10-K/A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form
10-K/A
 
Amendment No. 1
(Mark One)
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31,
2019
Or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from
                    
to
                    
Commission File No.
 001-34037
Commission Company Name: SUPERIOR ENERGY SERVICES INC
 
SUPERIOR ENERGY SERVICES, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
75-2379388
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
     
1001 Louisiana Street, Suite 2900
Houston, TX
 
77002
Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (713)
654-2200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
symbol
 
Name of each exchange
on which registered
Common Stock, $.001 par value
 
SPN
 
New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  
    No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  
    No  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
             
Non-accelerated
filer
 
 
Smaller reporting company
 
             
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    No  
At June 30, 2019, the aggregate market value of the registrant’s voting stock held by
non-affiliates
of the registrant was $205.4 million. At June 1, 2020 there were 15,798,919 shares of the registrant’s common stock outstanding.
 
 

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EXPLANATORY NOTE
Superior Energy Services, Inc. (the Company, we, us or our) filed its Annual Report on Form
 10-K
 for the fiscal year ended December 31, 2019 (the Form
10-K)
with the U.S. Securities and Exchange Commission (the SEC) on February 28, 2020. The Company is filing this Amendment No. 1 to the Form
 10-K
(the Form
10-K/A
or this Amendment) solely for the purpose of including the Part III information. This information was previously omitted from the original Form
10-K
in reliance on General Instruction G(3) to Form
10-K,
which permits the information in Part III to be incorporated in the Form
10-K
by reference from the Company’s definitive proxy statement or an amendment to the
Form10-K
if such statement or amendment is filed with the SEC no later than 120 days after the Company’s fiscal
year-end.
The Company is filing this Form
10-K/A
to include Part III information because the Company did not file a definitive proxy statement containing such information within 120 days after the end of the fiscal year covered by the Form
10-K.
This Form
 10-K/A
 hereby amends and restates in their entirety Items 10 through 14 of Part III of the Form
 10-K.
The Company is also relying on the
45-day
extension provided by an order issued on March 4, 2020 by the SEC under Section 36 of the Securities Exchange Act of 1934, as amended (the Exchange Act), granting exemptions from specified provisions of the Exchange Act and certain rules thereunder, as amended by Release No.
 34-88465
issued on March 25, 2020 (as amended, the Order) to delay the filing of this Form
10-K/A
after April 30, 2020, which is the original filing deadline (the Original Filing Deadline) for filing the Part III information. On April 28, 2020, the Company filed the Current Report on Form
8-K
with the SEC to indicate its intention to rely on the Order for the extension of the filing of this Form
10-K/A.
Consistent with our statements made in the Form
8-K,
the Company was unable to file this Form
10-K/A
until the date hereof because the Company’s operations have experienced disruptions due to the circumstances surrounding the
COVID-19
pandemic including, but not limited to, suggested and mandated social distancing and stay home orders. These mandates and the resulting office closures and staff reductions have severely limited access to the Company’s facilities by the Company’s financial reporting and accounting staff as well as other advisors involved in the preparation of this Form
10-K/A
and impacted the Company’s ability to fulfill required preparation and review processes and procedures with respect to this Form
10-K/A.
In light of the impact of the factors described above, the Company was unable to compile and review certain information necessary to permit the Company to timely file this
10-K/A
by the Original Filing Deadline without unreasonable effort and expense.
Pursuant to Rule
 12b-15
 under the Exchange Act, this Form
 10-K/A
 also contains new certifications by the principal executive officer and the principal financial officer as required by Section 302 of the Sarbanes-Oxley Act of 2002. Accordingly, Item 15(b) of Part IV is amended and restated to include the currently dated certifications as exhibits to this Form
10-K/A.
Because no financial statements have been amended by or included in this Form
 10-K/A
 and this Form
 10-K/A
 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation
 S-K,
 paragraphs 3, 4, and 5 of the certifications have been omitted.
Except as expressly noted in this Form
 10-K/A,
 this Form
 10-K/A
 does not reflect events occurring after the original filing of the Form
 10-K
 or modify or update in any way any of the other disclosures contained in the Form
 10-K
 including, without limitation, the financial statements. Accordingly, this Form
 10-K/A
 should be read in conjunction with the Company’s Form
 10-K
 and the Company’s other filings with the SEC.

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FORWARD-LOOKING STATEMENTS
This Form
10-K/A
and other documents filed by us with the SEC contain, and future oral or written statements or press releases by us and our management may contain, forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations of such words and similar expressions identify forward-looking statements, although not all forward-looking statements contain these identifying words. All statements other than statements of historical fact included in this Form
10-K/A
or such other materials regarding our financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to:
  the conditions in the oil and gas industry;
 
  the effects of public health threats, pandemics and epidemics, like the recent
 COVID-19
 pandemic, and the adverse impact thereof on our business, financial condition, results of operations and liquidity, including, but not limited to, our growth, operating costs, supply chain, labor availability, logistical capabilities, customer demand and industry demand generally, margins, utilization, cash position, taxes, the price of our securities, the ability to access capital markets;
 
  the ability of the members of OPEC+ to agree on and to maintain crude oil price and production controls;
 
  our outstanding debt obligations and the potential effect of limiting our ability to fund future growth;
 
  necessary capital financing may not be available at economic rates or at all;
 
  volatility of our common stock;
 
  operating hazards, including the significant possibility of accidents resulting in personal injury or death, or property damage for which we may have limited or no insurance coverage or indemnification rights;
 
  we may not be fully indemnified against losses incurred due to catastrophic events;
 
  claims, litigation or other proceedings that require cash payments or could impair financial condition;
 
  credit risk associated with our customer base;
 
  the effect of regulatory programs and environmental matters on our operations or prospects;
 
  the impact that unfavorable or unusual weather conditions could have on our operations;
 
  the potential inability to retain key employees and skilled workers;
 
  political, legal, economic and other risks and uncertainties associated with our international operations;
 
  laws, regulations or practices in foreign countries could materially restrict our operations or expose us to additional risks;
 
  potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results;
 
  changes in competitive and technological factors affecting our operations;
 
  risks associated with the uncertainty of macroeconomic and business conditions worldwide;
 
  potential impacts of cyber-attacks on our operations;
 
  counterparty risks associated with reliance on key suppliers;
 
  challenges with estimating our potential liabilities related to our oil and natural gas property; and
 
  risks associated with potential changes of the Bureau of Ocean Energy Management security and bonding requirements for offshore platforms.
 
These risks and other uncertainties related to our business are described in detail in Part I, Item 1A of the Form
10-K.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. 

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For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements. We undertake no obligation to update any of our forward-looking statements for any reason, notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
 

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SUPERIOR ENERGY SERVICES, INC.
FORM
10-K/A
AMENDMENT NO. 1
TABLE OF CONTENTS
         
 
Page
 
PART III
   
 
   
1
 
   
5
 
   
28
 
   
29
 
   
30
 
PART IV
   
 
   
31
 
 

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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors
Our board of directors (the Board or the Board of Directors) is responsible for oversight of our management, providing strategic direction and establishing broad corporate policies. In addition, our Board addresses the Company’s organizational needs, navigates competitive challenges, ensures succession and appropriately manages risks.
Set forth below is biographical information regarding the current members of our board of directors (the Board or the Board of Directors).
                     
Name
 
Age
 
 
Director Since
 
 
Principal Occupation
David D. Dunlap
   
58
     
2010
   
Chief Executive Officer and President
James M. Funk
   
70
     
2005
   
President of J.M. Funk & Associates
Terence E. Hall
   
74
     
1995
   
Founder and Chairman of the Board
Peter D. Kinnear
   
73
     
2011
   
Former Chairman, Chief Executive Officer and President of FMC Technologies, Inc.
Janiece M. Longoria
   
67
     
2015
   
Former Chairman of the Port of Houston Authority
Michael M. McShane
   
66
     
2012
   
Advisor to Advent International
W. Matt Ralls
   
70
     
2012
   
Former Chairman, Chief Executive Officer and President of Rowan Companies plc
 
David D. Dunlap
has served as our Chief Executive Officer (CEO) since 2010 and President since 2011. From 2007 until he joined the Company in 2010, Mr. Dunlap served as Executive Vice President — Chief Operating Officer of BJ Services Company (BJ Services), a renowned well services provider. He joined BJ Services in 1984 as a District Engineer. Prior to 1995, he served as Vice President — Sales for the Coastal Division of North America and U.S. Sales and Marketing Manager for BJ Services. Prior to being promoted to Executive Vice President — Chief Operating Officer, Mr. Dunlap held the position of Vice President — International Division from 1995 to 2007. Mr. Dunlap currently serves as director and trustee on the boards of numerous
non-profit
organizations.
James M. Funk
is currently the President of J.M. Funk & Associates, an oil and gas business consulting firm, and has more than 40 years of experience in the energy industry. Dr. Funk served as Senior Vice President of Equitable Resources (now EQT Corporation) and President of Equitable Production Co. from June 2000 to 2003. He worked for 23 years with Shell Oil Company and its affiliates and is a Certified Petroleum Geologist.
Mr. Funk has served on the board of directors of Range Resources Corporation since 2008.
Terence E. Hall
has served as the Chairman of our Board since 1995. Mr. Hall is the founder of the Company and served as CEO of the Company and its predecessors from 1980 until 2010.
Peter D. Kinnear
held numerous management, operations and marketing roles with FMC Technologies, Inc. (FTI) and FMC Corporation from 1971 until his retirement in 2011. Mr. Kinnear served as FTI’s CEO from 2007 to 2011, Chairman of the Board from 2008 to 2011, President from 2006 to 2010 and Chief Operating Officer from 2006 to 2007.
Janiece M. Longoria
is the Former Chairman of the Port of Houston Authority. She currently serves as Vice Chairman of the University of Texas System Board of Regents, and on the board of directors of the Federal Reserve Bank of Dallas, Houston Branch. Formerly, Ms. Longoria practiced law as a securities and commercial litigator for 23 years at Ogden Gibson Broocks Longoria & Hall LLP, and previously at Andrews & Kurth LLP.
Michael M. McShane
serves as an Advisor to Advent International, a global private equity fund. Mr. McShane served as a director, President and CEO of Grant Prideco, Inc. from 2002 until the completion of its merger with National Oilwell Varco, Inc. in 2008, having also served as the chairman of its board from 2003 to 2008.

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Prior to joining Grant Prideco, Mr. McShane was Senior Vice President — Finance and Chief Financial Officer and a director of BJ Services from 1990 to 2002 and Vice President — Finance from 1987 to 1990 when BJ Services was a division of Baker Hughes Incorporated.
Mr. McShane has served on the board of directors of NCS Multistage Holdings, Inc. since 2012, where he has served as chairman of the board of directors since 2017. He has also served on the board of directors of Forum Energy Technologies, Inc. and Oasis Petroleum, Inc. since 2010.
W. Matt Ralls
previously served as Executive Chairman, CEO and President of Rowan Companies plc (Rowan) from 2014 to 2016, the CEO from 2009 until 2014, and President from 2009 to 2013. Mr. Ralls served as Executive Vice President and Chief Operating Officer of GlobalSantaFe Corporation from 2005 until the completion of the merger of GlobalSantaFe with Transocean, Inc. in 2007, prior to which he had served as Senior Vice President and Chief Financial Officer from 2001 to 2005.
Mr. Ralls has served as chairman of the board of directors of Pacific Drilling S.A. since 2018. He has also served on the board of directors of NCS Multistage Holdings, Inc. since 2017 and Cabot Oil and Gas Corporation since 2011.
Meeting Attendance
Our Board has adopted a policy that recommends all directors personally attend each Annual Meeting. All of our directors attended our 2019 Annual Meeting.
In 2019, our Board held 7 meetings, and the committees held a total of 12 meetings. Each of our directors attended at least 75% of our Board meetings and the meetings of any committees of which the director was a member in 2019.
Director Independence
Our Board has determined that each of Messrs. Funk, Kinnear, McShane and Ralls and Ms. Longoria are “independent directors” as defined by the New York Stock Exchange (the NYSE) listing standards.
Executive Officers
Set forth below is certain information regarding our executive officers as of June 1, 2020, including all offices and positions held by each in the past five years.
             
Name
 
Age
 
 
Offices Held and Term of Office
David D. Dunlap
   
58
   
President and Chief Executive Officer, since February 2011
Westervelt T. Ballard, Jr.
   
48
   
Executive Vice President, Chief Financial Officer and Treasurer, since March 2018
Executive Vice President of International Services, from February 2012 to February 2018
James W. Spexarth
   
52
   
Chief Accounting Officer, since March 2018
Vice President and Corporate Controller, from August 2013 to February 2018
A. Patrick Bernard
   
62
   
Executive Vice President, since April 2016
Senior Executive Vice President, from July 2006 to March 2016
Brian K. Moore
   
63
   
Executive Vice President of Corporate Services, since April 2016
Senior Executive Vice President of North America Services, from February 2012 to March 2016
William B. Masters
   
63
   
Executive Vice President and General Counsel, since March 2008
 
Family Relationships
There are no family relationships among any of our directors or executive officers.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers to file with the SEC reports of ownership and changes in ownership of our equity securities. Based solely upon our review of the Forms 3 and 4 filed during 2019 and written representations from our directors and executive officers, we believe that all required reports were timely filed during 2019.
Board Committees
Each of our Board’s standing committees has adopted a written charter that has been approved by our Board. Copies of these charters, as well as copies of our Corporate Governance Principles, are available in the Corporate Governance section of our website at www.superiorenergy.com and are available in print upon request to our Secretary at Superior Energy Services, Inc., 1001 Louisiana Street, Suite 2900, Houston, Texas 77002.
Our Board has affirmatively determined that each member of our standing committees (the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee) has no material relationship with the Company and satisfies the independence criteria (including the enhanced criteria applicable to audit and compensation committees) set forth in the NYSE listing standards and SEC rules and regulations.
The table below shows the committees on which each of our directors sits and the number of committee meetings held by each committee in 2019.
                         
Name
 
Audit Committee
 
 
Compensation Committee
 
 
Corporate Governance
Committee
 
James M. Funk
   
     
M
     
M
 
Peter D. Kinnear
   
M*
     
     
M
 
Janiece M. Longoria
   
M  
     
     
C
 
Michael M. McShane
   
C*
     
M
     
 
W. Matt Ralls
   
     
C
     
M
 
                         
Meetings held in 2019
   
6  
     
3
     
3
 
 
* Audit committee financial expert
(C) Committee chair
(M) Committee member
Audit Committee
Our Board has a standing audit committee (Audit Committee), the members of which are Messrs. McShane and Kinnear and Ms. Longoria. The Audit Committee is comprised of three
non-employee
directors, each of whom meet the independence and financial literacy requirements under the SEC rules and NYSE listing standards, including the heightened NYSE independence requirements for Audit Committee members and two of whom qualify as an “audit committee financial expert” as defined by the SEC. Mr. McShane serves as committee chair of the Audit Committee.
Compensation Committee
The compensation committee (Compensation Committee) consists of three members of the Board of Directors, Messrs. Funk, McShane and Ralls, all of whom have been determined by the Board of Directors to be independent under the NYSE listing standards. In addition, each member of the Compensation Committee qualifies as a
“non-employee”
director within the meaning of Rule
16b-3
promulgated under the Exchange Act. Mr. Ralls serves as committee chair of the Compensation Committee.
Since May 2007, the Compensation Committee has engaged Pearl Meyer & Partners, LLC (Pearl Meyer), an independent compensation consultant, to advise the Compensation Committee on matters relating to executive compensation and assist it in maintaining and administering our executive compensation programs. The Compensation Committee annually requests Pearl Meyer to conduct an executive compensation review to evaluate the compensation of our senior executives relative to an industry peer group selected by the Compensation Committee with input from
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the compensation consultant and management and published market survey data. See “Item 11. Executive Compensation—Compensation Discussion and Analysis—How We Make Compensation Decisions—Compensation Consultant’s Role” herein for more information.
Our stock incentive plan permits the Compensation Committee to delegate to appropriate personnel its authority to make awards to employees other than officers and directors subject to Section 16 of the Exchange Act. The Compensation Committee has delegated authority to our CEO to make or alter awards under our long-term incentive (LTI) plan to participants (other than himself), subject to the following conditions:
  the CEO may grant awards relating to no more than 100,000 shares of our common stock in any fiscal year and awards relating to no more than 20,000 shares to any one participant;
 
  the CEO may grant no more than 30,000 performance share units (PSUs) in any fiscal year and no more than 5,000 PSUs to any one participant;
 
  the CEO may cancel, modify or waive rights under awards related to no more than 20,000 shares and 5,000 PSUs held by a participant;
 
  the CEO must approve the grant in writing during an open window period, with the grant date being the date of the written approval or a future date; and
 
  the CEO must report the grants, cancellations or alterations to the Compensation Committee at its next meeting.
 
Compensation Committee Interlocks and Insider Participation
During 2019, none of Messrs. Funk, McShane or Ralls, who comprised the Compensation Committee, were officers or employees of the Company or any of our subsidiaries or had any relationships requiring disclosure in this Amendment under “Item 13. Certain Relationships and Related Transactions, and Director Independence—Certain Transactions,” and none of our executive officers served as a member of the Compensation Committee of another entity or as a director of another entity whose executive officers served on our Board or the Compensation Committee. No member of the Compensation Committee is a former officer of the Company.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee (Corporate Governance Committee) consists of four members of the Board, Messrs. Funk, Kinnear, and Ralls and Ms. Longoria, all of whom meet the independence requirement under the NYSE listing standards. Ms. Longoria serves as committee chair of the Corporate Governance Committee. The Corporate Governance Committee conducts assessments of nominees to our Board and is charged with developing and recommending to our Board any policies, Corporate Governance Principles and the structure, leadership and membership of our Board committees, including those policies and principles related to, affecting or concerning risk oversight of our Board and its committees.
Code of Conduct
Our Shared Core Values at Work (Code of Conduct) applies to all of our directors, officers and employees. This Code of Conduct is publicly available on the Corporate Governance page in the About Us section of our website at http://www.superiorenergy.com. Any waivers granted to directors or executive officers and any material amendment to our Code of Conduct will be posted promptly on our website and/or disclosed in a current report on Form
8-K.
Procedures for Stockholder Recommendations of Nominees to the Board of Directors
There were no material changes to the procedures described in the Company’s Proxy Statement relating to the 2019 annual meeting of stockholders by which security holders may recommend nominees to the Company’s Board of Directors.
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Item 11. Executive
Compensation
Compensation Discussion and Analysis
The Compensation Discussion and Analysis (CD&A) describes our executive compensation philosophy and practices. The Compensation Committee reviews recommendations by our CEO and makes the final determination regarding executive compensation.
Executive Compensation Philosophy
The Compensation Committee is responsible for designing, implementing and administering our executive compensation program. The primary objective of our program is to:
  ensure that pay and performance are directly linked so that executive compensation is aligned with the Company’s operating and financial performance, including its stock price performance; and
 
  ensure that we can attract and retain talented executives with the skills, educational background, experience and personal qualities needed to successfully manage our business.
 
In structuring our executive compensation program, the Committee is guided by the following principles:
  Compensation should be performance driven and incentive compensation should comprise the largest part of an executive’s compensation package.
 
  The largest portion of our target executive compensation (88% for our CEO and 80% for the other named executive officers (NEOs)) is comprised of LTI awards and annual incentive plan (AIP) participation levels that are
at-risk,
performance-based with the ultimate value primarily determined by both our absolute and relative stock price performance.
 
  Base salary, the only fixed element of compensation in our executive compensation program, accounts for approximately 12% of our CEO’s target compensation and approximately 20% of our other NEOs’ target compensation.
 
  Compensation levels should be competitive in order to attract and retain talented executives.
 
  We annually receive extensive input from our independent compensation consultant regarding the competitiveness of our pay strategy relative to the market. We have a well-defined, established process to evaluate the competitiveness of our executive compensation program.
 
  Incentive compensation should balance short-term and long-term performance, including balancing short-term growth with long-term returns.
 
  Our AIP rewards executives for the achievement of annual goals based on our profitability and achievement of quantitative operational metrics.
 
  The value received by our CEO and other NEOs from LTI grants is aligned with our actual operational and financial performance, including both our absolute and relative stock price performance.
 
  In order to encourage our executives to prudently manage our business without sacrificing long-term returns, the performance metrics used for our PSUs are our
3-year
relative total stockholder return (TSR) and return on assets (ROA) as compared to our peers.
 
  We evaluate annually with our independent compensation consultant whether the program is balanced in terms of base pay and incentives, both short-term and long-term.
 
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Compensation programs should provide an element of retention and motivate executives to stay with the Company long-term.
 
  Executives forfeit their opportunity to earn a payout of their PSUs if they voluntarily leave the Company before the
3-year
performance cycle is complete, except in the case of retirement. Also, the use of time-vested stock options and restricted stock units (RSUs) provides a strong incentive for executives to stay with the Company.
 
  The retirement benefits provided under our Supplemental Executive Retirement Plan (SERP) increase the longer the executive remains with the Company.
 
  Compensation programs should encourage executives to own Company stock in order to align their interests with our stockholders.
 
  Our stock ownership guidelines require our executive officers to own shares of Company stock equivalent to a stated multiple of the executive’s base salary. The multiple varies depending on the executive’s job title. See “Item 11. Executive Compensation Policies—Stock Ownership Guidelines and Holding Requirement” for more information.
 
  We grant time-vested RSUs as one of our LTI grants, and we may also elect to pay up to 50% of the value of our PSUs in common stock.
 
Executive Summary of Our Compensation Practices
We maintain compensation practices that are aligned with sustainable corporate governance principles. Below, we highlight key elements of our compensation governance.
 
We pay for performance.
With the exception of salary and benefits, all of our executive compensation elements are incentive-based or tied to Company stock performance. Performance-based,
at-risk
pay constitutes 88%% of our CEO’s target total direct compensation and 80% of our other NEOs target total direct compensation.
 
 
We structure each element of compensation with a specific purpose.
Our process for making compensation decisions involves a strategic review of the role and the level of each compensation element, as well as the balance of short-term and long-term incentive compensation
 
 
We have “double trigger” change of control provisions.
The change of control program for our executives provides for change of control cash severance payments only if a qualifying termination of employment occurs in connection with the change of control. In addition, double trigger change of control provisions apply to all of our executive LTI awards.
 
 
We review our equity plan share usage regularly.
On at least an annual basis, we review and evaluate our share dilution, burn rate and overhang levels of our LTI program and its impact on stockholder dilution.
 
 
We consider the views of our stockholders.
We conduct an annual
say-on-pay
advisory vote and take into account the results of that vote. We also have a stockholder engagement program and are interested in stockholder feedback regarding our executive compensation program.
 
 
We have strong anti-hedging and anti-pledging policies.
We prohibit our executive officers and directors from hedging and pledging Company securities.
 
 
We have a broad-based LTI program.
We grant LTI awards broadly to
non-executive
management employees within the Company in an effort to promote stock ownership and alignment with our stockholders’ interests.
 
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We have a claw back policy.
Our AIP and LTI awards reflect our claw back policy, which applies to all of our executive officers and provide for the forfeiture of these awards or the return of any related gain in the event of a financial statement restatement.
 
 
We do not provide any excise tax gross-ups.
We do not provide excise tax
gross-ups
in any executive employment agreement or severance or change of control program.
 
 
We have robust stock ownership guidelines.
Our CEO is required to own our common stock in an amount equal to 6x his base salary, our CFO is required to own our common stock in an amount equal to 3x his base salary and our other executive officers are required to own our common stock in an amount equal to 2x their respective base salary.
 
 
We have a minimum holding requirement.
Our executive stock ownership guidelines require executives to maintain ownership of at least 50% of the net
after-tax
shares they acquire pursuant to any LTI awards, unless they have met the required ownership level.
 
 
We engage an independent compensation consulting firm.
Our independent compensation consultant provides information and advice regarding compensation philosophy objectives and strategy, including trends and regulatory and governance considerations related to executive compensation. Our consultant does not provide any other advisory or consulting services to the Company.
 
 
We annually review tally sheets.
We annually review tally sheets summarizing all of the compensation elements of our executive officers.
 
Determining Form and Amount of Compensation
Role of Management in Setting Compensation.
Our CEO recommends the compensation of our executive officers, other than himself. Each year, the CEO makes recommendations to the Committee regarding salary adjustments, AIP payout multiples and LTI grants for our other executive officers. In formulating his recommendations, the CEO considers various factors, including his subjective analysis of each executive’s performance and contributions to the Company, the performance of business units under his or her direct supervision (if applicable to the particular officer), experience level, tenure in position, the average base pay level for similar positions and the Company’s overall performance. Although the Committee considers the CEO’s recommendations with respect to other executive officers, the Committee makes all final determinations regarding executive compensation, including determining our CEO’s compensation.
Compensation Consultant’s Role.
Pearl Meyer advises the Committee on executive compensation matters and assists in developing and implementing our executive compensation program. As required by SEC and NYSE rules, the Committee has assessed the independence of Pearl Meyer and concluded that Pearl Meyer’s work did not raise any conflicts of interest during fiscal year 2019. In making this determination, the Committee noted that during 2019:
  Pearl Meyer provided advisory services related solely to executive and director compensation;
 
  Fees from the Company represented less than 1% of Pearl Meyer’s total revenue;
 
  Pearl Meyer maintains a conflicts policy to prevent a conflict of interest or any other independence issues;
 
  None of the team assigned to the Company had any business or personal relationship with members of the Committee outside of the engagement;
 
  None of the team assigned to the Company had any business or personal relationship with any Company executive officer outside of the engagement; and
 
  None of the team assigned to the Company maintained any individual position in our common stock.
 
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Peer Groups, Annual Benchmarking Process and Survey Data.
The Committee evaluates the Company’s executive compensation practices and financial performance by reference to two different peer groups as described below, the Performance Peer Group (Performance Peer Group) and the Compensation Peer Group (Compensation Peer Group). The Performance Peer Group is comprised of oilfield service companies which were chosen due to similarity of services provided, operating footprint, business focus, capital structure and competitive conditions. The Compensation Peer Group is a group of companies which would be considered peers for executive talent purposes. This second group is more similar to the Company in terms of size and scope of operations, although, due to the limited number of companies directly similar in size, we include companies that are both somewhat smaller and larger than the Company. Additionally, we have excluded certain Performance Peer Group companies from the Compensation Peer Group because of dissimilarity in pay approach and structures. The Committee annually reviews the companies comprising each peer group and revises each group as it deems appropriate after consultation with Pearl Meyer.
Our 2019 Performance Peer Group and Compensation Peer Group included the following companies:
     
Performance Peer Group*
     
Basic Energy Services, Inc.
 
C&J Energy Services, Ltd.
 
Halliburton Co.
 
Helix Energy Solutions Group, Inc.
 
Key Energy Services, Inc.
 
Nabors Industries Ltd.
 
Nine Energy Service, Inc.
 
Oil States International, Inc.
 
Patterson-UTI
Energy, Inc.
 
RPC, Inc.
 
Schlumberger Ltd.
 
Weatherford International plc
 
*
Reference group for the PSUs granted in 2019
     
Compensation Peer Group
     
Baker Hughes, a GE Company
 
Basic Energy Services, Inc.
 
Ensco plc
 
Forum Energy Technologies
 
Halliburton Co.
 
Helix Energy Solutions Group, Inc.
 
Helmerich & Payne, Inc.
 
Key Energy Services, Inc.
 
Nabors Industries Ltd.
 
National Oilwell Varco, Inc.
 
Oceaneering International, Inc.
 
Oil States International, Inc.
 
Patterson-UTI
Energy, Inc.
 
RPC, Inc.
 
Weatherford International plc 
The Compensation Peer Group set forth above had a trailing twelve-month median revenue of $2.05 billion as of December 31, 2019. We had revenue of $1.4 billion for the same period.
At the Committee’s request, Pearl Meyer conducts an annual executive compensation review to benchmark the Company’s senior executive compensation relative to the Compensation Peer Group with supplemental data from published market surveys. The Committee uses this report to evaluate whether the executive compensation levels, including base salary and actual incentive payouts, are within industry norms and the Company’s stated strategy.
Pearl Meyer supplements data from the Compensation Peer Group with broad-based compensation survey data to develop a comprehensive view of the competitive market data. We believe using survey data is an important element of our compensation evaluation. Compensation survey data includes companies from the broader energy industry that influence the competitive market for executive talent. In addition, the survey data also includes data from companies that are comparable to us in terms of size and scale.
Review of Tally Sheets
. We annually review and evaluate an executive tally sheet that contains a listing and quantification (as appropriate) of each component of our executive compensation program for our executive officers, including special executive benefits and perquisites, as well as accumulated values (e.g., stock option holdings) and other contingent compensation such as severance arrangements. We believe that our balance of annual and long-term compensation elements, our mix of long-term incentive vehicles and our stock ownership guidelines result in a
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compensation program that aligns our executives’ interests with those of our stockholders and does not encourage our management to take unreasonable risks relating to our business. The various components of our executive compensation program are described in detail below.
Components of Executive Compensation
The main components of our executive compensation program are base salary, AIP and LTI grants. Our executives also participate in our SERP. Overall, the primary emphasis of our executive compensation program is to provide a high level of variable
at-risk
performance-based compensation, linking executive pay with our operational and financial performance, including our stock price performance. As an executive’s level of responsibility increases, a greater portion of total compensation is
at-risk,
creating the potential for greater variability in the individual’s compensation from year to year.
As reflected in the charts set forth above, our CEO’s component mix is very heavily weighted towards long-term performance and reflects our view that his role in setting the Company’s strategic direction gives him greater influence on the ultimate performance levels achieved. We also believe that our emphasis on variable pay and balancing short-term and long-term performance is appropriate for a company competing in a highly competitive and cyclical industry.
Base Salary
The primary role of the base salary element of our executive compensation program is to compensate executives for the experience, education, personal qualities and other qualifications that are key for their specific role within the Company. In establishing the base salaries for our executives, we have historically targeted the median salaries of similarly-situated executives in our Company’s Compensation Peer Group and strive to set base salaries at consistent levels for positions with similar responsibilities.
AIP
The purpose of the AIP is to reward executives for achievement of annual financial and operational objectives. Although the Committee sets annual incentive target levels that result in median payouts when performance objectives are met, our program provides executives with the opportunity to earn higher payments depending on the extent to which these performance objectives are achieved or exceeded.
AIP Parameters for 2019
Under the AIP, our NEOs are eligible to earn a payout based on a target percentage of their base salary. We believed it was important, both for morale and competitive reasons, to incentivize performance by maintaining the same 2018 potential AIP payout target opportunity for our CEO and for our other NEOs. Given the decline in activity in the oil and gas industry, we also established what we believed was an aggressive EBITDA target of $300 million. We believed that this challenging performance goal would help achieve the balance we seek between stockholder returns and executive compensation.
Our AIP is designed to focus management’s attention on key financial and operational metrics that drive our performance, which are weighted as follows:
75% of the total payout is based on the achievement of the foregoing EBITDA target and 25% of the total payout is based on the Committee’s assessment of our achievement of key quantitative operational metrics. The overall incentive payout ranges from 0% to 200% of each NEO’s target award opportunity based on these factors, and is subject to being reduced by up to 15% based on the Committee’s evaluation of our safety performance.
Financial Metric
The Committee again determined to use EBITDA as the primary financial metric for the 2019 AIP. As a financial metric, EBITDA is closely linked to cash flow and encourages management to focus on improving efficiency from existing operations. The financial metric portion of the AIP provides for threshold, target and maximum payout levels, as a percentage of salary, based upon the achievement of 50%, 100% and 200% of the EBITDA target. Based on the business outlook at the time, the Committee set the EBITDA target for the 2019 AIP at $300 million, with the maximum being established at an unattainable level of $450 million.
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Operational Metrics
With respect to operational metrics, the Committee established four key 2019 objectives: closely manage our general and administrative costs (G&A), days sales outstanding (DSO) and days payable outstanding (DPO) and generate free cash flow. The payout levels with respect to this portion of the AIP is determined based on below target, at target and above target achievements.
Safety Component
As in prior years, the Committee could reduce the ultimate payout to each executive by up to 15% based on its assessment of the Company’s performance relative to various safety metrics and a grading system that makes up the executive team safety scorecard. The 2019 safety scorecard contained three results-oriented metrics that measure the number of safety incidents and five leading indicators that were designed to encourage behavior by the Company’s employees in order to decrease the number of safety incidents.
The possible total award payout levels for 2019, stated as a percentage of the officer’s base salary, are set forth in the table below.
                         
Named Executive Officer
 
Minimum
 
 
Target
 
 
Maximum
 
Mr. Dunlap
   
75
%    
150
%    
300
%
Mr. Ballard
   
50
%    
100
%    
200
%
Mr. Moore
   
47.5
%    
95
%    
190
%
Mr. Bernard
   
45
%    
90
%    
180
%
Mr. Masters
   
45
%    
90
%    
180
%
 
Determination of 2019 Results
The Compensation Committee reviewed the Company’s financial results for 2019 and evaluated management’s efforts and accomplishments with respect to the key operational objectives. As for the financial metric, the Company achieved approximately 81.9% of the EBITDA target. The key operational objectives focused on growing the Company’s cash balance, reducing its capital expenditures and divesting
non-core
assets. As a result of management’s efforts in 2019, we were able to reduce capital expenditures by 37%, increase our cash balance by 72% compared to 2018 and divest
non-core
assets resulting in cash proceeds of $110 million in 2019. In January of 2020, we received the remaining payment of $24 million relating to an asset sale which occurred during the fourth quarter of 2019. Due to the Company’s EBITDA performance compared to the target amount and the level of achievement of the key operational objectives, the Committee determined it was appropriate to approve an overall payout at 72.9% of target. In the Committee’s assessment of these operational objectives and determining the appropriate payout, we noted the following achievements:
  Closely Manage G&A: We targeted keeping adjusted G&A expense below $300 million in 2019. Adjusted G&A expense was actually $265.4 million in 2019, exceeding the objective by approximately 11%.
 
  Closely Manage DSO: We targeted to end 2019 with a DSO of 69 to 76 days with the low end of the range representing outperformance. We achieved a DSO of 79 days, slightly more than the high end of the targeted range.
 
  Closely Manage DPO: We targeted to end 2019 with a DPO of 50 to 55 days. We achieved a DPO of 58 days, outperforming the high end of the targeted range by approximately 5%.
 
  Generate Free Cash Flow: We targeted generating a range of between $35 million to $50 million of free cash flow (calculated as net cash provided by operating activities less capital expenditures) in 2019. We generated $5.9 million of free cash flow which was below the target range.
 
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Goal
 
% of Award
 
 
Target Achieved
 
 
Resulting Payout %
 
 
Target Payout %
 
EBITDA Target
   
75%
     
81.9%
     
47.9%
     
72.9%
 
Key Operational Objectives
   
25%
     
Target
     
25%
 
 
 
LTI Awards
The purpose of our LTI awards is to focus executives on the Company’s long-term performance and alignment of their compensation with both our absolute and relative stock price performance. The 2019 LTI awards were granted by the Committee with 65.7% of the LTI grant value to our NEOs in the form of PSUs, 21.8% in RSUs and 12.5% in stock options. LTI grant amounts are determined by dividing the LTI grant value by the target payout of $100 per unit for PSUs, the grant date fair market value of our stock for RSUs and the ASC 718 grant date fair value for stock options.
Consistent with the Company’s compensation philosophy, the Committee believes stock-based incentive awards are one of the best ways to align our executives’ interests with those of our stockholders. In addition, the terms of the PSUs reflect the Committee’s belief that executive compensation should be tied directly to the Company’s financial and operational performance, including its stock price performance. The PSUs provide our executives the opportunity to earn additional compensation based on the Company’s relative financial and operational performance, including its relative stock price performance.
2019 LTI Program
At-A-Glance
         
Component of LTI Program
 
Terms
 
How the Award Furthers our Compensation
Principles
RSUs
(21.8% of grant value)
 
Pays out in equivalent number of shares of our common stock
 
Vests in equal annual installments over a
3-year
period, subject to continued service
 
Widely used in the energy industry to strengthen the link between stockholder and employee interests, while motivating executives to remain with the Company
 
Provides a bridge between the short-term and long-term interests of stockholders, and reduces the impact of share price volatility over industry cycles
         
Stock Options
(12.5% of grant value)
 
Exercise price at fair market value on grant date
 
Vests in equal annual installments over
3-year
period, subject to continued service
 
10-year
term
 
Motivates executives to continue to grow the value of the Company’s stock over the long-term as the value of the stock option depends entirely on the long-term appreciation of the Company’s stock price
         
PSUs
(65.7% of grant value)
 
3-year
performance period
 
Vests at the end of the
3-year
performance period, subject to continued service
 
Target payout of $100 per unit with an actual payout range of $0 to $200 per unit based on performance compared to our Performance Peer Group
 
Performance criteria link the Company’s long-term performance directly to compensation received by executive officers and other key employees and encourage them to make significant contributions towards increasing ROA and, ultimately, stockholder returns
 
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Performance measures:
50% Relative ROA
50% Relative TSR
Payout in cash, although up to 50% of value may be paid in shares of stock in the Committee’s discretion
 
Use of TSR to better align the interests of our executives with those of our stockholders
 
2019 LTI Program Awards
The award mix for NEOs during 2019 was 65.7% in PSUs, 21.8% in RSUs and 12.5% stock options. The following table shows the 2019 LTI award value (denominated as a percentage of annual salary) and the approximate total value of the 2019 LTI grants (amounts reflected in Summary Compensation Table for RSUs and stock options reflect actual grant date fair values). The amounts reflected below reflect the LTI grant values and not the actual value received by any of the NEOs.
                                         
NEO
 
2019 LTI
% of
Salary
 
 
Total Value Granted as
PSUs
 
 
Total Value Granted as
RSUs
 
 
Total Value Granted as
Options
 
 
Total Value of 2019
LTI Awards
 
Mr. Dunlap
   
600
%   $
3,350,700
    $
1,111,800
    $
637,500
    $
5,100,000
 
Mr. Ballard
   
360
%   $
1,123,943
    $
372,937
    $
213,840
    $
1,710,720
 
Mr. Moore
   
300
%   $
989,294
    $
328,259
    $
188,222
    $
1,505,775
 
Mr. Bernard
   
300
%   $
701,134
    $
232,644
    $
133,397
    $
1,067,175
 
Mr. Masters
   
300
%   $
855,260
    $
283,785
    $
162,721
    $
1,301,766
 
Mr. Spexarth
   
300
%   $
645,700
    $
214,250
    $
122,850
    $
982,800
 
 
Structure of PSUs
For the PSUs granted for the 2019-2021 cycle, under both performance criteria, the maximum, target and threshold levels are met when our ROA and TSR are in the 75
th
percentile, 50
th
percentile and 25
th
percentile, respectively, as compared to the ROA and TSR of the Performance Peer Group, as described in the following table:
                         
Performance Level Relative to Performance Peer Group
 
Percent of
 Date-of-Grant

Value of PSU Received for
Relative ROA Level
 
 
Percent of
 Date-of-Grant

Value of PSU Received for
Relative TSR Level
 
 
Total Percent of
 Date-of-

Grant Value of PSU
Received
 
(Below 25th Percentile)
   
0
%    
0
%    
0
%
Threshold (25th Percentile)
   
25
%    
25
%    
50
%
Target (50th Percentile)
   
50
%    
50
%    
100
%
Maximum (75th Percentile or above)
   
100
%    
100
%    
200
%
 
The PSUs have a three year performance period, commencing January 1, 2019 and ending December 31, 2021, and will time-vest on December 31, 2021, subject to continued employment through the vesting date. Actual PSU performance results that fall
in-between
the “maximum,” “target” and
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“threshold” levels will be calculated based on a sliding scale. For purpose of determining the Company’s ROA rank in the Performance Peer Group, we generate the results using income from operations data and net operating asset data derived from financial statements as reported by each peer company in their
year-end
annual report on Form
10-K,
uniformly adjusted for any
non-operational
charges as determined by established, independent third-party financial data providers. All calculations are validated by the Committee’s independent compensation consultant.
Payout of 2017-2019 PSUs
The PSUs granted for the 2017-2019 performance period were paid out in cash to the PSU recipients in April 2020. The Company ranked in the 17th percentile of relative TSR and in the 44th percentile of relative ROA, both as compared to its performance peers, resulting in a payout to the NEOs of $50 per PSU.
The PSU payout received by each NEO is reflected in the table below and in the “2019 Summary Compensation Table” under the column
“Non-Equity
Incentive Plan Compensation.”
                 
Named Executive Officer
 
Number of Units
 
 
Value of PSU Payout
 
Mr. Dunlap
   
25,500
    $
1,275,000
 
Mr. Ballard
   
6,000
    $
300,000
 
Mr. Moore
   
7,529
    $
376,450
 
Mr. Bernard
   
5,336
    $
266,800
 
Mr. Masters
   
6,140
    $
307,000
 
Mr. Spexarth
   
1,541
    $
77,050
 
 
 
Perquisites
We seek to maintain a cost conscious culture, and specifically in connection with the benefits and modest perquisites provided to executives. The Company provides each of our executive officers an automobile allowance, including fuel and maintenance costs, and also reimburses them for business travel, as well as for all deductibles,
co-pays,
and other out of pocket expenses associated with our health insurance program through a program called ArmadaCare, and provides them with other limited perquisites. These perquisites are intended to ensure our executive officers are able to devote their full business time to the affairs of the Company. The attributed costs of the personal benefits described above for the NEOs for 2019 are included in the “2019 Summary Compensation Table.” We believe the provision of these benefits was modest and appropriate in 2019.
Post–Employment Compensation
The Company also provides post-employment benefits to our executive officers through our SERP, including a
non-qualified
deferred compensation plan and certain severance and change of control benefits pursuant to employment agreements that we have with our executive officers. For more information on these plans, see the sections entitled “Item 11. Executive Compensation—Retirement Benefit Programs” and “Item 11. Executive Compensation—Potential Payments upon Termination or Change of Control.” For more information on the contributions, earnings and aggregate account balances for each NEO, see the table entitled “Nonqualified Deferred Compensation and Supplemental Executive Retirement Plan Contribution for 2019.”
As described in more detail under “Item 11. Executive Compensation—Potential Payments upon Termination or Change of Control,” we entered into employment agreements with all of our executive officers whereby the executives are entitled to severance benefits in the event of an involuntary termination of employment under certain conditions. We have determined that it is appropriate to provide our executives with severance benefits under these circumstances in light of their positions with the Company and as part of their overall compensation package. The severance benefits are generally designed to approximate the benefits each would have received had he remained employed by the Company through the remainder of the term covered by his employment agreement.
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We believe that the occurrence, or potential occurrence, of a change of control transaction creates uncertainty regarding the continued employment of our executive officers and distracts them from effectively performing their duties. This uncertainty results from the fact that many change of control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage our executive officers to remain employed with the Company during an important time when their prospects for continued employment following a transaction are often uncertain, we provide our executive officers with enhanced severance benefits under our Change of Control Severance Plan if their employment is terminated by the Company without cause or, in certain cases, by the executive for good reason in connection with a change of control (a double-trigger benefit). Because we believe that a termination by the executive for good reason may be conceptually the same as a termination by the Company without cause, and because we believe that in the context of a change of control, potential acquirers would otherwise have an incentive to constructively terminate the executive’s employment to avoid paying severance, we believe it is appropriate to provide severance benefits in these circumstances. The change of control-related severance payments are made from a transaction sharing pool that is calculated as of the date of the change of control and based on the transaction value of the Company at the time of the change of control (with the transaction pool increasing or decreasing as the transaction value increases or decreases, respectively). The impact of a change of control on our long-term incentive awards is governed by the applicable award agreement, which currently provide for accelerated vesting upon a change of control. The terms of the employment agreements and the Change of Control Severance Plan and the benefits they provide are discussed more fully in the section entitled “Item 11. Executive Compensation—Potential Payments Upon Termination or Change of Control.”
Executive Compensation Policies
Stock Ownership Guidelines and Holding Requirement
We believe it is important that the interests of our executives and directors are aligned with the long-term interests of our stockholders. We have adopted stock ownership guidelines applicable to our executive officers. Under the guidelines, required ownership levels are as follows:
         
Position
 
Stock Value as a Multiple
of Base Salary
 
Chief Executive Officer
   
6x
 
Chief Financial Officer
   
3x
 
Executive Vice President
   
2x
 
 
 
 
Additionally, we included a requirement that our executives maintain ownership of at least 50% of the net
after-tax
shares of common stock acquired from the Company pursuant to any equity-based awards received from the Company, unless the executive has met his individual ownership requirement. The required share amount is determined as of the date the officer becomes subject to the guidelines, and is calculated by dividing such officer’s applicable base salary multiple by the
365-day
average closing price of our common stock as reported on the NYSE, and then rounding to the nearest 100 shares. The target ownership level does not change with changes in base salary or common stock price, but will change in the event the officer’s position level changes. Our executive officers are required to achieve their required ownership levels within five years from the date they become subject to the guidelines. The Committee will administer the guidelines and will periodically review each participant’s compliance (or progress towards compliance) and may impose additional requirements the Committee determines are necessary or appropriate to achieve the purposes of this program. See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Management and Director Stock Ownership” for the number of shares of our common stock beneficially owned by our NEOs.
Tax Implications
In structuring our executive compensation program, the Committee takes into account the tax treatment of our compensation arrangements, including compensation over $1 million paid to our NEOs who are “covered employees” as
non-tax
deductible under Section 162(m) of the Internal Revenue Code (Section 162(m)). As in prior years, in 2019 the Committee considered the tax implications (including the lack of deductibility) when making compensation decisions, but continued to reserve the right to make compensation decisions based on other factors if it determined that it was in the best interests of the Company and its stockholders to do so.
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Accounting for Stock-Based Compensation
We have followed FASB ASC Topic 718 in accounting for stock-based compensation awards. FASB ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. FASB ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. We expect that we will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
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Compensation Committee Report on Executive Compensation
The Compensation Committee has reviewed and discussed this CD&A with management, and based on such review and discussions, the Compensation Committee recommended to the Board that this CD&A be included in this Amendment.
Compensation Committee of the Board of  
Directors of Superior Energy Services, Inc.
The Report of the Compensation Committee is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
2019 Executive Compensation
2019 Summary Compensation Table
The following table summarizes the compensation awarded to, earned by, or paid to each NEO for the years ended December 31, 2019, 2018 and 2017.
                                                                 
Name and Principal Position
 
Year
 
 
Salary
($)
 
 
Bonus
($)
 
 
Stock
Awards
($)
(1)
 
 
Option
Awards
(2)
 
 
Non-equity

Incentive Plan
Compensation
($)
(3)
 
 
All Other
Compensation
($)
(4)
 
 
Total ($)
 
David D. Dunlap
   
2019
     
850,000
     
0
     
1,111,800
     
637,484
     
2,204,756
     
226,460
     
5,030,500
 
President & Chief
   
2018
     
850,000
     
0
     
1,274,999
     
1,274,998
     
3,092,224
     
195,366
     
6,687,587
 
Executive Officer
   
2017
     
850,000
     
0
     
1,274,991
     
1,275,000
     
3,340,603
     
131,209
     
6,871,803
 
Westervelt T. Ballard, Jr.
   
2019
     
475,200
     
0
     
372,911
     
213,823
     
646,525
     
97,322
     
1,805,781
 
Executive Vice President,
   
2018
     
433,333
     
0
     
395,998
     
396,003
     
703,462
     
96,281
     
2,025,077
 
Chief Financial Officer & Treasurer
   
2017
     
400,000
     
0
     
300,001
     
299,999
     
731,939
     
59,263
     
1,791,202
 
Brian K. Moore
   
2019
     
501,925
     
0
     
328,221
     
188,215
     
724,163
     
204,298
     
1,946,822
 
Executive
   
2018
     
501,925
     
0
     
376,442
     
376,446
     
988,774
     
206,997
     
2,450,584
 
Vice President
   
2017
     
501,925
     
0
     
376,448
     
376,442
     
1,057,995
     
156,218
     
2,469,028
 
A. Patrick Bernard
   
2019
     
355,725
     
0
     
232,606
     
133,381
     
500,262
     
166,132
     
1,388,106
 
Executive
   
2018
     
355,725
     
0
     
266,792
     
266,795
     
687,353
     
176,990
     
1,753,655
 
Vice President
   
2017
     
355,725
     
0
     
266,790
     
266,793
     
774,725
     
132,336
     
1,796.369
 
William B. Masters
   
2019
     
433,922
     
0
     
283,749
     
162,704
     
591,782
     
108,818
     
1,580,975
 
Executive Vice
   
2018
     
409,360
     
0
     
230,260
     
307,021
     
705,464
     
112,157
     
1,764,262
 
President and General Counsel
   
2017
     
409,360
     
0
     
307,015
     
307,021
     
796,374
     
102,944
     
1,922,714
 
James W. Spexarth
   
2019
     
327,600
     
0
     
214,250
     
122,828
     
292,053
     
78,280
     
1,035,011
 
Chief Accounting Officer
   
2018
     
307,208
     
0
     
320,079
     
152,421
     
342,676
     
72,845
     
1,195,229
 
   
2017
     
257,375
     
0
     
154,066
     
0
     
293,379
     
23,666
     
728,486
 
 
(1) The amounts reported in this column represent the grant date fair value of the RSUs that we granted to the NEOs. For a discussion of valuation assumptions, see Note 6 to our consolidated financial statements included in our 2019 Annual Report for the fiscal year ended December 31, 2019. Please see the “Grants of Plan-Based Awards Table During 2019” for more information regarding the stock awards we granted in 2019 and “Item 11. Executive Compensation—Compensation Discussion and Analysis-Long-Term Incentives” sets forth additional information related to RSUs.
(2) The Black-Scholes option model is used to determine the grant date fair value of the options that we grant to the NEOs. For additional information, refer to “Item 11. Executive Compensation—Compensation Discussion and Analysis—Long-Term Incentives” and “—Grants of Plan-Based Awards Table During 2019.” For a discussion of valuation assumptions, see Note 6 to our consolidated financial statements included in our 2019 Annual Report for the fiscal year ended December 31, 2019. See the “Grants of Plan-Based Awards Table During 2019” for more information regarding the option awards we granted in 2019.
(3) Amounts disclosed for 2019 reflect the AIP payout received by our NEOs and the aggregate cash payout of PSUs with a performance period ending on the last day of 2019. Please see the “Item 11. Executive Compensation—Compensation Discussion and Analysis—Long-Term Incentives” for more information regarding the AIP and PSUs.
                 
Name
 
AIP Payout
 
 
Value of PSU Payout
 
Mr. Dunlap
  $
929,756
    $
1,275,000
 
Mr. Ballard
  $
346,525
    $
300,000
 
Mr. Moore
  $
347,713
    $
376,450
 
Mr. Bernard
  $
233,462
    $
266,800
 
Mr. Masters
  $
284,782
    $
307,000
 
Mr. Spexarth
  $
215,003
    $
77,050
 
16

Table of Contents
(4) For 2019, the amount includes (i) annual contributions to the NEOs’ retirement account under our SERP and matching contributions to our 401(k) plan, (ii) life insurance premiums paid by the Company and (iii) the value of perquisites, consisting of premium payments made under the ArmadaCare program, the provision of an automobile allowance, including fuel and maintenance costs, commuting expenses and accrued dividend equivalents for outstanding time-based stock awards that were granted, but had not vested until 2019 at which time dividends were paid, as set forth below:
                                                 
Name
 
SERP
Contributions
 
 
401(k)
Contributions
 
 
Life
Insurance
Premiums
 
 
ArmadaCare
 
 
Automobile
and
Commuting
 
 
Dividends
 
David D. Dunlap
  $
181,222
    $
11,200
    $
1,278
    $
14,760
    $
18,000
    $
0
 
Westervelt T. Ballard, Jr.
  $
60,484
    $
11,200
    $
1,278
    $
14,760
    $
9,600
    $
0
 
Brian K. Moore
  $
172,356
    $
11,200
    $
1,278
    $
9,864
    $
9,600
    $
0
 
A. Patrick Bernard
  $
119,468
    $
11,200
    $
1,278
    $
14,760
    $
19,426
    $
0
 
William B. Masters
  $
71,140
    $
11,200
    $
1,278
    $
14,760
    $
10,440
    $
0
 
James W. Spexarth
  $
40,595
    $
11,200
    $
1,258
    $
15,132
    $
9,600
    $
495
 
Grants of Plan-Based Awards During 2019
The following table presents additional information regarding PSU, RSU, stock option awards granted to our NEOs during the year ended December 31, 2019.
                                                                         
 
Grant
Date
(2)
 
 
No. of Units
Granted
Under
Non-Equity

Incentive
Plan
Awards
(3)
 
 
Estimate Future Payouts
Under
Non-Equity
Incentive
Plan Awards
   
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
 
 
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(4)
 
 
Exercise
or Base
Price of
Option
Awards
 
 
Grant Date
Fair Value
of Stock and
Option
Awards
 
Name
Threshold
 
 
Target
 
 
Maximum
 
David D. Dunlap
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIP
(1)
   
     
    $
637,500
    $
1,275,000
    $
2,550,000
     
     
     
     
 
PSUs
   
2/5/2019
     
33,507
    $
1,675,350
    $
3,350,700
    $
6,701,400
     
     
     
     
 
RSUs
   
2/5/2019
     
     
     
     
     
25,500
     
     
    $
1,111,800
 
Stock Options
   
2/5/2019
     
     
     
     
     
     
25,914
    $
43.60
    $
637,484
 
                                                                         
Westervelt T. Ballard, Jr.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIP
(1)
   
     
    $
237,600
    $
475,200
    $
950,400
     
     
     
     
 
PSUs
   
2/5/2019
     
11,239
    $
561,950
    $
1,123,900
    $
2,247,800
     
     
     
     
 
RSUs
   
2/5/2019
     
     
     
     
     
8,553
     
     
    $
372,911
 
Stock Options
   
2/5/2019
     
     
     
     
     
     
8,692
    $
43.60
    $
213,823
 
                                                                         
Brian K. Moore
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIP
(1)
   
     
    $
238,414
    $
476,829
    $
953,658
     
     
     
     
 
PSUs
   
2/5/2019
     
9,893
    $
494,650
    $
989,300
    $
1,978,600
     
     
     
     
 
RSUs
   
2/5/2019
     
     
     
     
     
7,528
     
     
    $
328,221
 
Stock Options
   
2/5/2019
     
     
     
     
     
     
7,651
    $
43.60
    $
188,215
 
                                                                         
A. Patrick Bernard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIP
(1)
   
     
    $
160,076
    $
320,153
    $
640,305
     
     
     
     
 
PSUs
   
2/5/2019
     
7,011
    $
350,550
    $
701,100
    $
1,402,200
     
     
     
     
 
RSUs
   
2/5/2019
     
     
     
     
     
5,335
     
     
    $
232,606
 
Stock Options
   
2/5/2019
     
     
     
     
     
     
5,422
    $
43.60
    $
133,381
 
                                                                         
William B. Masters
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIP
(1)
   
     
    $
195,265
    $
390,530
    $
781,060
     
     
     
     
 
PSUs
   
2/5/2019
     
8,553
    $
427,650
    $
855,300
    $
1,710,600
     
     
     
     
 
RSUs
   
2/5/2019
     
     
     
     
     
6,508
     
     
    $
283,749
 
Stock Options
   
2/5/2019
     
     
     
     
     
     
6,614
    $
43.60
    $
162,704
 
                                                                         
James W. Spexarth
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIP
(1)
   
     
    $
147,420
    $
294,840
    $
589,680
     
     
     
     
 
PSUs
   
2/5/2019
     
6,457
    $
322,850
    $
645,700
    $
1,291,400
     
     
     
     
 
RSUs
   
2/5/2019
     
     
     
     
     
4,914
     
     
    $
214,250
 
Stock Options
   
2/5/2019
     
     
     
     
     
     
4,993
    $
43.60
    $
122,828
 
 
17

Table of Contents
(1) The amounts shown reflect possible payments under our 2019 AIP under which the NEOs were eligible to receive a cash bonus based on achievement of certain
pre-established
performance measures. Please see “Item 11. Executive Compensation—Compensation Discussion and Analysis” for more information regarding our 2019 AIP.
(2) On February 5, 2019, the Compensation Committee approved the PSU, RSU and stock option awards for each of our NEOs.
(3) The amounts shown reflect PSU grants under our 2019 LTI plan. The PSUs have a
3-year
performance period during which the PSUs granted on February 5, 2019 have a performance period of January 1, 2019 through December 31, 2021. In addition, the PSUs vest on December 31, 2021, subject to continued employment through the applicable vesting date. Please see “Item 11. Executive Compensation—Compensation Discussion and Analysis” for more information regarding the PSUs and the LTI awards made by the Compensation Committee.
(4) The stock options were granted as part of the 2019 LTI plan and vest
one-third
annually over a
3-year
period, commencing January 15, 2020. Please see “Item 11. Executive Compensation—Compensation Discussion and Analysis” for more information regarding the LTI awards made by the Compensation Committee.
Outstanding Equity Awards at 2019
Year-End
The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2019.
                                                                 
 
Option Awards
   
Stock Awards
 
Name
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
 
 
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
 
 
Option
Exercise
Price
 
 
Option
Expiration
Date
 
 
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(2)
 
 
Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
(3)
 
 
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
 
 
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(3)
 
David D. Dunlap
   
     
     
     
     
35,373
    $
177,219
     
     
 
   
14,437
     
—  
    $
254.90
     
04/28/2020
     
     
     
—  
     
—  
 
   
6,021
     
—  
    $
346.00
     
12/10/2020
     
     
     
     
 
   
6,671
     
—  
    $
285.90
     
12/08/2021
     
     
     
     
 
   
3,696
     
—  
    $
285.70
     
02/10/2022
     
     
     
     
 
   
16,035
     
—  
    $
230.30
     
01/15/2023
     
     
     
     
 
   
21,582
     
—  
    $
260.20
     
01/15/2024
     
     
     
     
 
   
24,000
     
—  
    $
172.70
     
01/15/2025
     
     
     
     
 
   
83,102
     
—  
    $
97.60
     
01/15/2026
     
     
     
     
 
   
10,166
     
5,085
    $
180.30
     
01/15/2027
     
     
     
     
 
   
7,404
     
14,808
    $
113.10
     
01/15/2028
     
     
     
     
 
   
—  
     
25,914
    $
43.60
     
02/05/2029
     
     
     
     
 
Westervelt T. Ballard, Jr.
   
     
     
     
     
11,623
    $
58,231
     
     
 
   
843
     
—  
    $
285.90
     
12/08/2021
     
     
     
—  
     
—  
 
   
331
     
—  
    $
285.70
     
02/10/2022
     
     
     
     
 
   
1,806
     
—  
    $
230.30
     
01/15/2023
     
     
     
     
 
   
2,801
     
—  
    $
260.20
     
01/15/2024
     
     
     
     
 
   
4,185
     
—  
    $
172.70
     
01/15/2025
     
     
     
     
 
   
14,491
     
—  
    $
97.60
     
01/15/2026
     
     
     
     
 
   
2,392
     
1,196
    $
180.30
     
01/15/2027
     
     
     
     
 
   
1,742
     
3,484
    $
113.10
     
01/15/2028
     
     
     
     
 
   
720
     
1,442
    $
85.60
     
03/01/2028
     
     
     
     
 
   
0
     
8,692
    $
43.60
     
02/05/2029
     
     
     
     
 
Brian K. Moore
   
     
     
     
     
10,442
    $
52,314
     
     
 
   
4,427
     
—  
    $
232.90
     
01/31/2021
     
     
     
—  
     
—  
 
   
4,007
     
—  
    $
280.09
     
01/31/2022
     
     
     
     
 
   
4,697
     
—  
    $
230.30
     
01/15/2023
     
     
     
     
 
   
6,372
     
—  
    $
260.20
     
01/15/2024
     
     
     
     
 
   
7,086
     
—  
    $
172.70
     
01/15/2025
     
     
     
     
 
   
24,536
     
    $
97.60
     
01/15/2026
     
     
     
     
 
   
3,002
     
1,500
    $
180.30
     
01/15/2027
     
     
     
     
 
   
2,186
     
4,372
    $
113.10
     
01/15/2028
     
     
     
     
 
   
0
     
7,651
     
43.60
     
02/05/2029
     
     
     
     
 
A. Patrick Bernard
   
     
     
     
     
7,400
    $
37,074