (8) failure by Pioneer to continue to provide the participant with benefits substantially similar to those enjoyed by the participant prior to a change in control; or (9) a requirement by Pioneer that the participant relocate his or her residence outside the metropolitan area in which the participant was based immediately prior to a change in control, or a move of the participant’s principal business location more than 45 miles from the participant’s previous principal business location. The participant’s continued employment shall not of itself constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting good reason under the KESP. Upon a change in control of Pioneer, all participants will be entitled to full vesting of all options, restricted stock and other equity awards. Upon an involuntary termination within two years following the effective date of a change in control, a Level I or Level II participant will receive (1) a lump-sum cash payment equal to 300% of the sum of the participant’s (A) annual base salary, (B) annual maximum bonus and (C) annual car allowance and club dues, and (2) continued life insurance and medical benefits coverage at active employee rates for 18 months. A Level III participant will receive (1) a lump-sum cash payment equal to 200% of the sum of the participant’s (A) annual base salary, (B) annual maximum bonus and (C) annual car allowance and club dues, and (2) continued life insurance and medical benefits coverage at active employee rates for twelve months. Other participants will receive (1) a lump-sum cash payment equal to 150% of the sum of the participant’s (A) annual
base salary, (B) annual maximum bonus and (C) annual car allowance and club dues, and (2) continued life insurance and medical benefits coverage at active employee rates for twelve months. Furthermore, a terminated participant who is unable to sell securities on the open market may require the surviving entity to acquire any vested equity awards or any shares acquired pursuant to equity awards at a price equal to the then fair market value for such shares; such right must be exercised prior to twelve months after the participant’s involuntary termination within two years after the change in control. A “change in control” shall conclusively be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred: (1) any person, (other than (A) Pioneer; (B) any affiliate of Pioneer; (C) any employee benefit plan of Pioneer or of any affiliate and any person organized, appointed or established by Pioneer for or pursuant to the terms of any such plan or for the purpose of funding any such plan or funding other employee benefits for employees of Pioneer or any affiliate of Pioneer; or (D) any corporation or other entity owned, directly or indirectly, by the shareholders of Pioneer in substantially the same proportions as their ownership of capital stock of Pioneer) is or becomes the beneficial owner of voting stock of Pioneer (not including in the securities beneficially owned by such person any securities acquired directly from Pioneer after the date the KESP first became effective) representing 40% or more of the combined voting power of the voting stock of Pioneer then outstanding;provided, however, that a change of control will not be deemed to occur under this paragraph (1) if a person becomes the beneficial owner of voting stock of Pioneer representing 40% or more of the combined voting power of the voting stock of Pioneer then outstanding solely as a result of a reduction in the number of shares of voting stock of Pioneer outstanding which results from Pioneer’s repurchase of voting stock of Pioneer, unless and until such time as that person or any affiliate or associate of that person purchases or otherwise becomes the beneficial owner of additional shares of voting stock of Pioneer constituting 1% or more of the combined voting power of the voting stock of Pioneer then outstanding, or any other person (or persons) who is (or collectively are) the beneficial owner of shares of voting stock of Pioneer constituting 1% or more of the combined voting power of the voting stock of Pioneer then outstanding becomes an affiliate or associate of that person, unless, in either such case, that person, together with all its affiliates and associates, is not then the beneficial owner of voting stock of Pioneer representing 40% or more of the voting stock of Pioneer then outstanding; (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: (A) individuals who, on the date the KESP first became effective, constitute the board of directors; and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Pioneer) whose appointment or election by the board of directors of Pioneer or nomination for election by Pioneer’s shareholders was approved or recommended by a majority vote of the directors then still in office who either were directors on the date the KESP first became effective or whose appointment, election or nomination for election was previously so approved or recommended; PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 43 (3) there is consummated a merger or consolidation of Pioneer or any parent or direct or indirect subsidiary of Pioneer with or into any other corporation, other than: (A) a merger or consolidation which results in the voting stock of Pioneer outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities which entitle the holder thereof to vote generally in the election of members of the board of directors or similar governing body of Pioneer or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or (B) a merger or consolidation effected to implement a recapitalization of Pioneer (or similar transaction) in which no person (other than those persons listed in clauses (A) through (D) of paragraph (1) above) is or becomes the beneficial owner of voting stock of Pioneer (not including, for purposes of this determination, any voting stock of Pioneer acquired directly from Pioneer or its subsidiaries after the date the KESP first became effective other than in connection with the acquisition by Pioneer or one of its subsidiaries of a business) representing 40% or more of the combined voting power of the voting stock of Pioneer then outstanding; or (4)
In addition, in the event any participant is subject to an excise tax under Section 4999 of the Internal Revenue Code, as amended, as a result of payments under the KESP or otherwise, the participant will be entitled to a gross-up payment such that after payment of all taxes on the gross-up payment, the participant retains sufficient funds to pay the Section 4999 excise tax on his or her KESP and other payments (or such excise tax is paid on his or her behalf). Pioneer will be responsible for any attorneys’ fees incurred by a participant who is successful in pursuing litigation for benefits under the KESP. For any participant who is a “specified employee” within the meaning of Section 409A of the Code, payments under the KESP will generally be delayed six months following termination of employment. At its March 30, 2011 meeting, the Compensation Committee adopted a policy prohibiting the Company from entering into any future change in control arrangements with executive officers that provide for excise tax gross-up payments, unless such arrangement is approved by shareholders. Pursuant to the policy, any participant who enters the Key Executive Severance Plan after March 30, 2011 will not be entitled to any excise tax gross-up payments. The KESP may not be amended in a manner adverse to the rights of a participant without his or her consent. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 44
Potential Payments upon Termination or Change in Control The tables below reflect the amount of compensation that would be payable to each of the named executive officers in various scenarios involving termination of the named executive officer’s employment, including following a change in control. The amount of compensation payable to each named executive officer upon voluntary termination, involuntary not-for-cause termination (non-change in control), voluntary termination for good cause or involuntary termination following a change in control, involuntary for cause termination, and termination in the event of death or disability of each named executive officer is shown below. The amounts shown assume that the termination was effective on December 31, As of December 31,
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 45
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 47
The terms for the payments for involuntary not-for-cause termination (non-change in control) and for involuntary or good reason termination (following a change in control) are summarized under the heading “Key Executive Severance Plan” of this section. In the event of a change in control termination, if the termination qualified as (i) a change in ownership or effective control or (ii) a change in ownership of a substantial portion of our assets, in either case as defined in Section 280G of the Internal Revenue Code, then severance payments and benefits paid to our named executive officers may be subject to an excise tax under Section 4999 of the Internal Revenue Code. At its March 30, 2011 meeting, the Compensation Committee adopted a policy prohibiting the Company from entering into any future change in control arrangements with executive officers that provide for excise tax gross-up payments, unless such arrangement is approved by shareholders. For certain arrangements entered into with executive officers prior to the adoption of this policy, in the event a named executive officer is subject to such excise tax, the named executive officer will be entitled to a gross-up payment, such that after payment of all taxes on the gross-up payment, the named executive officer retains sufficient funds to pay the excise taxes that result from the severance payments and benefits received.
Compensation Committee Interlocks and Insider Participation Messrs. Burkhardt, Thompson, Rauh and Urban served on our Compensation Committee during the fiscal year ended December 31, During the fiscal year ended December 31,
Our audit committee reviews any transaction in which (1) we or any of our subsidiaries, on the one hand, and (2) any of our directors, nominees for director, executive officers or holders of more than 5% of our common stock or any of their immediate family members, on the other hand, is, was or is proposed to be a participant and the amount involved exceeds $120,000. Our audit committee is required by its charter to review and approve all such related person transactions, as well as to periodically reassess these transactions to ensure their continued appropriateness. Our chief financial officer is primarily responsible for the development and implementation of processes and controls to obtain information from directors and officers with respect to any such None of our directors or executive officers and no holder of more than 5% of the outstanding shares of our common stock, and no member of the immediate family of any such director, officer or security holder, to our knowledge, had any material interest in any transaction during the fiscal year ended December 31,
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and any persons beneficially owning more than 10% of our common stock to report their initial ownership of our common stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established, and we are required to disclose in this proxy statement any failure to file by these dates. To In making these disclosures, we relied solely on written statements of directors, executive officers and shareholders, and copies of the reports that they have filed with the SEC. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 48
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of Pioneer We have discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards No. 61,Communication with Audit Committees, as amended, (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (the “PCAOB”) in Rule 3200T. We have received the written disclosures and the letter from KPMG LLP required by applicable requirements of the PCAOB regarding KPMG’s communications with the Audit Committee concerning independence, and we have discussed with KPMG LLP its independence. Based on the review and discussions referred to above, we recommended to the Board of Directors of Pioneer The Audit Committee Dean A. Burkhardt John Michael Rauh, Chairman C. John Thompson Scott D. Urban The information above in the Report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates the information by reference. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 49 PROPOSAL 2 Approval of the Amendment and Restatement of the 2007 Incentive Plan
• Increase the number of authorized shares that can be awarded to our officers, employees and consultants of the Company or any of its subsidiaries and any nonemployee director of the Company under the plan by 1,350,000 shares (from 6,400,000 shares to 7,750,000 shares); • Add a provision to allow for a fungible share pool that reduces the shares available for issuance under the plan more rapidly when “full value” awards (i.e., restricted stock and restricted stock units) are • Delete the provision limiting the number of shares of common stock that are available for issuance under the plan in connection with full value awards to no more than 2,100,000 shares of common stock; and • Extend the expiration of the plan for an additional ten years to May 15, 2023. The amendment and restatement of the 2007 Incentive Plan also changes the name of the plan from “Pioneer Drilling Company 2007 Incentive Plan” to “Pioneer Energy Services Corp. 2007 Incentive Plan." Current Request to Increase the Share Reserve Awards under the 2007 Incentive Plan are a major component of our long-term incentive program for our employees, consultants and members of our Board. As noted in the “Compensation Discussion and Analysis,” we recognize that having an ownership interest in the Company is critical to aligning the financial interests of our employees and shareholders. In order to ensure that shares of our common stock continue to be available for future awards, in March 2013, the Compensation Committee of the Board approved an amendment and restatement to the 2007 Incentive Plan. The Compensation Committee believes it is important to obtain an additional 1,350,000 shares for grant under the 2007 Incentive Plan. In this proxy statement, we refer to any grant under the 2007 Incentive Plan as an “award.” As of March 27, 2013, approximately 4,766,531 shares subject to awards were outstanding under the 2007 Incentive Plan and 522,443 shares were available for future awards. We do not believe that this amount is sufficient to meet the Company’s anticipated grants of awards through the date of our 2014 Annual Meeting of Shareholders. As of March 27, 2013, approximately 333 or 9% of our employees, officers, consultants and nonemployee directors were eligible to participate in the 2007 Incentive Plan, of which five were named executive officers, four were non-employee directors and none were consultants. If shareholders do not approve
In its determination to approve the amendment and restatement of the 2007 Incentive Plan, the Compensation Committee reviewed the burn rate, dilution and overhang metrics disclosed below, peer group market practices and trends, and the cost of the amendment and restatement, including the estimated shareholder value transfer cost. YOU ARE URGED TO READ THIS ENTIRE PROPOSAL, WHICH EXPLAINS OUR REASONS FOR SUPPORTING THE AMENDMENT AND RESTATEMENT OF THE 2007 INCENTIVE PLAN. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 50 Current Requests to (i) Add Fungible Share Pool Provision and (ii) Delete the Provision Limiting the Number of Shares of Common Stock Available for Issuance under the Plan in Connection with Full Value Awards to 2,100,000 Shares As discussed above, the amendment and restatement of the 2007 Incentive Plan contains a fungible share pool provision that provides any shares of our common stock issued with respect to a full-value award (i.e., any award under the plan other than a cash award, a stock option or an SAR) granted under the plan after May 15, 2013 will be counted against the shares available for issuance under the plan as 1.38 shares for every one share actually issued in connection with a full-value award. For example, if 100 shares of our common stock are issued in connection with a restricted stock unit granted on May 16, 2013, 138 shares will be counted against the shares available for issuance under the plan in connection with that restricted stock unit award. Shares of our common stock issued in respect of a non-full-value award (i.e., stock option or an SAR) will be counted against the share reserve as one share for every one share actually issued in connection with a non-full-value award. For example, if 100 shares of our common stock are issued in connection with the exercise of a stock option, 100 shares will be counted against the shares available for issuance under the plan in connection with the exercise of that stock option award. In connection with adding a fungible share pool provision, the plan is being further amended to
Currently, the term of the 2007 Incentive Plan expires on August 3, 2017. The amendment and restatement of the 2007 Incentive Plan extends the term of the plan to May 15, 2023, which is ten years from the date of our upcoming Annual Meeting of Shareholders. The Importance of Equity Compensation The Compensation Committee believes that amendment and restatement of the 2007 Incentive Plan will provide it flexibility to continue to issue equity compensation in the future to: • Attract and retain the services of key employees, nonemployee directors and consultants who can contribute to our success; • Align the interests of our key employees and nonemployee directors with the interests of our shareholders through certain incentives whose value is based upon the performance of our common stock; • Motivate key employees to achieve our strategic business objectives; and • Provide a long-term equity incentive program that is competitive with our peer companies. The Compensation Committee strongly believe that granting equity awards motivates employees to think and act like owners, rewarding them when value is created for our stockholders. Key Historical Equity Metrics Approval of the amendment and restatement of the 2007 Incentive Plan will enable us to compete effectively in the competitive market for employee talent over the coming years, while maintaining reasonable burn rates and overhang. • Our three-year average burn rate of 1.69% is below the estimated ISS global industry classification standard (GICS) burn rate limit for our industry of 4.57%. • The following table shows how the key equity metrics have changed over the past three fiscal years under the 2007 Incentive Plan:
The Compensation Committee strongly believes that the approval of the
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 51 Our named executive officers who are current employees of the The last reported sales price for The general description of the amendment and restatement of the 2007 Incentive Plan and the other material features of the 2007 Incentive Plan are qualified in their entirety by reference to the copy of the 2007 Incentive Plan attached hereto as Appendix A. Summary of the 2007 Incentive Plan The following description summarizes certain provisions of the 2007 Incentive The 2007 Incentive Plan is designed to attract and retain officers, key employees, consultants and qualified directors, to encourage the sense of proprietorship of such employees, consultants and directors and to stimulate the active interest of such persons in the development and financial success of our Company and its subsidiaries.
The 2007 Incentive Plan is administered by the Compensation Committee. The 2007 Incentive Plan provides for various types of awards to be granted to participants. Under the 2007 Incentive Plan, options to purchase shares of our common stock and stock appreciation rights may be granted, provided the exercise price is not less than the fair market value of a share of our common stock on the date of grant. In addition, the 2007 Incentive Plan permits grants of cash awards, shares of our common stock or of rights to receive shares of our common stock, or a combination of such awards, on such terms as the Compensation Committee may determine. The 2007 Incentive Plan also provides for cash or stock bonus awards based on Shares The 2007 Incentive Plan Fungible Share Pool Under the 2007 Incentive Plan, shares of common stock subject to awards other than stock options Selection of Participants The Compensation Committee selects the participants and determines the number and type of awards to be granted to each Awards may be granted as alternatives to or in replacement of (a) awards previously granted under the 2007 Incentive Plan or any other plan or arrangement of ours, or (b) awards outstanding under a plan or arrangement of a business or entity all or part of which is acquired by us; provided, however, that except for adjustments to account for a corporate transaction as described below, Stock Options The exercise price of a stock option granted pursuant to the 2007 Incentive Plan may be not less than the fair market value of our common stock on the date of grant. The term of a stock option may not exceed ten years from the date of grant. Subject to the foregoing provisions, the Compensation Committee determines the terms, conditions and limitations applicable to any stock option awarded pursuant to this
Stock Appreciation Rights The Compensation Committee is authorized to grant stock appreciation rights, or SARs, to employees and nonemployee directors. Every SAR entitles the participant, on exercise of the SAR, to receive shares of common stock with a value equal to the excess of the market value of a specified number of shares of common stock at the time of exercise, over the exercise price established by the Compensation Committee. The term of any SAR may not exceed ten years from the date of grant. SARs may be granted in tandem with options, subject to such terms and restrictions as established by the Compensation Committee. Stock Awards and Cash Awards The 2007 Incentive Plan authorizes the Compensation Committee to grant Participants stock awards consisting of shares of our common stock or of a right to receive shares of our common stock, or their cash equivalent or a combination of both, in the future. Award Limits No participant may be granted, in any one-year period, stock options or SARs that are exercisable for more than 400,000 shares of our common stock, stock awards covering more than 200,000 shares of our common stock, or a combination of cash and other awards other than options and SARs having a value greater than $3,000,000. Performance Awards Any award available under the 2007 Incentive Plan may be made as a performance award. Performance awards not intended to qualify as qualified performance-based compensation under Code Section 162(m) will be based on achievement of such goals and are subject to such terms, conditions and restrictions as the Compensation Committee or its delegate will determine. Performance awards granted under the 2007 Incentive Plan that are intended to qualify as qualified performance-based compensation under Code Section 162(m) must be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective performance goals established by the Compensation • increased revenue; • net income measures (including but not limited to income after capital costs and income before or after taxes); • stock price measures (including but not limited to growth measures and total shareholder return); • price per share of common stock; • market share; • net earnings; • earnings per share (actual or targeted growth); • earnings before interest, taxes, depreciation and amortization (“EBITDA”); • earnings before interest, taxes and amortization (“EBITA”); • economic value added (or an equivalent metric); • market value added; • debt-to-equity ratio; • cash flow measures (including cash flow per share, cash flow return on capital, cash flow return on tangible capital, net cash flow, net cash flow before financing activities and improvement in or attainment of working capital levels); • return measures (including but not limited to return on equity, return on average assets, return on capital, risk-adjusted return on capital, return on investors’ capital and return on average equity); • operating measures (including operating income, funds from operations, cash from operations, after-tax operating income, net operating profit after tax, revenue volumes, operating efficiency, rig fleet day rates and rig fleet utilization); •
expense measures (including but not limited to overhead cost, general and administrative expense and improvement in or attainment of expense levels); • margins; • shareholder value; • proceeds from dispositions; • total market value; • reliability; • productivity; • corporate values measures (including ethics compliance, environmental and safety); and • debt reduction. Unless otherwise stated, such a performance goal need not be based on an increase or positive result under a particular business criterion and could include, for example, maintaining thestatus quo, Cash awards, as well as the above-mentioned performance measures for stock awards and cash awards, are included in the 2007 Incentive Plan to enable the Compensation Committee to make awards that qualify as qualified performance-based compensation under Code Section 162(m). The Compensation Committee can satisfy those requirements by, among other things, including provisions in stock awards and cash bonuses that will make them payable solely on account of the attainment of one or more pre-established, objective performance goals based on performance measures that have been approved by our shareholders. Although the Compensation Committee does not have to include such provisions in stock awards or cash bonuses, the inclusion of such provisions and compliance with certain other requirements of PIONEER ENERGY SERVICES CORP. – Award Limits For awards intended to qualify as performance-based compensation under Code section 162(m), no participant may be granted, in any Deductibility Not Required The committee may award compensation to our executive officers that is not fully deductible if it determines the Duration; Plan Amendments The 2007 Incentive Plan has a term of ten years from the date of shareholder approval Applicability of ERISA; Tax Qualification The 2007 Incentive Plan is not intended to be subject to the provisions of the Employee Retirement Income Security Act of 1974, nor is it intended to be qualified under Section 401(a) of the Code.
Certain Federal Income Tax Consequences of Awards Under the 2007 Incentive Plan The following is a summary of the general rules of present federal income tax law relating to the tax treatment of incentive stock options, nonqualified stock options, SARs, stock awards and cash awards under the 2007 Incentive Plan. The discussion is general in nature and does not take into account a number of considerations, which may apply, based on the circumstances of a particular participant under the 2007 Incentive Plan. Options Some of the options issuable under the 2007 Incentive Plan may constitute “incentive stock options” within the meaning of Code Section 422, In contrast, on the exercise of a nonqualified option, the optionee recognizes No deduction is available to us on the grant or exercise of an incentive stock option (although a deduction may be available if the employee sells the shares acquired on exercise before the applicable holding period expires), whereas on exercise of a nonqualified stock option, we are entitled to a deduction in an amount equal to the income recognized by the optionee. Except in the case of the death or disability of an optionee, an optionee has three months after termination of employment in which to exercise an incentive stock option and retain favorable tax treatment at exercise. An option exercised more than three months after an optionee’s termination of employment for other than PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 54 Stock Appreciation Rights The fair market value of any shares of our common stock received by the holder on the exercise of SARs under the 2007 Incentive Plan will be subject to ordinary income tax in the year of receipt, and we will be entitled to a deduction for that amount. Stock Awards A grant of shares of our common stock or a cash equivalent that is not subject to vesting restrictions will result in taxable income for federal income tax purposes to the recipient at the time of grant in an amount equal to the fair market value of the shares or the amount of cash awarded. We would be entitled to a corresponding deduction at that time for the amount included in the recipient’s income. Generally, a grant of shares of our common stock under the 2007 Incentive Plan subject to vesting and transfer restrictions will not result in taxable income to the recipient for federal income tax purposes or a tax deduction to us at the time of the grant. The recipient will generally realize taxable income at the time the shares become vested in an amount equal to the then fair market value of the shares. However, a recipient may elect pursuant to Code Section 83(b) to treat the fair market value of the shares on the date of grant as compensation
income at the year of the grant. The early income election must be made, if at all, within 30 days after the date of the grant. In any case, we will receive a deduction for federal income tax purposes corresponding in amount to the amount of compensation included in the recipient’s income in the year in which that amount is so included. Cash Awards Cash awards are taxable income to the recipient for federal income tax purposes at the time of payment. The recipient will have compensation income equal to the amount of cash paid, and we will have a corresponding deduction for federal income tax purposes. Other
New Plan Benefits Because it is within the discretion of the Compensation Committee to determine which individuals receive awards and the amount and type of awards received, it is not presently possible to determine the number of individuals to whom awards will be made in the future under the 2007 Incentive Plan or the amounts of such awards. Benefits to Named Executive Officers and Others Although not necessarily indicative of future awards that may be made under the 2007 Incentive Plan, the following table sets forth with respect to each named executive officer listed in the Summary Compensation Table and each group listed below
During the three months ended March 31, 2013, we granted options to purchase 220,656 shares of our common stock and long-term incentive restricted stock unit awards covering 198,136 shares of our common stock to 134 employees and executive officers. No grants have been made that are contingent on shareholder approval of the amendment and restatement of the 2007 Incentive Plan.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement55 Equity Compensation Plan Information The following table summarizes, as of December 31,
Vote Required Assuming the presence of a quorum, the approval of the amendment and restatement of the 2007 Incentive Plan requires the affirmative vote of the holders of a majority of the shares of our common stock entitled to vote on, and that voted for or against or expressly abstained with respect to this proposal; provided that the minimum vote that will constitute shareholder approval for NYSE listing purposes is (i) the approval of a majority of the votes Our board of PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 56 PROPOSAL 3 Advisory Vote on Executive Compensation This advisory vote on executive compensation gives shareholders the opportunity to approve our named executive officers’ compensation, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K. Based upon the Inspector of Election’s report, at the 2012 Annual Meeting of Shareholders the advisory vote on executive compensation received the favorable support of 96% of the votes cast thereon. The Compensation Committee determined that the voting results reflect strong shareholder support for our 2011 executive compensation program. Additionally, in response to the majority of the votes cast for an advisory vote on executive compensation every year at our 2011 Annual Meeting of Stockholders, we have determined that the advisory vote on executive compensation will be conducted every year, until we hold the next advisory vote on the frequency of advisory votes on executive compensation. Our next advisory vote on executive compensation will occur at our 2014 Annual Meeting of Shareholders. As described in detail in our Compensation Discussion and Analysis, we believe that our 2012 executive compensation program is competitive and strongly aligned with pay-for-performance principles. Consistent with prior practice, in 2012 the Compensation Committee emphasized compensation opportunities that reward our named executive officers when they deliver targeted financial and operational results. Accordingly, the majority of the named executive officers’ compensation that was granted in 2012 was performance-linked, as further described below. The Compensation Committee will continue to focus on executive compensation practices that attract, motivate and retain high performance executives, reward those executives for the achievement of short-term and long-term performance, and support our other executive compensation objectives. The important elements and features of our 2012 executive compensation program included the following: • Performance-linked compensation delivered in the form of an annual cash incentive award, stock options, and target performance-based RSU awards, represented approximately 78% of the Chief Executive Officer’s total direct compensation in 2012 and approximately 59% (on average) of the other named executive officers’ total direct compensation in 2012. • Each named executive officer’s annual cash incentive award was based on targeted financial and operational results, including diluted earnings per share; consolidated or segment level adjusted EBITDA; consolidated adjusted EBITDA return on capital employed; consolidated or segment level safety record; and individual performance during 2012. • Each named executive officer’s long-term incentive awards were allocated approximately 60% to stock options and 40% to target performance-based RSU awards, except for Mr. West who received a • Each named executive officer is employed at-will and is expected to demonstrate strong personal performance in order to continue serving as a member of the executive team. • We have implemented stock ownership guidelines that are intended to strengthen the alignment of the interests of the named executive officers and the shareholders. • Our Key Executive Severance Plan, in which the named executive officers participate, pays out only upon a double-trigger change in control termination. For a further description of this plan, see the “Potential Payments Upon Termination or Change in Control” section above. • The Compensation Committee continued to adhere to its policy prohibiting us from entering into any future change in control arrangements with executive officers that provide for excise tax gross-up payments, unless such arrangement is approved by shareholders. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 57 Early in 2012, our board of directors approved a business plan that reflected very aggressive goals for earnings per share (“EPS”), Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), return on capital employed (“ROCE”) and safety. These goals served as targets for our annual cash incentive plan. Despite our strong performance in 2012, we did not achieve some of the challenging goals set out for us in our annual cash incentive plan. However, the Compensation Committee believes that management performed very well during 2012 and delivered strong results for all of the 2012 Team Goals. Key highlights of our 2012 performance include the following: • Grew each of our core businesses resulting in increased revenues, Adjusted EBITDA, and margin; • Deployed seven new-build drilling rigs, 15 wireline units, 19 well servicing rigs, and three coiled tubing units; • Rebranded and changed our name to Pioneer Energy Services Corp.; • Integrated our new coiled tubing business; • Maintained high utilization of our drilling, well servicing, and wireline fleets; • Improved profitability in Colombia and ended the year with 100% utilization in December; • Achieved excellent safety results, with the lowest recordable incident rate in the history of the company; • Launched a cross-selling campaign to further capture synergistic gains; • Selected an electronic preventative maintenance system now in development with expected launch in 2013; and • Added a VP of Drilling to our core management team. You have the opportunity to vote “for” or “against” or “abstain” from voting on the following non-binding resolution: “RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers as disclosed in our Proxy Statement for the 2013 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including the compensation discussion and analysis, the compensation tables, and the narrative discussion of this proxy statement.” While your vote on this proposal is advisory and will not
Back to Contents PROPOSAL
The audit committee of our board of directors has selected KPMG LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, Assuming the presence of a quorum, the affirmative vote of a majority of the votes entitled to be cast by the shareholders that vote for or against or expressly abstain from voting is necessary to ratify the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, Principal Accounting Fees and Services The aggregate fees billed by KPMG LLP in the fiscal years ended December 31,
Audit Fees include aggregate fees billed for professional services rendered by KPMG LLP for the audit of our annual financial statements, audit of our internal control over financial reporting and review of financial statements included in our Form 10-Qs and services that are normally provided by the principal auditor (e.g., comfort letters, statutory audits, consents and assistance with and review of documents filed with the SEC) in the fiscal years ended December 31, Audit Committee’s Pre-Approval Policies and The audit committee has established a policy for the pre-approval of audit and non-audit services performed for us by the independent auditors, which also specifies the types of services that the independent auditors may and may not provide to us. The policy provides for general pre-approval of services and specific case-by-case approval of certain services. The services that are pre-approved include audit services and audit-related services, such as due diligence services pertaining to potential business acquisitions and dispositions, and may also include other services. The audit committee approved all of the fees and services described above. At the present time, we use a third party other than KPMG LLP to prepare our tax returns and assist with tax-compliance issues. The term of any pre-approval is twelve months and is generally subject to certain specific budgeted amounts or ratios, as determined by the audit committee. The audit committee may revise the list of general pre-approved services from time to time based on subsequent determinations. Unless a type of service has received general pre-approval, it will require specific pre-approval by the audit committee. Any proposed services which were addressed in the pre-approval, but which exceed pre-approved cost levels or budgeted amounts, will also require specific pre-approval by the audit
committee. The audit committee does not delegate its responsibilities concerning pre-approval of services to management. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for services performed to date. During the fiscal year ended December 31,
PIONEER
Expenses Related to this Proxy Solicitation We will pay all expenses relating to this proxy solicitation. We retained Phoenix Partners to assist in the solicitation of proxies. Phoenix Partners will receive an aggregate fee of $8,500, plus out-of-pocket expenses. We also agreed to indemnify Phoenix Partners against certain liabilities arising out of or in connection with this engagement. In addition to
Date for Submission of Shareholder Proposals Under the currently effective rules the SEC has established, any shareholder who wishes to have a qualified proposal considered for inclusion in our proxy statement for our In addition, our bylaws establish an advance notice procedure for shareholder proposals to be brought before an annual meeting. In general, the procedure provides that shareholders must submit proposals to us in writing containing certain information specified in our bylaws not more than 180 days and not less than 90 days prior to the first anniversary of our preceding year’s annual meeting. Accordingly, in order to be brought before our
The SEC permits a single set of annual reports and proxy statements to be sent to any household at which two or more shareholders reside if they appear to be members of the same family. Each shareholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces our mailing and printing expenses. A number of brokerage firms have instituted householding. As a result, if you hold your shares though a broker and you reside at an address at which two or more shareholders reside, you will likely be receiving only one annual report and proxy statement unless any shareholder at that address has given the broker contrary instructions. However, if any such beneficial shareholder residing at such an address wishes to receive a separate annual report or proxy statement in the future, or if any such beneficial shareholder that elected to continue to receive separate annual reports or proxy statements wishes to receive a single annual report or proxy statement in the future, that shareholder should contact their broker or send a request to our Corporate Secretary at our principal executive offices, 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209, telephone number (210) 828-7689. We will deliver, promptly upon written or oral request to the Corporate Secretary, a separate copy of the Annual Report and Additional Materials Our annual report for the fiscal year ended December 31, PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 60 Other Matters Our board of directors does not intend to bring any other matters before the annual meeting and has not been informed that any other matters are to be presented by others. If any other matters properly come before the annual meeting, the persons named in the enclosed form of proxy will
San Antonio, Texas April
AMENDED AND RESTATED 2007 INCENTIVE PLAN ( 1. Plan
This Amended and Restated 2007 Incentive Plan of Pioneer 2. Objectives
This Plan is designed to attract and retain officers, key employees and consultants of the Company and its Subsidiaries, to attract and retain qualified directors of the Company, to encourage the sense of proprietorship of such officers, employees, consultants and directors and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries. These objectives are to be accomplished by making Awards under this Plan and thereby providing Participants with a proprietary interest in the growth and performance of the Company and its Subsidiaries. 3. Definitions
As used herein, the terms set forth below shall have the following respective meanings: “Authorized Officer” means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom either of them shall delegate the authority to execute any Award Agreement). “Award” means the grant of any Option, SAR, Stock Award, Performance Award or Cash Award, whether granted singly, in combination or in tandem, to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in accordance with the objectives of the Plan. “Award Agreement” means any written agreement between the Company and a Participant setting forth the terms, conditions and limitations applicable to an Award. “Board” means the Board of Directors of the Company. “Cash Award” means an award denominated in cash. “Code” means the Internal Revenue Code of 1986, as amended from time to time. “Committee” means the Compensation Committee of the Board or such other committee of the Board as may be designated by the Board to administer the Plan. “Common Stock” means the Common Stock, par value $0.10 per share, of the Company. “Director” means an individual serving as a member of the Board. “Dividend Equivalents” means, with respect to shares of Restricted Stock or Restricted Stock Units, with respect to which shares are to be issued at the end of the Restriction Period, an amount equal to all dividends and other distributions (or the economic equivalent thereof) that are payable to shareholders of record during the Restriction Period on a like number of shares of Common Stock. “Employee” means an employee of the Company or any of its Subsidiaries and an individual who has agreed to become an employee of the Company or any of its Subsidiaries and actually becomes such an employee within the following six months.
“Exchange Act” means the Securities Exchange Act of 1934, as amended. “Fair Market Value” of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sales reported on that date, on the last preceding date on which such a sale was so reported, (ii) if the Common Stock is not so listed, the mean between the closing bid and asked price on that date, or, if there are no such prices available for such date, on the last preceding date on which such prices shall be available, as reported by the National Quotation Bureau Incorporated, or (iii) if shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose. PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 62 “Incentive Option” means an Option that is intended to comply with the requirements set forth in Section 422 of the Code. “Option” means a right to purchase a specified number of shares of Common Stock at a specified price. “Nonqualified Option” means an Option that is not intended to comply with the requirements set forth in Section 422 of the Code. “Participant” means an Employee, consultant or Director to whom an Award has been made under this Plan. “Performance Award” means an award made pursuant to this Plan to a Participant who is an Employee, which Award is subject to the attainment of one or more Performance Goals. Performance Awards may be Stock Awards or Cash Awards. “Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Award shall be earned. “Restricted Stock” means any Common Stock that is restricted or subject to forfeiture provisions. “Restricted Stock Unit” means a unit evidencing the right to receive one share of Common Stock or equivalent value (as determined by the Committee) that is restricted or subject to forfeiture provisions. “Restriction Period” means a period of time beginning as of the date upon which an Award of Restricted Stock or Restricted Stock Units is made pursuant to this Plan and ending as of the date upon which the Common Stock subject to such Award is issued (if not previously issued), no longer restricted or subject to forfeiture provisions. “SAR” means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number of shares of Common Stock on the date the right is exercised over a specified strike price, in each case, as determined by the Committee. “Stock Award” means an award in the form of shares of Common Stock or units denominated in shares of Common Stock. “Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing 50% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the shareholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns 50% or more of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise). 4. Eligibility
5.Common Stock Available for Awards Subject to the provisions of paragraph 15 hereof, there shall be available for Awards under this Plan granted wholly or partly in Common Stock (including rights or options that may be exercised for or settled in Common Stock) an aggregate of
6. Administration Authority of the
7.Delegation of Authority The Committee may delegate to the Chief Executive Officer and to other senior officers of the Company its duties under this Plan pursuant to such conditions or limitations as the Committee may establish. 8. Awards
(a) Except as otherwise provided in paragraph 9 hereof pertaining to Awards to Nonemployee Directors, the Committee shall determine the type or types of Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Awards. Each Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and shall be signed by the Participant to whom the Award is made and by an Authorized Officer for and on behalf of the Company. Awards may consist of those listed in this paragraph 8(a) and may be granted singly, in combination or in tandem. Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other plan of the Company or any of its Subsidiaries, including the plan of any acquired entity; provided that, except as contemplated in paragraph 15 hereof, no Option may be issued in exchange for the cancellation of an Option with a higher exercise price nor may the exercise price of any Option be reduced. All or part of an Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attainment of specified growth rates and other comparable measurements of performance. Upon the termination of employment by a Participant who is an Employee, any unexercised, deferred, unvested or unpaid Awards shall be treated as set forth in the applicable Award Agreement.
the Company or upon an Employee’s termination of employment by reason of death, disability or retirement, (ii) such three-year minimum Restricted Period shall not apply to a Stock Award that is granted in lieu of salary or bonus, and (iii) vesting of a Stock Award may occur incrementally over the three-year minimum Restricted Period.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 64 Cash
• increased revenue; • net income measures (including but not limited to income after capital costs and income before or after taxes); • stock price measures (including but not limited to growth measures and total shareholder return); • price per share of Common Stock; • market share; • net earnings; • earnings per share (actual or targeted growth); • earnings before interest, taxes, depreciation, and amortization (“EBITDA”); • earnings before interest, taxes and amortization (“EBITA”); •
economic value added (or an equivalent metric); • market value added; • debt to equity ratio; • cash flow measures (including but not limited to cash flow per share, cash flow return on capital, cash flow return on tangible capital, net cash flow, net cash flow before financing activities and improvement in or attainment of working capital levels); • return measures (including but not limited to return on equity, return on average assets, return on capital, risk-adjusted return on capital, return on investors’ capital and return on average equity); • operating measures (including operating income, funds from operations, cash from operations, after-tax operating income; net operating profit after tax, revenue volumes, operating efficiency, rig fleet day rates and rig fleet utilization); • expense measures (including but not limited to overhead cost, general and administrative expense and improvement in or attainment of expense levels); • margins; • shareholder value; • proceeds from dispositions; • total market value; • reliability; • productivity; • corporate values measures (including ethics compliance, environmental, and safety) and • debt reduction. Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining thestatus quo,
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 65 Notwithstanding anything to the contrary contained in this Plan, the following limitations shall apply to any Awards made hereunder:
9.Awards to Nonemployee Directors
Upon becoming a Director, each Nonemployee Director shall receive a fully-vested Nonqualified Option to purchase 10,000 shares of Common Stock, and as of the close of business on the date on which the Company’s regular annual meeting of shareholders is held for each year after the year in which the Plan is approved by the shareholders of the Company, each Nonemployee Director then serving shall receive a fully-vested Nonqualified Option to purchase 10,000 shares of Common Stock (individually, a “Nonemployee Director’s Option,” and collectively, “Nonemployee Directors’ Options”). The Board may, in its discretion, determine to increase, from time to time, the number of shares subject to Nonemployee Directors’ Options awarded after such determination, provided that any such increase in any single calendar year shall not exceed 10,000 shares per Nonemployee Director’s Option. Each Nonemployee Director’s Option shall expire five years from the date of grant; otherwise, a Nonemployee Director’s Option shall not be subject to forfeiture or termination. Upon the termination of the Plan or the unavailability of shares of Common Stock for issuance under the Plan, no additional Nonemployee Directors’ Options shall be granted pursuant to this sub-paragraph.
10.Award Payment; Dividends; Substitution
11.Stock Option Exercise The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash or, if elected by the Participant, the Participant may purchase such shares by means of tendering Common Stock or surrendering another Award, including Restricted Stock, valued at Fair Market Value on the date of exercise, or any combination thereof. The Committee shall determine acceptable methods for Participants to tender Common Stock or other Awards; provided that any Common Stock that is or was the subject of an Award may be so tendered only if it has been held by the Participant for at least six months. The Committee may provide for procedures to permit the exercise or purchase of such Awards by use of the proceeds to be received from the sale of Common Stock issuable pursuant to an Award. Unless otherwise provided in the applicable Award Agreement, in the event shares of Restricted Stock are tendered as consideration for the exercise of an Option, a number of the shares issued upon the exercise of the Option, equal to the number of shares of Restricted Stock used as consideration thereof, shall be subject to the same restrictions as the Restricted Stock so submitted as well as any additional restrictions that may be imposed by the Committee.
12. Adjustments
other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make appropriate adjustments to (i) the number of shares of Common Stock covered by Awards in the form of Common Stock or units denominated in Common Stock, (ii) the exercise or other price in respect of such Awards, and (iii) the appropriate Fair Market Value and other price determinations for such Awards, (iv) the number of shares of Common Stock covered by Awards to Directors automatically granted pursuant to paragraph 9 hereof and (v) the Stock-based Award Limitations described in paragraph 8(b) hereof, to give effect to such transaction shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 67 Unfunded
IN WITNESS WHEREOF, Pioneer PIONEER Energy Service Corp.
PIONEER ENERGY SERVICES CORP. – 2013 Proxy Statement 68
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