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Section 1: DEF 14A (DEF 14A)

DEF 14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

 

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.                 )

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

NABORS INDUSTRIES LTD.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

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

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

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

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


Table of Contents

 

 

LOGO

 

Annual General Meeting of Shareholders

Tuesday, June 2, 2020, 10:00 A.M. CDT

The Offices of Nabors Corporate Services, Inc.

515 West Greens Road

Houston, Texas 77067

 

 


Table of Contents

LOGO

Notice of 2020 Annual General Meeting of Shareholders

Tuesday, June 2, 2020, 10:00 A.M. CDT

The Offices of Nabors Corporate Services, Inc., 515 W. Greens Rd., Houston, Texas 77067

April 23, 2020

Dear Fellow Shareholder:

On behalf of the Board of Directors (the “Board”) of Nabors Industries Ltd. (“Nabors,” or the “Company”), we cordially invite you to attend the Company’s 2020 annual general meeting of shareholders to be held at the offices of our subsidiary, Nabors Corporate Services, Inc., 515 W. Greens Rd., Houston, Texas, 77067 on June 2, 2020 at 10:00 A.M. CDT (the “meeting”). Depending on concerns about the Coronavirus or COVID-19, we may choose to hold a virtual annual meeting (the “virtual meeting”) instead of holding the meeting in Texas. The Company would publicly announce a determination to hold a virtual meeting in a press release available at www.nabors.com as soon as practicable before the meeting. In that event, the meeting would be conducted solely on a virtual basis, on the above date and time, via live audio webcast. You or your proxyholder could participate, vote, and examine our shareholder list at the virtual meeting by visiting http://www.virtualshareholdermeeting.com/NBR2020ANNUAL, but only if the meeting is not held in Texas. Regardless of whether the meeting is held in person or virtually, you are entitled to vote at the meeting if you were a shareholder of record at the close of business on April 3, 2020. This year, shareholders will consider:

 

1.

the election of seven directors for a one year term (Item 1);

 

2.

the approval and appointment of PricewaterhouseCoopers LLP as the Company’s independent auditor for the year ending December 31, 2020, and authorization for the Audit Committee of the Board to set the independent auditor’s remuneration (Item 2);

 

3.

an advisory “Say on Pay” vote to approve the compensation paid by the Company to its named executive officers as disclosed in the Proxy Statement (Item 3);

 

4.

the approval of the Company’s Amended and Restated 2016 Stock Plan (Item 4); and

 

5.

such other business as may properly come before the meeting.

The Company’s annual audited financial statements for the year ended December 31, 2019, also will be presented at the meeting.

Further information regarding the meeting and the above proposals is set forth in the Proxy Statement. We are mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 23, 2020. Shareholders who have requested a paper copy of the Proxy Statement and the Company’s 2019 Annual Report will receive those documents. The Notice contains instructions on how to access the proxy materials, vote online and obtain a paper copy of the proxy materials.

YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE. We hope you will read the Proxy Statement and 2019 Annual Report and submit your proxy, or use telephone or Internet voting, prior to the meeting. Even if you plan to attend the meeting, please submit a proxy as soon as possible to ensure that your shares are voted at the meeting in accordance with your instructions.

On behalf of the Board and our management team, I extend our appreciation for your continued support.

Sincerely yours,

 

LOGO

ANTHONY G. PETRELLO

Chairman, President and Chief Executive Officer

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL GENERAL MEETING TO BE HELD ON JUNE 2, 2020:

Our Proxy Statement and our 2019 Annual Report are available at:

www.proxyvote.com


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LOGO

April 23, 2020

Dear Fellow Shareholder:

The members of the Board of Directors of Nabors Industries Ltd. (“Nabors”) are proud of the Company’s accomplishments over the last year. During the year, in what was and continues to be a difficult industry environment, the Company:

 

 

Generated cash provided by operating activities of $685 million, and free cash flow after dividends of $279 million;

 

 

Reduced total debt by $253 million, and net debt by $224 million;

 

 

Improved its liquidity by entering into a $250 million A/R purchase and sale facility, and amending its 2018 revolving credit facility to, among other things, replace the capitalization-related covenant with a more appropriate covenant comparing net funded debt to EBITDA;

 

 

Increased adjusted EBITDA by 6 percent;

 

 

Increased daily margins in the U.S. Lower 48 by 8.4% to $10,218 in the fourth quarter of 2019;

 

 

Increased annual average rig count in the US Lower 48 while the industry decreased by approximately 10 percent;

 

 

Introduced our next generation Canrig® Sigma top drive; and

 

 

Increased higher-margin integrated tubular running services work.

These accomplishments and others help to explain why the Company was able to outpace industry competitors in relative Total Shareholder Return during 2019.

During the year, management and members of the Board again reached out to shareholders to let them ask questions and to listen to their concerns. Environmental, social, and governance (ESG) issues continue to be of the utmost importance. We feel the same way. In fact, Nabors has a long history of sustainability-minded operations, having pioneered the use of alternative-powered rigs on the North Slope of Alaska way back in 1985. Today, all of our active rigs on the North Slope are highline-capable, and 40 of our rigs in the U.S. Lower 48 are dual-fuel-capable. We are now at the forefront of the industry in developing robots for use on the rig floor. We believe that increased automation will improve efficiency, reduce our green-house gas emissions and, more importantly, help us to improve on the Company’s already stellar safety performance.

Notwithstanding the above accomplishments, Nabors is facing some of the most difficult economic conditions experienced in years. The combination of the COVID-19 pandemic and an ongoing price war in the oil sector is impacting our activity levels in the U.S. and overseas. Rest assured that the Company and the Board are engaged and taking appropriate measures to address these extraordinary circumstances, including the recent amendment to our common share capital to effect a reverse stock split of our outstanding common shares. In addition, we have instituted Company-wide cost savings measures involving, among other things, planned reductions to 2020 capital expenditures and reductions to Board and executive compensation. The Board’s annual non-committee retainer has been reduced by 20 percent, and the CEO’s and CFO’s base salaries have been reduced by approximately 31 percent for the period from March 23, 2020 through the remainder of the year (and 26 percent and 24 percent for the entire year) from the amounts set forth in their respective employment agreements.

We appreciate each and every one of our shareholders, and we are especially grateful for those that take the time to meet with us one on one. We want you to know that we will do our utmost to be as responsive as possible while we strive to maximize shareholder returns. Our vision has not changed. We will be the driller of choice for employees, customers and investors.

We encourage you to read this Proxy Statement and the accompanying 2019 Annual Report. We thank you for your investment in Nabors, and encourage you to vote your shares with the Board’s recommendations.

Sincerest regards,

 

LOGO

JOHN YEARWOOD

Lead Director


Table of Contents

Table of Contents

 

          

PROXY SUMMARY

     1  
          

Items to be Considered & Board Recommendations

     1  

Director Nominees

     2  

Director Dashboard

     2  

Corporate Governance Highlights

     3  

Note Regarding Share Number Disclosures in Proxy Statement

     3  
          
  

PROXY STATEMENT

     4  
          

General

     4  

Meeting Information

     4  

Who can Vote & Record Date

     4  

Meeting Attendance

     4  

Important Notice Regarding Internet Availability of Materials

     4  

Householding

     5  

Proxy Solicitation

     5  

Voting Information

     5  
          
  

CORPORATE GOVERNANCE

     7  
          

Role of the Board of Directors

     7  

Overview of Key Governance Topics

     7  

Sustainability

     9  

Code of Business Conduct

     9  

Shareholder Engagement

     9  

Meetings of the Board and Committees

     10  

Item 1: Election of Directors

     12  

Criteria

     13  

Director Nominee Snapshot

     14  

Director Nominees

     16  

Other Executive Officers

     20  

Non-Employee Director Compensation

     21  

Director Compensation Table

     22  

Share Ownership

     23  

Delinquent Section 16(a) Reports

     24  

Certain Relationships and Related-Party Transactions

     25  
          
  

AUDIT COMMITTEE REPORT

     26  
          

Item  2: Approval and Appointment of Independent Auditor and Authorization for the Audit Committee to Set the Independent Auditor’s Remuneration

     28  

Audit Committee Pre-Approval Policy

     28  

Independent Auditor Fees

     28  
          
  

COMPENSATION DISCUSSION AND ANALYSIS

     29  
          

Executive Summary

     29  

Compensation Principles and Practices

     35  

Key Components of Executive Compensation

     36  

Setting Executive Compensation

     46  

Other Benefits and Perquisites

     47  

Term of Employment

     49  

Share Ownership Policy

     49  

Hedging Policy and Practices

     50  

Risk Assessment

     50  

Tax Considerations – Section 162(m)

     50  
          
  

COMPENSATION COMMITTEE REPORT

     51  
          
  

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     52  
          
  

EXECUTIVE COMPENSATION TABLES

     53  
          

Summary Compensation Table

     53  

Grants of Plan-Based Awards

     56  

Option Exercises and Shares Vested

     57  

Outstanding Equity Awards at Fiscal Year End

     58  

Nonqualified Deferred Compensation

     59  

Potential Payments upon Termination or Change in Control

     60  

Required CEO Pay Ratio Disclosure

     63  
          
  

COMPANY PROPOSALS

     65  
          

Item 3: Advisory Vote to Approve Compensation of Named Executive Officers

     65  

Item 4: Approval of the Company’s Amended and Restated 2016 Stock Plan

     66  
          
  

ADDITIONAL INFORMATION

     76  
          

Shareholder Matters

     76  

2021 Shareholder Proposals

     76  

Other Matters

     76  
          
  

ANNEX A RECONCILIATION OF NON-GAAP MEASURES

     A-1  
          
  

ANNEX B AMENDED AND RESTATED NABORS INDUSTRIES LTD. 2016 STOCK PLAN

     B-1  
          
 

 

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PROXY SUMMARY

This summary highlights information contained in this Proxy Statement. It does not contain all the information that you should consider before voting. We encourage you to read the entire Proxy Statement. For information regarding the Company’s 2019 financial performance, please read our 2019 Annual Report. The annual meeting will take place:

 

         

Date:

 

June 2, 2020

            

Time:

 

10:00 A.M. CDT

            

Place:

 

The Offices of

Nabors Corporate Services, Inc.

515 W. Greens Rd.

Houston, Texas 77067

 

Please vote your shares promptly, as this will save the expense of additional proxy solicitation. You may submit your vote by Internet, telephone, mail or in person.

 

       
LOGO   Visit the website listed on your proxy card/voting instruction form to vote via the Internet.   LOGO   Call the telephone number on your proxy card/voting instruction form to vote by telephone.
             
       
       

 

LOGO

  Sign, date and return your proxy card/voting instruction form to vote by mail.   LOGO   Vote in person at the annual meeting. Owners with shares held through a bank or broker may vote in person at the meeting if they have a legal proxy from the bank or broker and bring it to the meeting.

Items To Be Considered & Board Recommendations

 

       

Item

   Votes Required
for Approval
  Board’s Voting
Recommendation
  Page
Reference
                  
        

Item 1

  Elect directors    Plurality of votes cast   FOR   12
                  
        

Item 2

  Approve and appoint PricewaterhouseCoopers LLP as our independent auditor for the year ending December 31, 2020 and authorize the Board’s Audit Committee to set the independent auditor’s remuneration    Majority of votes present   FOR   28
                  
        

Item 3

  Advisory vote to approve the compensation of the company’s named executive officers   

Majority of votes present

The vote on this item is nonbinding, but the Board will consider the results of the vote in making future decisions

  FOR   65
              
        

Item 4

  Approve the Company’s Amended and Restated 2016 Stock Plan    Majority of votes present   FOR   66
                  

 

                
  This Proxy Statement and our 2019 Annual Report are available electronically on our hosted website at www.proxyvote.com and accessible via the QR code at the right. The Notice and proxy materials are first being made available to our shareholders on or about April 23, 2020.    LOGO  
                

 

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PROXY SUMMARY

 

Director Nominees

Upon the recommendation of the ESG Committee (formerly the Governance and Nominating Committee), our Board of Directors has nominated the following seven director nominees (all of whom are current directors) to be elected at the annual general meeting of shareholders. All the nominees for director are independent under the rules of the NYSE, other than Mr. Petrello, who is our Chief Executive Officer. Detailed information about each director nominee, including their respective backgrounds, skills and experience, can be found under “Corporate Governance—Director Nominees”.

 

       

Name, Age and Primary Occupation

  Director
Since
  Independent     Committees
                     
       

LOGO

 

Tanya S. Beder, Age 64

Chairman and CEO

of SBCC Group Inc.

  2017         Risk Oversight (Chair), Audit, Compensation, Technology and Safety
                     
       

LOGO

 

Anthony R. Chase, Age 65

Chairman and CEO

of ChaseSource, L.P.

  2019         ESG, Risk Oversight
                     
       

LOGO

 

James R. Crane, Age 66

Chairman and CEO

of Crane Capital Group Inc.

  2012         Technology and Safety (Chair), Executive
                     
       

LOGO

 

John P. Kotts, Age 69

Private investor

and entrepreneur

  2013         Audit (Chair), Compensation, Risk Oversight
                     
       

LOGO

 

Michael C. Linn, Age 68

President and CEO

of MCL Ventures, LLC

  2012         Compensation (Chair), ESG
                     
       

LOGO

 

Anthony G. Petrello, Age 65

Chairman of the Board,

President and CEO

  1991     Executive (Chair)
                     
       

LOGO

 

John Yearwood, Age 60

Retired President, CEO and COO

of Smith International, Inc.

  2010         ESG (Chair), Audit, Executive, Technology and Safety
                     

Director Dashboard

 

LOGO

 

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PROXY SUMMARY

 

Corporate Governance Highlights

The following actions reflect our ongoing, constructive dialogue with shareholders and commitment to transparency and good corporate governance:

 

 

Introduced unvested Performance Share Unit awards in early 2020, issued at the beginning of the one-year performance period instead of after the conclusion of the performance period as has been the practice with Performance Share awards;

 

 

Changed the name of the Nominating and Governance Committee to the Environmental, Social and Governance Committee, to recognize the growing importance of ESG matters in our operations;

 

 

In light of the COVID-19 crisis and the oil price war, further reduced the CEO’s base salary from March 23, 2020 through the end of the year to approximately 69 percent of the amount set forth in his employment agreement (74 percent for all of 2020); and

 

 

Held direct discussions regarding corporate governance and executive compensation matters with shareholders representing approximately 24 percent of shares, and regular direct investor relations outreach to active institutional investors representing approximately 34 percent of shares.

Note Regarding Share Number Disclosures in Proxy Statement

On April 20, 2020, the Company held a Special Meeting of Shareholders in order to, among other things, seek shareholder approval of an amendment to the Company’s common share capital to effect a consolidation (reverse stock split) of the Company’s outstanding common shares at a ratio not less than one-for-fifteen (1:15) and not greater than one-for-fifty (1:50), with the exact ratio to be set within that range at the discretion of the Board before the effective date of the reverse stock split without further approval or authorization of the Company’s shareholders. The record date for the Annual General Meeting of Shareholders to which this proxy statement applies was April 3, 2020, prior to the effectiveness of the reverse stock split. Therefore, unless explicitly stated otherwise, the disclosures in this proxy statement reflect share numbers outstanding prior to the effectiveness of the reverse stock split.

 

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PROXY STATEMENT

General

This Proxy Statement and the proxy card/voting instructions are being furnished to all shareholders beginning on or about April 23, 2020, in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Nabors Industries Ltd. for the 2020 annual general meeting of shareholders (the “meeting”).

In this Proxy Statement, “Nabors”, the “Company”, “we”, “us” and “our” refer to Nabors Industries Ltd. Where the context requires, these references also include our consolidated subsidiaries and predecessors. Our principal executive offices are located at Crown House, 4 Par-la-Ville Road, Second Floor, Hamilton, HM 08 Bermuda.

Meeting Information

We will hold the meeting at the offices of our subsidiary, Nabors Corporate Services, Inc., located at 515 W. Greens Rd., Houston, Texas, 77067, at 10:00 a.m. Central Daylight Time on Tuesday, June 2, 2020, unless adjourned or postponed. Directions to the meeting can be found under the Investor Relations tab of our website at www.nabors.com or by calling our Investor Relations department at 281-775-8038. Depending on concerns about the Coronavirus or COVID-19, we may choose to hold a virtual annual meeting (the “virtual meeting”) instead of holding the meeting in Texas. The Company would publicly announce a determination to hold a virtual meeting in a press release available at www.nabors.com as soon as practicable before the meeting. In that event, the meeting would be conducted solely virtually, on the above date and time, via live audio webcast. You or your proxyholder could participate, vote, and examine our shareholder list at the virtual meeting by visiting http://www.virtualshareholdermeeting.com/NBR2020ANNUAL, but only if the meeting is not held in Texas

Who Can Vote & Record Date

All shareholders of record at the close of business on April 3, 2020 (the “record date”), are entitled to vote, in person at the meeting or by proxy, on each matter submitted to a vote of shareholders at the meeting. On the record date, 419,457,162 of the Company’s common shares were outstanding, the holders of which are entitled to one vote per common share on all matters. The number of common shares outstanding includes shares held by certain of our Bermuda subsidiaries, which will be voted consistent with the Board’s recommendation. We currently have no other class of securities entitled to vote at the meeting. The number of shares outstanding on the record date does not reflect the reverse stock split approved by the shareholders on April 20, 2020..

Meeting Attendance

Only record or beneficial owners of the Company’s common shares may attend the meeting in person. If you are a shareholder of record, you may be asked to present proof of identification, such as a driver’s license or passport. Beneficial owners who hold their shares through a broker, dealer, or other nominee must also present evidence of share ownership, such as a recent brokerage account or bank statement, as well as present a legal proxy from their broker. All attendees must comply with our standing rules, which are available on our website and will be distributed upon entrance to the meeting.

Important Notice Regarding Internet Availability of Materials

Pursuant to the Securities and Exchange Commission (the “SEC”) “notice and access” rules, we may furnish proxy materials, including this Proxy Statement and our Annual Report for the year ended December 31, 2019, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them prior to distribution of the Proxy Statement. Instead, a Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed or otherwise delivered, which explains how you may access and review the proxy materials and how you may submit your proxy on the Internet. We believe that this makes the proxy distribution process more efficient, less costly, and helps to conserve natural resources. If you would like to receive a paper or electronic copy of our proxy materials, please follow the instructions included in the Notice. Shareholders who requested paper copies of the proxy materials or previously elected to receive proxy materials electronically did not receive the Notice and are receiving the proxy materials in the format requested. Proxy materials will also be provided for distribution through brokers, custodians and other nominees and fiduciaries. We will reimburse these parties for their reasonable out-of-pocket expenses for forwarding the proxy materials.

 

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PROXY STATEMENT

 

Householding

The SEC permits a single set of annual reports and proxy statements or a notice of Internet availability of proxy materials, as applicable, 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 or voting instructions. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces mailing and printing expenses. A number of brokerage firms have instituted householding. As a result, if a shareholder holds shares through a broker and resides at an address at which two or more shareholders reside, that residence may receive only one annual report and proxy statement or notice, as applicable, unless any shareholder at that address has given the broker contrary instructions. However, if any such shareholder residing at such an address wishes to receive a separate annual report and proxy statement or Notice in the future, or if any such shareholder that elected to continue to receive such materials wishes to receive a single set of materials in the future, that shareholder should contact their broker, call our Corporate Secretary at (441) 292-1510, or send a request to our Corporate Secretary at Crown House Second Floor, 4 Par-la-Ville Road, Hamilton, HM08 Bermuda. The Company will deliver, promptly upon written or oral request to the Corporate Secretary, a separate copy of the annual report and proxy statement or notice, as applicable, to a shareholder at a shared address to which a single copy of the documents was delivered.

Proxy Solicitation

We have retained Georgeson LLC, 1290 Avenue of the Americas, 9th Floor, New York, NY 10104, for a fee of approximately $16,000, plus reimbursement of out-of-pocket costs and expenses, to solicit proxies on behalf of the Board by mail, in person and by telephone. We will pay all expenses associated with this solicitation and the preparation of proxy materials. In addition, certain of our directors, officers, and employees may solicit proxies by telephone, personal contact, or other means of communication. They will not receive any additional compensation for these activities.

Voting Information

Quorum. A majority of the common shares outstanding on the record date, represented in person or by proxy, will constitute a quorum to transact business at the meeting. Abstentions, withheld votes, and broker nonvotes will be counted for purposes of establishing a quorum.

Submitting voting instructions for shares held in your name. As an alternative to voting in person at the meeting, you may direct your vote for the meeting by telephone or via the Internet or, for those shareholders who receive a paper proxy card in the mail, by mailing a completed and signed proxy card. We encourage you to vote via telephone or the internet prior to the meeting in order to ensure that your vote is recorded in a timely manner. A properly submitted proxy submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke it. A properly submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you submit a signed proxy without indicating your vote, the person voting the proxy will vote your shares according to the Board’s recommendation unless they lack the discretionary authority to do so.

Submitting voting instructions for shares held in street name and broker nonvotes. If you hold your shares through your broker, follow the instructions you receive from your broker. If you want to vote in person at the meeting, you must obtain a legal proxy from your broker and bring it to the meeting. If you do not submit voting instructions to your broker, your broker may still be permitted to vote your shares. New York Stock Exchange (“NYSE”) member brokers may vote your shares on the approval and appointment of the Company’s independent auditor and authorization for the Audit Committee to set the independent auditor’s remuneration, which is a “discretionary” item. All other items to be voted on at the meeting are “nondiscretionary” items. Absent specific voting instructions from the beneficial owners, NYSE member brokers may not vote on these proposals. If your broker does not have discretion to vote your shares on a matter, your shares will not be voted on that matter, resulting in a “broker nonvote”. Broker nonvotes will be counted for purposes of establishing a quorum, but will not be counted in determining the outcome of “non-discretionary” items. In other words, broker nonvotes will have no effect on the proposal.

Withholding your vote or voting to “abstain”. You may withhold your vote for any nominee for election as a director. Withheld votes will be excluded from the vote. Because directors are elected by a plurality of votes and there are only seven nominees for the seven director positions, withheld votes will have no effect on the election of directors. On the other proposals, you may vote to “abstain”. If you vote to “abstain”, your shares will be counted as present at the meeting, and your abstention will have the effect of a vote against the proposal.

Revoking your proxy. You may revoke your proxy at any time before it is actually voted by (1) delivering a written revocation notice prior to the meeting to the Corporate Secretary in person or by courier at the address on the notice of meeting appearing at the front of this Proxy Statement or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda; (2) submitting a later-dated proxy that we receive no later than the conclusion of voting at the meeting; or (3) actually voting in person at the meeting. Please note that merely attending the meeting will not, by itself, constitute a revocation of a proxy.

 

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PROXY STATEMENT

 

Votes Required / Abstentions and Broker Nonvotes. The following chart provides information on the votes required to elect a director nominee or approve a proposal and the treatment of abstentions and broker nonvotes:

 

     

Voting Item

   Vote Required to Elect or Approve    Treatment of Abstentions and
Broker Nonvotes
           
     

Election of Directors

   Each director must receive a plurality of the votes cast; however, a nominee who does not receive the affirmative vote of a majority of the shares voted in connection with his/her election must tender his conditional resignation from the Board, which the Board will accept unless it determines that it would not be in the Company’s best interests to do so.    No effect
           
     

Independent Auditor

   Requires the affirmative vote of the holders of a majority of shares present in person or represented by proxy.    Abstentions have the same effect as a vote against the proposal; brokers may vote undirected shares
           
     

Say-on-Pay

   Requires the affirmative vote of the holders of a majority of shares present in person or represented by proxy. The vote on this item is nonbinding, but the Board will consider the results of the vote in making future decisions.    Abstentions have the same effect as a vote against the proposal; broker nonvotes will have no effect
           
     

Amended and Restated 2016 Stock Plan

   Requires the affirmative vote of the holders of a majority of shares present in person or represented by proxy. The vote on this item is nonbinding, but the Board will consider the results of the vote in making future decisions.    Abstentions have the same effect as a vote against the proposal; broker nonvotes will have no effect
           

 

   LOGO  

 

 YOUR VOTE IS IMPORTANT 

 

PLEASE VOTE

 
   
                

 

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CORPORATE GOVERNANCE

Role of the Board of Directors

The Board directs the management of the Company’s business and affairs. The shareholders elect the Board to act on their behalf and to oversee their interests. Unless reserved to the shareholders under applicable law or the Company’s Bye-laws, all corporate authority resides in the Board as the representative of the shareholders.

The Board selects and appoints executive officers to manage the day-to-day operations of the Company, while retaining ultimate oversight responsibilities. Together, the Board and management share an ongoing commitment to the highest standards of corporate governance and ethics. The Board reviews all aspects of our governance policies and practices, including the “Board Guidelines on Significant Corporate Governance Issues” (the “Governance Guidelines”) and the Company’s “Code of Business Conduct”, at least annually and makes changes as necessary. The Governance Guidelines and the Code of Business Conduct along with all committee charters are available on the Company’s website at www.nabors.com.

Overview of Key Governance Topics

Director Independence

The ESG Committee (formerly the Governance and Nominating Committee) conducts a review at least annually of the independence of each member of the Board and its committees and reports its findings to the full Board. As permitted by the rules of the NYSE, the Board has adopted categorical standards to assist it in making determinations of director independence. These standards incorporate and are consistent with the independence requirements of the NYSE and are set forth in our Governance Guidelines available on our website at www.nabors.com. In addition to these standards, the Board also reviews each of the transactions, relationships and arrangements described under “Certain Relationships and Related-Party Transactions” below, as well as social and other relationships, in determining whether a director is independent.

Upon the recommendation of the ESG Committee, the Board has determined that each director of the Board, other than Mr. Petrello, is independent. The Board also has determined that each member of our Audit, Compensation, and ESG Committees meets the independence standards established for these committees by the NYSE and the rules and regulations of the SEC.

Director Nominations

The ESG Committee recommends director candidates to the full Board. The ESG Committee considers the entirety of each candidate’s credentials including, especially, the ability of each candidate to assist the Board in fulfilling its fiduciary duties to the Company and its shareholders. See “Item 1: Election of Directors” below for a more complete discussion of the criteria used to select director nominees.

Shareholder Nominations and Proxy Access Policy

The ESG Committee accepts shareholder recommendations of director candidates and evaluates such candidates in the same manner as other candidates. Shareholders who wish to submit a candidate for consideration by the ESG Committee for election at our 2021 annual general meeting of shareholders may do so by submitting in writing the candidate’s name, together with the information described in the Board’s “Amended and Restated Policy Regarding Director Candidates Recommended by Shareholders” available at www.nabors.com. In addition, in July 2017, our Board amended the Company’s proxy access policy to permit up to 20 shareholders owning collectively three percent or more of our outstanding common shares for at least three years to nominate and include in our proxy materials nominees representing up to 20% of the Board, as detailed in the policy, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in the policy. Submissions to the Board should be delivered in person or by courier to the address on the notice of meeting appearing at the beginning of this Proxy Statement or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda, no later than the date required for shareholder submissions pursuant to SEC Rule 14a-8, as set forth on page 76 of this proxy statement.

Shareholder Communications with the Board

Shareholders and other interested parties may contact any of the Board’s directors (as a group or individually), committees, or independent directors as a group, by writing to them at Nabors Industries Ltd., c/o Corporate Secretary. Communications should be delivered in person or by courier to the address on the notice of meeting appearing at the beginning of this Proxy Statement or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda. Shareholder communications received in this manner will be handled in accordance with the Board’s “Policy Regarding Shareholder

 

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Communications with the Board of Directors” which is available at www.nabors.com. In addition, any concern about the Company’s conduct, or a complaint about the Company’s accounting, internal control or auditing matters, may be communicated directly to the Lead Director, to the outside directors as a group, or to the Audit Committee. Such communications will be treated as confidential and can be anonymous, and may be submitted in writing in care of the Corporate Secretary, or reported by phone to the Nabors Hotline, established specifically for reporting policy concerns, at 1-877-NABORS7.

Annual Meeting Attendance Policy

The Company encourages all directors to attend the annual general meeting of the shareholders. Five of the seven incumbent directors then comprising the full Board attended the 2019 annual general meeting of shareholders.

Executive Sessions of Non-Employee Directors

Our non-employee directors, each of whom the Board has determined is independent, meet in executive session at each regular meeting of the Board, and any executive sessions convened by the Lead Director during the year, without the CEO or any other member of management present. The Lead Director presides over these executive sessions.

Board Leadership Structure

Our Governance Guidelines were modified in 2014 to provide for an independent chairman of the Board following the tenure of our current Chairman and CEO, Mr. Petrello, whose employment agreement provides that he will serve in both roles. Until such time, the Board believes that the current combination of the chairmanship with an experienced, independent Lead Director creates an effective Board leadership structure for the Company. The Board believes that, as the individual with primary responsibility for managing the Company’s day-to-day operations and with extensive knowledge and understanding of the Company, Mr. Petrello is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues and to focus the Board’s attention on the issues of greatest importance to the Company and its shareholders. Furthermore, combining the roles of Chairman and CEO in Mr. Petrello creates a clear line of authority that promotes decisive and effective leadership, both within and outside the Company. The Board’s current view is that a combined Chairman and CEO position, together with a predominantly independent board and a proactive, independent Lead Director, promotes a candid discourse and responsible corporate governance.

Mr. Yearwood will continue to serve as our independent Lead Director, a position he has held since 2011. The Lead Director’s primary responsibility is to preside over executive sessions of non-employee directors and to call meetings of the non-employee directors as desirable. Such executive sessions provide non-employee directors an opportunity to independently evaluate management and the Company’s operations. In addition, the Lead Director:

 

 

serves on the Executive Committee of the Board;

 

 

chairs certain portions of Board meetings;

 

 

serves as liaison between the Chairman and the non-employee directors;

 

 

develops and approves, together with the Chairman, the agenda for Board meetings, adding agenda items where he deems appropriate;

 

 

leads the Board’s annual self-evaluation; and

 

 

performs other duties delegated by the Board from time to time.

The Board believes that the Company’s corporate governance and leadership structures, including the composition of the Board, its committees and the presence of a strong Lead Director, creates an effective leadership structure for the Company with independent oversight of the Board itself and management. Both the Chairman and Lead Director serve on the Board’s Executive Committee, and any director may raise a matter for consideration by the Board. This past year, our Lead Director:

 

 

partnered with the Chair of the Compensation Committee and others in extensive communications with significant shareholders regarding governance matters; and

 

 

provided input and guidance on strategy and growth directly to management in operations.

The Board believes that Mr. Yearwood’s extensive management experience in the industry and effective performance in the role of Lead Director qualify him to continue to serve in that capacity.

 

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Board’s Role in Risk Oversight

Our full Board is responsible for risk oversight and has designated the Risk Oversight Committee to provide assistance in fulfilling its oversight responsibilities with respect to the Company’s processes and policies regarding risk assessment and risk management, including the Company’s enterprise risk management, compliance and operational control activities. The Risk Oversight Committee currently meets, at a minimum, on a quarterly basis to evaluate the Company’s risk exposure and tolerance. Ms. Beder, who has significant professional experience in risk management, serves as the Chair of the Risk Oversight Committee.

 

  Risk Oversight Committee’s Role in Risk Oversight        

 

        

  Receives information from management regarding a variety of matters, including operations, legal, regulatory, finance, internal audit, cybersecurity, information technology, and strategy, as well as any material risks associated with each matter.

         

  Receives an update from the Company’s Enterprise Risk Management Committee* (“ERMC”) comprised of almost a dozen top senior managers of the Company from various functions, each of whom supervises day-to-day risk management throughout the Company.

         

  Receives an update from the chairman of each of the committees and in turn provides a quarterly risk report to the Board.

      
   
                     

 

*

The ERMC is not a committee of the Board. The ERMC is tasked with identifying all potential material risks facing the Company and implementing mitigation measures. The ERMC members meet formally throughout the year to define and improve the risk mapping process and implementation.

The Board also has adopted a procedure for employees and shareholders to report concerns about the Company’s conduct, accounting, internal controls and other matters directly to certain members of the Board. In addition, the Board oversees management as management fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks.

Sustainability

Sustainability is an essential part of our corporate culture and an integral part of our strategic plans. Through technological innovation, environmental impact planning, corporate safety initiatives and community relations activities, the Company understands that how we conduct business is of equal importance to our results. Our sustainability report can be found on our website, www.nabors.com.

Code of Business Conduct

The Company has adopted a Code of Business Conduct in accordance with NYSE requirements. All of our employees, including our executive officers and senior management, as well as our non-employee directors, are required to abide by our Code of Business Conduct, and related policies and procedures, to ensure that our business is conducted in a consistently legal and ethical manner. We also expect venders and suppliers to act consistently with the Code of Business Conduct. The Code of Business Conduct is posted on our website at www.nabors.com. We intend to disclose on our website any material amendments to the Code of Business Conduct, or waivers from any provision of the Code of Business Conduct that apply to our CEO and CFO.

Shareholder Engagement

 

    Engagement Process    
LOGO     LOGO     LOGO     LOGO
Outreach   »   Discussion   »   Feedback   »   Results
Shareholders are engaged through various methods, including one-on-one meetings, analyst conferences, investor days, panel discussions, and the annual shareholder meeting.   Active discussions are the key to gaining insight and understanding of investor questions and concerns.   Shareholder feedback from any medium is shared with management and the Board of Directors.   Serious matters are deliberated by the Board, which converts shareholder feedback into tangible actions.

 

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In making decisions regarding corporate governance and executive compensation issues, the Board considers shareholder opinions and input, which it obtains in several ways. One way is through advisory votes on executive officer compensation, as well as shareholder and other proposals at our annual general meetings. In addition, as part of our shareholder outreach effort, since our last annual meeting we contacted our ten largest institutional shareholders, representing approximately 46 percent of our outstanding common shares, in an attempt to obtain their views on the Company’s corporate governance and executive compensation programs. Of those, only three shareholders representing approximately 24 percent of our shares, ultimately agreed to hold discussions with Board members, including our Lead Director and the Chairman of our Compensation Committee. In early 2020, members of our Board and management also met via telephone with teams from Glass Lewis & Co. LLC and Institutional Shareholder Services Inc. to discuss governance issues, including executive compensation. We believe that dialogue with shareholders and other stakeholders affords our directors deeper insight into shareholder concerns than is provided just by a vote on individual topics, and enables a more effective response to issues of most importance to shareholders. We will continue our shareholder outreach, and hope to have higher shareholder response in the future. In addition, during 2019 our investor relations team engaged in dialogue on a regular basis with approximately 100 shareholders collectively holding approximately 34 percent of our outstanding shares.

Meetings of the Board and Committees

The Board met four times during 2019.

The Board has six committees, each of which report their activities to the Board: (1) the Audit Committee, (2) the Compensation Committee, (3) the Executive Committee, (4) the ESG Committee, (5) the Risk Oversight Committee and (6) the Technology and Safety Committee. Appointments to and chairmanships of the committees are recommended by the ESG Committee and approved by the Board. Directors are expected to attend all meetings of the Board and committees on which they serve.

Each of our incumbent directors attended over 75 percent of all meetings of the Board and committees on which he or she served during 2019.

The following chart shows the current membership and chairmanship of each Board committee, and the number of meetings held by each committee during 2019.

 

 

             

Director

  Audit   Compensation   Executive   ESG   Risk
Oversight
  Technology
and Safety
                         

Tanya S. Beder

    (1)        (2)    Chair  

Anthony R. Chase

              (4)    (4)     

James R. Crane

      (3)              Chair

John P. Kotts

  Chair                

Michael C. Linn

      Chair              

Anthony G. Petrello

          Chair            

John Yearwood

          Chair   (2)   

Number of Meetings

  4   4   0   4   4   4

 

(1)

Since July 25, 2019.

(2)

Until February 21, 2019.

(3)

Until July 25, 2019.

(4)

Since Mr. Chase’s appointment to the Board on February 21, 2019.

Board Practices and Commitment

The Board typically meets four times a year at a location outside the United States. A typical Board meeting requires at least one, and most times two, overnight stays. The Board targets at least one meeting each year to be held at a key Nabors market location outside the United States. This practice allows the Board members to have direct contact with both field level and local management, and facilitates a greater understanding of the challenges and opportunities in these markets. The Board also may use these occasions to meet with key customers and vendors, and to receive direct feedback on the Company’s performance and opportunities.

Board meetings, including committee meetings, typically consume collectively about 15 hours of actual meeting time for each trip. Travel times range from 8 hours to as many as 34 hours depending on location.

 

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As a policy, Board member participation is virtually always in person and not telephonic. Key management personnel are invited on a rotational basis to make presentations to the Board at almost every meeting. This practice ensures informed contact by the Board members with one another as well as with management.

Given that Board meetings must be held outside the U.S., our standard practice is for each director to attend all committee meetings, whether or not a member of that committee. This practice promotes extraordinary depth of knowledge with respect to Company matters and ensures the Company benefits from the directors’ collective knowledge, skill and experience. Board members also hold meetings with shareholders, either in person or by telephone. This allows the Board to have direct communication and to discuss all issues that are of importance to the shareholders. This year Board members also held a telephone conference with a team from Glass Lewis & Co. LLC and Institutional Shareholder Services Inc. to discuss governance issues. Members of the Board also meet regularly with management and employees of the Company to discuss strategy and other matters.

The Company believes these Board practices are among the best in class for corporate governance.

Key Committee Responsibilities

The following table shows the key responsibilities of each Board Committee.

 

   
  Audit Committee     Key Responsibilities

 

 

•  Oversees the integrity of our consolidated financial statements, system of internal controls, internal audit, financial risk management, and compliance with legal and regulatory requirements.

 

•  Selects, determines the compensation of, evaluates and, if deemed appropriate, replaces the independent auditor, and preapproves audit and permitted nonaudit services.

 

•  Determines the qualifications and independence of our independent auditor and evaluates the performance of our internal auditors and independent auditor.

 

•  After review, recommends to the Board the acceptance and inclusion of the annual audited consolidated financial statements in our annual report on Form 10-K.

 

•  Conducts information sessions in connection with the Company’s quarterly earnings releases and other matters.

 

All members of the Audit Committee were determined to have met the independence, financial literacy and experience requirements of the NYSE and SEC rules and regulations. The Board has also determined that Messrs. Kotts and Yearwood and Ms. Beder are “audit committee financial experts” as defined under SEC rules.

 

The Audit Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.

 
             

 

   
  Compensation Committee     Key Responsibilities

 

 

•  Reviews and approves the compensation of our executive officers and other senior leaders.

 

•  Oversees the administration of our incentive compensation and other equity-based compensation plans for officers and employees.

 

•  Reviews and discusses with management the Compensation Discussion and Analysis and recommends to the Board the inclusion of the CD&A in the proxy statement.

 

•  Communicates with the Audit Committee regarding performance goals and evaluations of key finance, internal control, internal audit and risk management personnel.

 

•  Meet with the Risk Oversight Committee to confirm that compensation and incentive pay structures do not encourage unnecessary risk taking.

 

All members of the Compensation Committee were determined to have met the independence standards of the NYSE.

 

The Compensation Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.

 
             

 

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  Executive Committee     Key Responsibilities

 

 

•  As necessary between meetings of the Board, exercises all power and authority of the Board overseeing the management of the business and affairs of the Company.

 
             

 

   
  ESG Committee      Key Responsibilities

 

 

•  Identifies and recommends candidates for election to the Board.

 

•  Establishes procedures for the committee’s oversight of the evaluation of the Board.

 

•  Recommends director compensation.

 

•  Reviews corporate governance policies annually.

 

•  Reviews and approves any related-party transactions involving directors and executive officers.

 

•  Monitors and advises the Board on environmental, social, and governance-related policy initiatives, including compliance, and oversees the publication of the Company’s sustainability report.

 

All members of the ESG Committee during 2019 were determined to have met the independence standards of the NYSE.

 

The ESG Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.

 
             

 

   
  Risk Oversight Committee     Key Responsibilities

 

 

•  Monitors management’s identification and evaluation of major strategic, operational, regulatory, information and external risks inherent in the Company’s business.

 

•  Reviews the integrity of the Company’s systems of operational controls, regarding legal and regulatory compliance.

 

•  Reviews the Company’s processes for managing and mitigating operational and enterprise risk.

 

The Risk Oversight Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.

 
             

 

   
  Technology and Safety Committee     Key Responsibilities

 

 

•  Reviews the Company’s strategic technology positions, including intellectual property, patents, and trademarks.

 

•  Monitors the Company’s compliance with health and safety standards.

 

•  Reviews the Company’s safety performance and strategic technology position.

 

•  Reviews the integrity of information technology systems, including the potential for cybersecurity threats.

 

The Technology and Safety Committee Charter Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.

 
             

Item 1: Election of Directors

Each nominee for director who is elected at the meeting will serve a one-year term, expiring at the next annual general meeting of shareholders or until such later time as such director’s successor is duly elected and qualified. At the meeting, proxies cannot be voted for a greater number of individuals than seven. The directors standing for election have been nominated by the Board, upon the recommendation of the ESG Committee. Each of the nominees has agreed to serve as a director if elected, and we do not anticipate that any will be unable or unwilling to stand for election. If that were to occur, your proxy will be voted for another person nominated by the Board.

 

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Criteria

The Board’s top priority is to ensure effective and ethical oversight of the Company and its operations, and the implementation of its strategic goals. To accomplish this the Board, through the ESG Committee, seeks a diverse group of director nominees that have demonstrated exceptional skills, qualifications, attributes, and experience. In identifying and recommending director nominees, the ESG Committee places primary emphasis on the following criteria:

 

 

Reputation, integrity and independence (for non-employee directors);

 

 

Judgment and diversity of viewpoints, backgrounds and experience, including gender, race, ethnicity, age, and geography;

 

 

Business or other relevant experience;

 

 

The extent to which the interplay of the nominee’s expertise, skills, knowledge, and experience with that of the other members of the Board will result in an effective Board that is responsive to the Company’s needs; and

 

 

For director nominees who are current directors, history of attendance at Board and committee meetings, as well as preparation for, participation in and contributions to the effectiveness of those meetings.

These criteria include those set forth in our Board Guidelines on Significant Corporate Governance Issues, which are available on our website at www.nabors.com and to any shareholder who requests them in writing. Requests should be addressed to the Corporate Secretary and delivered in person or by courier to the address on notice of meeting appearing at the beginning of this Proxy Statement, or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda.

The ESG Committee believes that each nominee should be evaluated on his or her individual merits, taking into account the needs of the Company at any given time as well as the overall composition of the Board. There are certain criteria that are expected of all director nominees. For example, all nominees are expected to have high integrity and a reputation of success in his or her field. In addition, all nominees are expected to have the time and ability to fulfill his or her responsibilities to the Company and its shareholders, if elected. Other than these basic criteria, however, the Board does not set universal minimum qualifications that all nominees must meet in order to be recommended. Rather, using the broad criteria set out above, the Board identifies specific skills and qualifications that may be beneficial at any given time – including those that are determined to be necessary for committees of the Board to fulfill their respective mandates – which the ESG Committee in turn utilizes to determine whether a given director nominee is qualified to serve on our Board. Members of the ESG Committee then discuss and evaluate possible candidates in detail and suggest individuals to explore in greater depth. Accordingly, while we believe that each director meets the broad criteria for inclusion as a director nominee, he or she undoubtedly does so in a way specific to that director. The Board, together with the ESG Committee, believes this approach helps to ensure a diversity of viewpoints and experience that enables the Board, and the Company, to maintain the highest levels of corporate governance and oversight. The ESG Committee has discretion to engage outside consultants to help identify candidates and also considers suggestions from shareholders, as described in our Governance Guidelines.

 

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Director Nominee Snapshot

 

 

INDEPENDENT DIRECTORS

85.7%

            

 

DIVERSITY

 

            

 

AGE RANGE

60 u 69

   

14.3%

WOMEN

 

14.3%

MINORITY

 
         

 

   
                                       

IND. DIRECTOR AVG. TENURE

6.2 YEARS

 

            

AVERAGE AGE

65 YEARS

                                       

 

               
    Beder     Chase     Crane     Kotts     Linn     Petrello     Yearwood  
                                                         
             

Skills & Experience

             
                                                         
             

Board of Directors

                                         

Corporate Governance

                                         

Oilfield Services Industry

                                 

Drilling

                             

Oil and Gas

                                     

CEO / Business Head

                                         

International

                                         

Finance / Capital Allocation

                                     

Financial Literacy / Accounting

                                         

Investment Banking

                             

Manufacturing

                         

Technology

                             

Logistics

                 

Academia/Education

                         

Health, Safety and Environment

                             
                                                         
             

Board Tenure

             
                                                         
             

Years

    3       1       8       7       8       29       10  
                                                         

 

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Being on a board of directors for a public company with global operations brings a broad scope of responsibilities, as directors must understand general operational activities as well as corporate governance, including issues surrounding strategic direction and exposures to risk. As a result, the ESG Committee believes that the skills and experience listed above benefit the Board in overseeing the Company’s governance as well as its vision and long-term strategy, as follows:

 

      
  

 

Board of Directors

   Prior public-company board experience is helpful in that the nominee will have an understanding of (i) his or her role – there is no time for on-the-job training; (ii) how to deal with the myriad complex issues that can arise and need attention; and (iii) the time commitment involved
      
  

 

Corporate Governance

   Experience in dealing with evolving and dynamic corporate governance matters helps to ensure proper corporate policies are in place and enforced, and that the Board and management are appropriately and fully fulfilling their responsibilities
      
  

Oilfield Services/
Drilling/Oil & Gas

   An in-depth knowledge of these industries is important for maintaining our place as a leading provider of drilling and drilling-related services and equipment
      
  

 

CEO/Business Head

   Background and experience as a CEO provides an understanding of what it takes to manage employees and run a company
      
  

 

International

 

   International experience is essential for a company like Nabors, with operations and offices in over 20 countries worldwide
      
  

Finance/
Capital Allocation

   Knowledge and expertise in financial matters helps to ensure the availability and correct allocation of financial resources to maximize returns
      
  

 

Investment Banking

 

  

A background and understanding in this area is useful in pursuing strategic acquisitions

 

      
  

 

Financial Literacy/
Accounting

   An understanding of financial reporting and accounting principles is necessary to satisfy stock market listing requirements and, more importantly, in fulfilling accounting oversight responsibilities
      
  

 

Manufacturing

   Experience and knowledge of manufacturing processes is important for us as, unlike some of our competitors, we develop and manufacture much of the equipment we use
      
  

 

Technology

   A broad understanding of technology and technical systems helps ensure the sensible investing in, and development of, technology
      
  

 

Logistics

   Without the proper flow of equipment, supplies, and personnel, we cannot support and satisfy global customer demands
      
  

 

Academia/Education

   An academic background can bring new ways of thinking and problem solving to corporate issues
      
  

Health, Safety and
Environment

   Essential to achieving Nabors’ Mission Zero company-wide effort to eliminate injuries and incidents, and ensuring environmentally sound operations
      

Please see the biographic information under “—Director Nominees” beginning on page 16 for insight as to how each director satisfies the skills and experience indicated above.

While the proper skillset and professional expertise are important, the ESG Committee also believes that the Board should reflect racial, gender, cultural and geographical diversity, as appropriate, in light of the entire Board’s composition. To that end, Mr. Anthony Chase was appointed to the Board and nominated to stand for election last year for the first time. Ms. Tanya S. Beder was nominated and voted onto the Board in 2017. Equally as important as race or gender, however, is the considerable experience, expertise and insight these and the other nominees brings to the Board, as identified in their respective professional biographies set forth under “—Director Nominees” below. The members of the ESG Committee recommended the re-nomination of all continuing director nominees. The full Board has agreed with the recommendations of the ESG Committee and nominated each of Ms. Beder and Messrs. Chase, Crane, Kotts, Linn, Petrello and Yearwood for re-election.

 

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Over the past several years, the ESG Committee has nominated qualified new independent directors to provide fresh perspectives to the Board. The average tenure of the independent director nominees is just over six years, with two new directors added within the last three years. The Committee believes that directors with many years of service provide the Board with a deep knowledge of the Company, while newer directors lend fresh perspectives.

The members of the ESG Committee, as well as the full Board, believe that the combination of the various qualifications, attributes, skills, and experience of the director nominees will contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications and expertise to provide effective oversight of the Company and its business.

In the biographical descriptions that follow, except as otherwise noted, the companies for which directors have worked are not a parent, subsidiary or otherwise affiliated with the Company.

Director Nominees

 

     
LOGO   

TANYA S. BEDER

 

Independent Director

Director since: 2017

Age: 64

  

Committees:

Audit, Compensation, Risk Oversight, Technology and Safety

 

Other Public Company Boards: 1

Ms. Beder currently serves as the Chairman and CEO of SBCC Group, Inc. (“SBCC”), which she founded in January 1987. SBCC is an independent advisory firm operating globally, whose projects include assisting corporate management, institutional investors, large financial firms and other clients in solving complex financial problems under crisis and providing strategic advice to seize opportunities. Ms. Beder has served since 2011 on the board of the American Century mutual fund complex in Mountain View, California, where she chairs the Risk Committee and is a member of the Portfolio Committee and the Audit & Compliance Committee. She also served on the board of Kirby Corporation (NYSE:KEX) since October 2019. Previously, Ms. Beder served as a member of the CYS Investments, Inc. (NYSE:CYS) board of directors from May 2012 to September 2018, where she chaired the Nominating and Governance Committee and was a member of the Audit and Compliance Committee. She also served as the Chief Executive Officer of Tribeca Global Management LLC, a $2.6 billion dollar fund with operations in Singapore, London, and New York; Managing Director of Caxton Associates LLC, a $10 billion asset management firm with operations in New York and London; and President of Capital Market Risk Advisors, Inc. in New York, which she co-founded. Ms. Beder also spent time in various positions with The First Boston Corporation (now Credit Suisse) where she was a part of the first team of derivatives traders and structurers for currency and interest rate swaps, caps, collars, floors, futures, and options, and was on the mergers and acquisitions team in New York and London. In January 2013, she was appointed to the President’s Circle of the National Academies in Washington, DC, after serving six years at the National Academy of Sciences on the Board of Mathematics and their Applications. Ms. Beder also serves on the Mathematical Finance Advisory Board of New York University and is a Board Member Emeritus of the International Association of Quantitative Finance, where she previously served as Chairman. She is an appointed Fellow of the International Center for Finance at Yale University and teaches a course on finance and fintech at Stanford University. From 2004 – 2017 she served on the Advisory Board of the Columbia University Financial Engineering Program, from 2014 – 2017 she served on the Board of The Institute for Pure and Applied Mathematics at UCLA, and from 2010-2014 she served as a Director of the Pilgrim Asia Macro Fund in Singapore. Ms. Beder holds a B.A. in mathematics and philosophy from Yale University, and an MBA from Harvard Business School.

 

Qualifications:

Ms. Beder brings to the Board extensive asset management experience, vast knowledge of operational and risk management, and experience serving on both public and private boards of directors. The Board also benefits greatly from Ms. Beder’s audit committee experience and financial expertise.

 

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CORPORATE GOVERNANCE

 

     

ANTHONY R. CHASE

 

Independent Director

Director since: 2019

Age: 65

  

Committees:

ESG, Risk Oversight

 

Other Public Company Boards: 1

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Mr. Chase is Chairman and Chief Executive Officer of ChaseSource, L.P., a Houston-based staffing and real estate development firm. He was a founder of mobile phone provider Cricket Wireless and of ChaseCom, L.P., a global customer relationship management and staffing services company, until its sale to AT&T, Inc. in 2007. He is a tenured Professor of Law and Business at the University of Houston Law Center, where he began teaching in 1990. He has published numerous law review articles during his tenure. Mr. Chase is on the board of directors of the Texas Medical Center, M.D. Anderson Board of Visitors and the Greater Houston Partnership, serving as its chairman during 2012. Mr. Chase has been nominated to serve on the board of directors of Cullen/Frost Bankers, Inc., and previously served as a director of Anadarko Petroleum Corporation, Paragon Offshore plc, Sarepta Therapeutics, Inc. and Western Midstream Operating, LP. Additionally, he is a Trustee of the Houston Endowment, and served on the board of trustees of St. John’s School and KIPP Schools. Mr. Chase is the former Deputy Chairman of the Federal Reserve Bank of Dallas and a former Director of the Federal Reserve Bank of Houston. Mr. Chase holds B.A., M.B.A. and J.D. degrees from Harvard University. He is also an Eagle Scout.

 

Qualifications

Mr. Chase brings experience and expertise in oil and gas, environmental law, real estate, and management and provision of human resources, as well as experience as an executive and as a board member of both public and private companies.

 

     

JAMES R. CRANE

 

Independent Director

Director since: 2012

Age: 66

  

Committees:

Executive, Technology and Safety

 

Other Public Company Boards: 2

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Chairman and CEO of Crane Capital Group Inc., an investment management company, since 2006. Crane Capital Group has invested in transportation, power distribution, real estate and asset management. Its holdings include Crane Worldwide Logistics, a premier global provider of customized transportation and logistics services with 130 offices in 35 countries, and Crane Freight & Cartage. Mr. Crane purchased the Floridian National Golf Club in March 2010 and quickly turned it into one of the nation’s premier golf clubs. Mr. Crane led an investor group that in November 2011 purchased the Houston Astros. In January 2017, Crane acquired and serves as Chairman of the board of Davaco, a leader in high-volume remodels and technology deployments in global brands. In March 2017, Mr. Crane opened two restaurants – Osso & Kristalla and Potente – in Houston, Texas. In June 2017, he started Crane Safety, a commercial safety supply company. In August 2017 he started Modiant, a software company. In June 2018 he became the principal owner of Apurture Cellars, a winery in Sonoma County, California. Mr. Crane was Founder, Chairman and Chief Executive Officer of Eagle Global Logistics, Inc., a NASDAQ-listed global transportation, supply chain management and information services company, from 1984 until its sale in August 2007. Mr. Crane holds a B.S. in Industrial Safety from Central Missouri State University. He serves on the boards of directors of Cargojet, Inc. (TO:CJT) and Western Midstream Holdings, LLC, a subsidiary of Occidental Petroleum Corporation and the general partner of Western Midstream Partners, LP.

 

Qualifications

Mr. Crane’s experience in marketing, logistics, global operations and creating shareholder value provide an important resource to the Board. The Board also benefits from Mr. Crane’s proven leadership abilities and experience.

 

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LOGO   

JOHN P. KOTTS

 

Independent Director

Director since: 2013

Age: 69

  

Committees:

Audit, Compensation, Risk Oversight

 

Other Public Company Boards: 2

Mr. Kotts is a private investor and entrepreneur. Through his management company, J.P. Kotts & Co., Inc., Mr. Kotts also operates a private investment fund focused on the trading of U.S. and international securities and other financial instruments. He also invests in real estate and private equities. Mr. Kotts is currently the owner and CEO of Vesco/Cardinal, an oil tool rental and service company, as well as several manufacturing companies. Mr. Kotts previously held various financial, banking and investment banking positions in companies specializing in leveraged buyouts, venture capital and turnaround transactions. From 1990 to 1998, he owned and operated Cardinal Services, Inc., a leading supplier of liftboat rentals and other production-related services, including mechanical wireline services and plug and abandonment services, to oil companies operating in the Gulf of Mexico. Mr. Kotts previously served on the board of directors for C&J Energy Services Ltd. from March 2015 to September 2015. He holds a B.A. in Philosophy and an M.B.A in Finance from Hofstra University and completed additional post-graduate work at McGill University in Montréal, New York University and Harvard Business School.

 

Qualifications

Mr. Kotts’ industry background and knowledge, business acumen and financial expertise were the primary factors considered by the Board in deciding to appoint him as a director and nominate him for election to the Board. Mr. Kotts brings to the Board entrepreneurial drive and management skills.

 

     
LOGO   

MICHAEL C. LINN

 

Independent Director

Director since: 2012

Age: 68

  

Committees:

ESG, Compensation

 

Other Public Company Boards: 1

President and CEO of MCL Ventures, LLC, an oil, gas and real estate investment firm, since 2012. Mr. Linn is the former Chairman, CEO, President and Director of LINN Energy, LLC, which he founded. Since 2015 he has served as a director for the general partner of Black Stone Minerals, L.P. He has served as a Senior Advisor for Quantum Energy Partners, LLC since 2012, and previously served as a director for Western Refining Logistics GP. Mr. Linn is on the Board of Managers of Cavallo Mineral Partners, LLC, and previously served as a director of Jagged Peak Energy Inc. He serves as a member of the National Petroleum Council’s Board of Directors and as Chairman of the Education Committee of the IPAA. He previously served on the board of directors of C&J Energy Services Ltd., as Non-Executive Director and Chairman of the Safety, Health, Environment, Security and Ethics Committee for Centrica plc, as Chairman and director of the Natural Gas Council, as Chairman of the Independent Petroleum Association of America, as director of the Natural Gas Supply Association, as Chairman and President of each of the Independent Oil and Gas Associations of New York, Pennsylvania and West Virginia, and as Texas Representative for the Legal and Regulatory Affairs Committee of the Interstate Oil and Gas Compact Commission. Mr. Linn holds a B.A. in Political Science from Villanova University and a J.D. from the University of Baltimore School of Law.

 

Qualifications

Mr. Linn’s broad understanding of the energy landscape and insight into the needs of our customers, together with his extensive industry knowledge and relationships, provide valuable resources to the Board. The Board also benefits from Mr. Linn’s proven leadership from his experience as a chief executive officer.

 

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ANTHONY G. PETRELLO

 

Independent Director

Director since: 1991

Age: 65

  

Committees:

Executive

 

Other Public Company Boards: None

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Chairman of the Board of Nabors since 2012 and director since 1991; Deputy Chairman of Nabors 2003-2012; President and CEO of Nabors and Nabors Industries, Inc. since 2011; President and Chief Operating Officer of Nabors and Nabors Industries, Inc. from 1991-2011. Mr. Petrello holds a J.D. degree from Harvard Law School and B.S. and M.S. degrees in Mathematics from Yale University. Mr. Petrello also serves as a director of Hilcorp Energy Company. In 2018, Mr. Petrello was the recipient of the Offshore Energy Center Pinnacle Award, recognizing outstanding individuals who have taken today’s leading-edge tools and technologies and applied them to real world challenges.

 

Qualifications

Mr. Petrello brings to the Board an extensive and unique combination of commercial, operational, and technical skills and a thorough knowledge of the Company’s operational activities worldwide. He serves as an integral link between the Company and the Board, enabling the Board to better perform its oversight role.

 

     

JOHN YEARWOOD

 

Independent Director

Director since: 2010

Age: 60

  

Committees:

Audit, ESG, Executive, Technology and Safety

 

Other Public Company Boards: 1

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Mr. Yearwood currently serves on the board of directors of TechnipFMC plc, Sheridan Production Partners, Barra Energia, Foro Energy LLC, Bazean LLC, and Coil Tubing Partners LLC. He previously served on the boards of Sabine Oil & Gas, LLC until August 2016, Premium Oilfield Services, LLC until April 2017, and Dixie Electric LLC until November 2018. Until August 2010, he served as the Chief Executive Officer, President and Chief Operating Officer of Smith International, Inc. (“Smith”). He was first elected to Smith’s board of directors in 2006 and remained on the board until he successfully negotiated and completed the sale of Smith to Schlumberger Limited in August 2010. Before joining Smith, Mr. Yearwood spent 27 years with Schlumberger Limited in numerous operations, management and staff positions throughout Latin America, Europe, North Africa and North America, including as President and in financial director positions. He also previously served as Financial Director of WesternGeco, a 70:30 joint venture between Schlumberger and Baker Hughes from 2000 to 2004. Mr. Yearwood received a B.S. Honors Degree in Geology and the Environment from Oxford Brookes University in England.

 

Qualifications

Mr. Yearwood brings significant executive management experience in the oilfield services industry to the Board. His extensive industry knowledge, combined with his keen insight into strategic development initiatives, operations and our competitive environment, have provided the basis for the extraordinary leadership and critical independent oversight Mr. Yearwood demonstrates as Lead Director.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES FOR DIRECTOR WITH A TERM ENDING AT THE 2020 ANNUAL GENERAL MEETING.

 

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Other Executive Officers

 

   
LOGO   

WILLIAM J. RESTREPO

 

Chief Financial Officer

Age: 60

CFO of Nabors since March 2014. In this role, Mr. Restrepo has global oversight for finance and accounting, including the treasury, tax, risk management, internal audit and supply chain groups. He also works closely on Nabors’ corporate development and investor relations initiatives. Mr. Restrepo formerly served as Chief Financial Officer at Pacific Drilling S.A. from February 2011 to February 2014. He also previously served as Chief Financial Officer at Seitel from 2005 to 2009, and at Smith from 2009 to 2010 until its merger with Schlumberger Limited. Prior to that, from 1985 to 2005, Mr. Restrepo served in various senior financial and operational positions for Schlumberger Limited, including operational responsibility for all product lines in the Continental Europe and Arabian Gulf markets, as well as senior financial executive roles in Corporate Treasury and worldwide controller positions with international posts in Europe, South America and Asia. Mr. Restrepo currently serves on the board of SANAD (Nabors’ joint venture with Saudi Aramco) and previously served on the boards of directors of C&J Energy Services Ltd. from 2015 to 2017, Probe Technology Services from 2008 to 2016, and Platinum Energy Solutions, Inc. from 2012 to 2013. Mr. Restrepo holds a B.A. in Economics and an M.B.A, both from Cornell University, as well as a B.S. in Civil Engineering from the University of Miami.

 

   
LOGO   

MARK D. ANDREWS

 

Corporate Secretary

Age: 47

Corporate Secretary of Nabors since September 2007. Prior to joining Nabors, Mr. Andrews served in various treasury and financial management positions with General Electric Company, a diversified technology and financial services company, beginning in December 2000. Mr. Andrews was employed by the public accounting firm of PricewaterhouseCoopers LLP from September 1996 to November 2000 in a number of capacities, including Tax Manager, within the firm’s Mining and Resource Practice. Mr. Andrews holds a B.B.A. degree from Wilfrid Laurier University and is also a Chartered Professional Accountant, Chartered Secretary and a CFA charterholder.

 

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Non-Employee Director Compensation

We believe it is essential to attract outstanding non-employee directors and align their economic interest in the Company with other shareholders. We accomplish this through a combination of annual cash retainers and equity incentive awards. Director compensation and benefits are set by the full Board, upon the recommendation of the ESG Committee in consultation with the Compensation Committee and with market analysis provided by Pearl Meyer & Partners LLC (“Pearl Meyer”), the compensation consultancy firm retained by both committees. Both the ESG Committee and the Compensation Committee consist entirely of independent directors, and are authorized to delegate authority to one or more subcommittees. We believe that director compensation should be reasonable in light of what is customary for companies of similar size, scope and complexity and should reflect the time, effort and expertise required of directors to adequately perform their responsibilities. The amount of compensation paid or awarded to non-employee directors takes into account the fact that, given the nature of the business and the location of our operations, our directors are required to travel a substantial distance to attend meetings outside of the U.S. These travel obligations often result in the directors dedicating a number of days to attending meetings. Directors do not receive additional amounts for attendance at these Board and committee meetings.

In 2018, in connection with the amendment of the Company’s 2016 Stock Plan, the Board approved and the shareholders ratified a director compensation policy that limits each non-employee director’s individual compensation to a maximum of $550,000 per calendar year (the “Non-Employee Director Compensation Limitation”). Under the Non-Employee Director Compensation Limitation, the Board has the authority to make decisions with respect to director compensation within the $550,000 limit; in other words, such compensation may consist of cash, equity or other amounts, but cannot in any event exceed $550,000 per non-employee director per calendar year. The Non-Employee Director Compensation Limitation will continue as part of the Company’s Amended and Restated 2016 Stock Plan, if approved by the shareholders at the annual meeting.

The amount of director compensation was not increased in connection with the adoption and ratification of the Non-Employee Director Compensation Limitation. In fact, our non-employee director compensation was reduced in early 2019, with the annual retainer for the chairman of each committee, other than the chairman of the Audit Committee, being reduced from $50,000 to $30,000, and the retainer for the chairman of the Audit Committee being reduced from $100,000 to $60,000. In addition, the retainer paid to members of the Audit Committee was reduced by $5,000, to $15,000 annually. Finally, the retainer for the Lead Director was reduced from $50,000 to $35,000. More recently, in March of 2020, the annual non-committee cash retainer for each member of the Board was reduced by 20 percent, to $80,000, in connection with cost-cutting initiatives resulting from the industry downturn caused by the COVID-19 crisis and the price war in the oil sector.

All cash retainers are paid on a pro rata basis at the end of each quarter. Any director may elect to receive immediately vested stock options, in lieu of any cash compensation, valued at the amount of the payment using the Black-Scholes valuation model. During 2019, in lieu of cash compensation Mr. Kotts elected to receive immediately vested options at the end of each of the first, second and third quarter, and Mr. Chase – who was appointed to the Board on February 21, 2019 – elected to receive immediately vested options at the end of the first quarter.

In addition to the cash compensation described above, non-employee directors also receive an annual equity incentive award. Annual grants of restricted share awards to non-employee directors are made shortly after the annual general meeting of shareholders. This ensures that the awards are granted only to shareholder-elected members for the current year and not to directors who are retiring or otherwise not continuing as directors. In addition, directors who retire from the Board and who meet other criteria may under certain circumstances maintain previously issued equity awards outstanding upon approval by the ESG Committee.

Beginning in 2018, following shareholder approval of the amendment to the Company’s 2016 Stock Plan, we began issuing restricted shares to our non-employee Board members with a vesting period of one year from the grant date. In early 2019, the Board agreed to reduce the yearly stock grant from $300,000 to $250,000, with the number of shares granted based on the “fair market value” equal to our share price on the date of grant.

In 2018 the Board also approved and adopted new Director Share Ownership Guidelines. Under the guidelines, each director is required to own Company shares with a value of at least five times the director’s annual cash retainer (exclusive of any portion of the retainer received as a member or chair of any Board committee). Share value for purposes of the guidelines is determined as of the date of grant for vested or unvested restricted share awards or, in the case of open market purchases, the date of acquisition. Each director has three years from the date of his or her first election to the Board by the shareholders to meet the ownership requirements of the guidelines. Each director is currently in compliance with the guidelines or is on schedule to be within the requisite three-year period.

 

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The following table sets forth information concerning total director compensation in 2019 for each non-employee director.

Director Compensation Table

 

               

Name(1)

   Fees
Earned or
Paid in
Cash ($)
     Stock
Awards
($)(2)(3)
     Option
Awards
($)(4)
     Non-Equity
Incentive Plan
Compensation
Non-Equity
Incentive Plan
Compensation
($)
     Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
     All Other
Compensation
($)
     Total ($)  
                                                                

Tanya S. Beder

     160,765        250,000        0        0        0        0        410,765  

Anthony R. Chase(5)

     90,000        250,000        13,000        0        0        0        353,000  

James R. Crane

     135,652        250,000        0        0        0        0        385,652  

John P. Kotts

     45,000        250,000        135,000        0        0        0        430,000  

Michael C. Linn

     140,000        250,000        0        0        0        0        390,000  

John Yearwood

     191,417        250,000        0        0        0        0        441,417  

 

(1)

Mr. Petrello, who was an employee of the Company throughout 2019, is not included in this table. His compensation is reflected in the Summary Compensation Table under “—Executive Compensation Tables” below.

(2)

The amounts shown in the “Stock Awards” column reflect the grant-date fair value of restricted share awards, in accordance with FASB ASC Topic 718. Dividends on stock awards are not shown in the table because those amounts are factored into the grant date fair value. On June 4, 2019, upon re-election each non-employee director then on the Board received an award of 96,899 restricted shares as part of his or her annual compensation. The number of restricted shares was determined by dividing the approved award dollar amount of $250,000 by the “Fair Market Value” on the date of grant, which was $2.58.

(3)

As of December 31, 2019, the aggregate number of outstanding unvested restricted share awards held by non-employee directors were: Ms. Beder—107,370 shares; Mr. Chase—96,899 shares; Mr. Crane—107,370 shares; Mr. Kotts—107,370 shares; Mr. Linn—107,370 shares; and Mr. Yearwood—107,370 shares.

(4)

The amounts shown in the “Option Awards” column reflect the grant-date fair value of stock option awards, as calculated in accordance with FASB ASC Topic 718. The only stock option awards granted to non-employee directors during 2019 were to Messrs. Chase and Kotts, each of whom received options in lieu of certain of their quarterly cash retainers. As of December 31, 2019, the aggregate numbers of stock options outstanding were: Ms. Beder—2,982; Mr. Chase—8,851; Mr. Crane—58,463; and Mr. Kotts—479,791, all of which are fully vested.

(5)

Mr. Chase was appointed as a director on February 21, 2019. Accordingly, fees earned by Mr. Chase consist of a pro-rata amount of annual retainer fee and committee membership fees in 2019 following his appointment to the Board.

 

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Share Ownership

Share Ownership of Directors and Executive Officers

We encourage our directors and executive officers to own our common shares in order to align their interests with those of other shareholders. Ownership of the Company’s common shares ties a portion of their net worth to the Company’s share price and provides a continuing incentive for them to work toward superior long-term stock performance.

As of April 3, 2020, Nabors had 419,457,162 common shares outstanding and entitled to vote, including shares held by subsidiaries of Nabors. For purposes of the following table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any common shares that such person has the right to acquire within 60 days. The following table sets forth the beneficial ownership of common shares, as of April 3, 2020, by each of our current directors and executive officers, both individually and as a group. Except as otherwise indicated below, each person has sole voting and investment power for the common shares shown below.

 

   
     Common Shares Beneficially Owned  

Beneficial Owner(1)

   Number of Shares     Percent of Total
Outstanding(2)
 
                  

Tanya S. Beder(3)

     222,391        

Anthony R. Chase(3)

     105,750        

James R. Crane(3)

     331,796        

John P. Kotts(3)

     755,924        

Michael C. Linn

     273,333        

Anthony G. Petrello(3)(4)

     15,250,667       3.55

John Yearwood

     494,333        

Mark D. Andrews

     92,128        

William J. Restrepo(3)

     3,148,605        

All directors and executive officers as a group(3)

     20,674,927       4.91

 

*

Less than 1%

(1)

The address of each of the directors and named executive officers listed above is in care of the Company at Crown House, 4 Par-la-Ville Rd., Second Floor, Hamilton, HM 08 Bermuda.

(2)

Based on the Company’s total common shares outstanding as of April 3, 2020, the record date for this year’s meeting.

(3)

We have included in the table common shares underlying stock options that have vested or are scheduled to vest within 60 days of April 3, 2020. For purposes of computing the percentage of shares held by the persons named above, such option shares are not deemed to be outstanding for purposes of computing the ownership of any person other than the relevant option holder. The number of common shares underlying fully vested stock options, or those vesting within 60 days of April 3, 2020, included in the table are as follows: Ms. Beder – 2,982; Mr. Chase – 8,851; Mr. Crane – 58,463; Mr. Kotts – 479,791; Mr. Petrello – 750,000; and all directors/executive officers as a group – 1,300,087. Restricted share awards are considered outstanding shares and therefore are included in the table above regardless of vesting schedule. Similarly, we have included in the table common shares underlying mandatory convertible preferred shares as of April 3, 2020, based on the minimum conversion rate of 5.7173 common share for each preferred share held. For purposes of computing the percentage of shares held by the persons above, such convertible shares are not deemed to be issued and outstanding for purposes of computing the ownership of any other person other than the relevant holder of the preferred shares. The number of common shares underlying fully converted preferred shares as of April 3, 2020, included in the table, are as follows: Mr. Petrello – 5,146; Mr. Restrepo – 41,336.

(4)

The shares listed for Mr. Petrello include 314,236 shares owned by a charitable foundation over which Mr. Petrello, as an officer of the foundation, has voting and dispositive power. Mr. Petrello disclaims beneficial ownership of those shares.

 

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Share Ownership of Certain Beneficial Owners

The following table contains information regarding each person known to us to beneficially own more than 5% of our outstanding common shares as of April 3, 2020, based on Schedule 13G filings made by such persons with the SEC.

 

     

Beneficial Owner Name and Address

   Number of Shares      Percent of Total
Outstanding(1)
 
                   
     

BlackRock, Inc.(2)

55 East 52nd Street

New York, NY 10055

     56,302,802        13.42
                   
     

Dimensional Fund Advisors LP(3)

Building One

6300 Bee Cave Road

Austin, TX 78746

     27,523,737        6.56
                   
     

The Vanguard Group(4)

100 Vanguard Blvd.

Malvern, PA 19355

     37,332,050        8.90
                   

 

(1)

Based upon the Company’s total common shares outstanding as of April 3, 2020.

(2)

Based on a Schedule 13G/A filed on February 10, 2020, BlackRock, Inc. and certain of its affiliates have sole voting power with respect to 55,150,925 shares and sole dispositive power with respect to 56,302,802 shares as of December 31, 2019.

(3)

Based on a Schedule 13G/A filed on February 12, 2020, Dimensional Fund Advisors LP and certain of its affiliates have sole voting power with respect to 26,851,806 shares and sole dispositive power with respect to 27,523,737 shares as of December 31, 2019. Dimensional Fund Advisors LP serves as investment adviser, sub-adviser and/or manager to certain investment companies, comingled funds, group trusts and separate accounts that own all of the reported shares. According to its Schedule 13G/A, Dimensional Fund Advisors LP disclaims beneficial ownership of such shares.

(4)

Based on a Schedule 13G/A filed on February 12, 2020, The Vanguard Group and certain of its affiliates have sole voting power with respect to 322,368 shares, shared voting power with respect to 37,305 shares, sole dispositive power with respect to 37,008,344 shares and shared dispositive power with respect to 323,706 shares as of December 31, 2019.

Delinquent Section 16(a) Reports

All of our directors and executive officers are required to file reports of share ownership and reports of changes in ownership with the SEC pursuant to Section 16(a) of the Exchange Act. To our knowledge, and based solely on our review of the copies of Forms 3, 4 and 5 and amendments thereto furnished to us during 2019, and written representations from our directors and executive officers, we believe that all Section 16(a) filing requirements were met for such directors and executive officers in 2019 in a timely manner, with the exception of a single transaction by Mr. Kotts for which a Form 4 was inadvertently not filed due to an administrative error, but which was filed later on a Form 5.

 

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Certain Relationships and Related-Party Transactions

The Board has adopted a written policy regarding the review, approval and ratification of “related-party transactions”. A “related person” is defined under applicable SEC rules and includes our directors, executive officers, beneficial owners of 5% or more of our common shares and each of their immediate family members. Under the written policy, our ESG Committee, which is comprised entirely of independent directors, is responsible for reviewing and approving in advance all transactions involving any related party of the Company. In making its determination, the Committee must consider the fairness of the transaction to the Company and the potential impact of the transaction on the director’s independence.

Mr. Crane, an independent director of our Board, controls Crane Capital Group Inc. (“CCG”), an investment management company that indirectly owns a majority interest in or otherwise controls several operating companies, some of which have provided services to the Company in the ordinary course of business, including transportation and international logistics. In 2019, the Company’s payments to these CCG companies totaled $18.9 million excluding pass through charges, which the ESG Committee determined is immaterial to both the Crane companies and the Company. In its determination, the ESG Committee considered that:

 

(1)

The Company’s aggregate payment for services to the CCG companies constituted approximately 1.2 percent of the consolidated revenue of the CCG companies;

(2)

Mr. Crane was not and is not involved in the commercial decisions of either the Company or the CCG companies related to the provision of services to the Company; and

(3)

All commercial transactions between the Company and the CCG companies were and are conducted at arm’s length and in the ordinary course of business.

The ESG Committee and the Board considered the totality of the information and concluded that Mr. Crane met both the objective and subjective standards of director independence established by the NYSE, as well as the Board’s Governance Guidelines. The ESG Committee and the Board also approved ongoing ordinary-course business transactions between the Company and the CCG companies.

 

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AUDIT COMMITTEE REPORT

The Audit Committee operates under a written charter adopted by the Board, which is available on the Company’s website at www.nabors.com. The Audit Committee is responsible for (i) oversight of the quality and integrity of the Company’s consolidated financial statements, the Company’s system of internal controls over financial reporting, and financial risk management, (ii) the qualifications and independence of the Company’s independent registered public accounting firm (independent auditor), (iii) the performance of the Company’s internal auditors and independent auditor and (iv) the Company’s compliance with legal and regulatory requirements with respect to the foregoing. Subject to approval by the shareholders, the Audit Committee has the sole authority and responsibility to select, determine the compensation of, oversee, evaluate and, when appropriate, replace the Company’s independent auditor.

The Audit Committee serves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. Management is responsible for the financial reporting process, including the Company’s system of internal controls for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States, and for the assessment of and the report on the Company’s internal control over financial reporting included in the Annual Report. The Company’s independent auditor is responsible for auditing those financial statements and expressing an opinion as to (i) their conformity with such accounting principles and (ii) the effectiveness of the Company’s internal controls over financial reporting. PricewaterhouseCoopers LLP was the Company’s independent auditor in 2019. The Audit Committee’s responsibility is to oversee the financial reporting process and to review and discuss management’s report on the Company’s internal controls over financial reporting. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management, the internal auditors and the independent auditor.

During 2019, the Audit Committee, among other things:

 

 

Reviewed and discussed the Company’s quarterly earnings releases, quarterly reports on Form 10-Q, and the annual report on Form 10-K, including the consolidated financial statements and the report on internal controls;

 

 

Reviewed and discussed the Company’s policies and procedures for financial risk assessment and financial risk management and the major financial risk exposures of the company and its business units, as appropriate;

 

 

Reviewed and discussed the annual plan and the scope of work of the internal auditors for 2019 and summaries of the significant reports to management by the internal auditors;

 

 

Provided input to the Compensation Committee regarding performance of key finance, internal control and risk management personnel;

 

 

Reviewed and discussed with management their reports on the Company’s policies regarding applicable legal and regulatory requirements;

 

 

Reviewed and approved the Audit Committee’s charter; and

 

 

Met with the independent auditor in executive sessions.

The Audit Committee reviewed and discussed with management, the internal auditors and the independent auditor the audited consolidated financial statements for the year end December 31, 2019, the critical accounting policies that are set forth in the Company’s annual report on Form 10-K for the year then ended, management’s annual report on the Company’s internal controls over financial reporting, and PricewaterhouseCoopers LLP’s opinion on the effectiveness of the internal controls over financial reporting.

The Audit Committee discussed with the independent auditor matters that independent registered public accounting firms must discuss with Audit Committees under generally accepted auditing standards and standards of the Public Company Accounting Oversight Board (“PCAOB”), including, among other things, matters related to the conduct of the audit of the Company’s consolidated financial statements and the matters required to be discussed by PCAOB Accounting Standards No. 1301 (Communications with Audit Committees). This review included a discussion with management and the independent auditor of the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the disclosures in the Company’s consolidated financial statements, including the disclosures related to critical accounting policies.

The independent auditor also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the PCAOB and represented that it is independent from the Company. The Audit Committee discussed with the independent auditor its independence from the Company, and considered whether services it provided to the Company beyond those rendered in connection with its audit of the Company’s annual consolidated financial statements included in its annual report on Form 10-K, reviews of the Company’s interim condensed consolidated financial statements included in its quarterly reports on form 10-Q, and its opinion on the effectiveness of the Company’s internal controls over financial reporting, were compatible with maintaining its independence.

 

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AUDIT COMMITTEE

 

The Audit Committee also reviewed and preapproved, among other things, the audit, audit-related, tax and other services performed by, and related fees of, the independent auditor. The Audit Committee received regular updates on the amount of fees and scope of audit, audit-related, tax and other services provided.

Based on the Audit Committee review and these meetings, discussions and reports discussed above, and subject to the limitations on its role and responsibilities referred to above and in the Audit Committee charter, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements for the year ended December 31, 2019, be included in the Company’s annual report on Form 10-K. The Audit Committee also selected PricewaterhouseCoopers LLP as the Company’s independent auditor for the year ending December 31, 2020, which it believes is in the best interest of the Company and/or shareholders, and is presenting that selection to shareholders for approval at the meeting.

Respectfully submitted,

THE AUDIT COMMITTEE

John P. Kotts, Chairman

Tanya S. Beder

John Yearwood

 

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AUDIT COMMITTEE

 

Item 2: Approval and Appointment of Independent Auditor and Authorization For The Audit Committee To Set The Independent Auditor’s Remuneration

PricewaterhouseCoopers LLP served as independent auditors for the Company for the year ended December 31, 2019. PricewaterhouseCoopers LLP or its predecessor has been our independent auditor since May 1987.

Under Bermuda law, our shareholders have the responsibility to approve the appointment of the independent auditor of the Company to hold office until the close of the next annual general meeting and to authorize the Audit Committee of the Board to set the independent auditor’s remuneration. At the meeting, the shareholders will be asked to approve the appointment of PricewaterhouseCoopers LLP as our independent auditor for the year ending December 31, 2020, and to authorize the Audit Committee to set the independent auditor’s remuneration. The selection of PricewaterhouseCoopers LLP as our independent auditor for the year ending 2020 was approved by the Audit Committee in February 2020.

Representatives of PricewaterhouseCoopers LLP will be present at the meeting with the opportunity to make a statement if they desire to do so and to respond to appropriate questions.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2, THE APPOINTMENT OF

PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITOR OF THE COMPANY AND AUTHORIZATION

OF THE AUDIT COMMITTEE TO SET THE INDEPENDENT AUDITOR’S REMUNERATION

Audit Committee Pre-Approval Policy

The Audit Committee has established a pre-approval policy for all audit and permitted nonaudit services (including the fees and terms thereof) to be performed for the Company by the independent auditor. The Chairman of the Audit Committee may preapprove permissible proposed nonaudit services that arise between committee meetings, provided that the decision to preapprove the service is reported to the full Audit Committee at the next regularly scheduled meeting. During 2019, all audit and nonaudit services performed by the independent auditor were subject to the pre-approval policy.

Independent Auditor Fees

The following table summarizes the aggregate fees for professional services rendered by PricewaterhouseCoopers LLP. The Audit Committee preapproved all fees for 2019 and 2018 services.

 

     
     2019      2018  
                   

Audit Fees

   $ 5,414,088      $ 6,964,484  

Audit-Related Fees

     18,258        2,500  

Tax Fees

     242,134        1,285,269  

All Other Fees

     2,700        2,700  

Total

   $ 5,677,180      $ 8,254,953  

Audit Fees for the years ended December 31, 2019 and 2018, respectively, include fees for professional services rendered for the audits of the consolidated financial statements of the Company and the audits of the Company’s internal control over financial, in each case as required by Section 404 of the Sarbanes-Oxley Act of 2002 and applicable SEC rules, statutory audits, consents and accounting consultation attendant to the audit.

Audit-Related Fees for the years ended December 31, 2019 and 2018, respectively, include consultations concerning financial accounting and reporting standards.

Tax Fees for the years ended December 31, 2019 and 2018, respectively, include services related to tax compliance, including the preparation of tax returns and claims for refund, and tax planning and tax advice.

All Other Fees for the years ended December 31, 2019 and 2018 respectively, include nonrecurring advisory services with respect to corporate process improvements, as well as market data research.

 

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COMPENSATION DISCUSSION

AND ANALYSIS

This compensation discussion and analysis (“CD&A”) is intended to help you understand the executive compensation practices and decisions we made in 2019 relating to the named executive officers listed below (the “executive officers”). This CD&A supplements and should be read in conjunction with the compensation tables and related narratives of this Proxy Statement.

 

 

CD&A and Related Compensation Disclosures

  Table of Contents

 

Executive Summary

    29  

Compensation Principles and Practices

    35  

Key Components of Executive Compensation

    36  

Setting Executive Compensation

    46  

Other Benefits and Perquisites

    47  

Term of Employment

    49  

Share Ownership Policy

    49  

Risk Assessment

    50  

Tax Considerations – Section 162(m)

    50  

Compensation Committee Report

    51  

Compensation Committee Interlock and Insider Participation

    52  

Executive Compensation Tables

    53  

Summary Compensation Table

    53  

Grants of Plan-Based Awards

    56  

Option Exercises and Shares Vested

    57  

Outstanding Equity Awards at Fiscal Year End

    58  

Nonqualified Deferred Compensation

    59  

Potential Payments Upon Termination or Change in Control

    60  

Required CEO Pay Ratio Disclosure

    63  

Executive Summary

Named Executive Officers

  Anthony G. Petrello, Chairman of the Board, President and Chief Executive Officer
  William J. Restrepo, Chief Financial Officer
  Mark D. Andrews, Corporate Secretary

Our executive compensation program for 2019 consisted of three main components that reflect our compensation philosophy:

 

1.

Annual base salary;

 

2.

A capped performance-based cash award (“annual performance bonus”) under our Incentive Plan (as defined below); and

 

3.

Equity awards consisting of the following: (i) for our CEO and CFO, capped long-term performance-based equity incentive awards, consisting of performance shares that are subject to achievement of annual performance goals (“Performance Shares”) and capped long-term performance shares subject to achievement of Total Shareholder Return relative to our peers over a three-year period (“TSR Shares”); and (ii) for Mr. Andrews, time-based restricted shares.

The purpose of this program is to enable us to remain competitive within our industry while ensuring that our executive officers are appropriately incentivized to deliver shareholder value, both over the medium and the long term.

 

 

Our 2019 Say-on-Pay and Shareholder Outreach

LOGO

At our 2019 Annual Meeting, 47.3% of votes cast were in favor of our 2019 executive compensation program, up significantly from the prior year. Nonetheless, the Board continues to be concerned with the low level of support that our executive compensation program has received from our shareholders. In late 2019, members of the Board – including our Lead Director and the Chairman of the Compensation Committee – reached out to shareholders to discuss a variety of corporate governance topics and to hear investors’ specific views on our executive compensation programs. In connection with these engagement efforts, our 10 largest institutional shareholders were contacted, representing approximately 46 percent of our outstanding shares. Of those, only three institutional shareholders representing approximately 24 percent of our outstanding shares responded and agreed to hold discussions. The feedback from these shareholders included suggestions to:

 

 

Make at least a portion of incentive compensation subject to achieving ESG (environmental, social, and governance) related objectives;

 

 

Consider weighting incentives more heavily toward de-leveraging or other initiatives important to shareholders; and

 

 

Make incentive compensation more closely resemble that of our peers.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

The Board hopes that shareholders will view positively the following Compensation Committee considerations and responses in connection with this feedback:

 

     

Shareholder Concern

        Company Considerations And Responses
             
   

Establish ESG-related incentive goals

   

•  At least one goal for Mr. Petrello will be ESG related in 2020.

             
   

Consider weighting incentives more heavily toward de-leveraging or other initiatives important to shareholders

   

•  Of the five goals for each of Mr. Petrello and Mr. Restrepo in 2020, two related to financial performance will account for 55 percent of their total Performance Share metrics.

             
   

Make incentive compensation more closely resemble that of peers

   

•  In January 2020, the Compensation Committee awarded unvested Performance Share Units (“PSU”) to Messrs. Petrello and Restrepo in lieu of the Performance Shares that each would have otherwise been eligible to earn under his employment agreement with respect to 2020 performance metrics established by the Compensation Committee. The Compensation Committee believes these PSU awards more closely resemble the types of awards given to NEOs of our peers. In addition, by granting the PSU awards at the beginning of the performance period, rather than at the end as is the case with the Performance Shares, the awards are now “forward looking” and more clearly demonstrate the performance-based nature of the awards. The PSU awards will only vest to the extent the applicable performance metrics are achieved during 2020.

             

2019 Performance Highlights

The Company accomplished several important objectives during the year:

 

         

Cash Provided by Operations

 

h $685 M

    

Free Cash Flow after Dividends(1)

 

h $279 M

    

Adjusted EBITDA(2)

 

h 6.0%

    

Total Debt

 

i $253M

    

Net Debt(3)

 

i $224M

 

Delivered cash from operations of $685 million, and free cash flow after dividends of $279 million

 

Reduced total debt by $253 million, and net debt by $224 million

 

Improved liquidity by entering into a $250 million A/R purchase and sale facility, and by amending the 2018 revolving credit facility to, among other things, replace the capitalization-related covenant with a more appropriate leverage covenant

 

Increased adjusted EBITDA by 6 percent

 

Increased daily margins in the U.S. Lower 48 by 8.4 percent to $10,218 in the fourth quarter of 2019

 

Increased annual average rig count in the U.S. Lower 48 while the industry decreased by approximately 10 percent

 

Introduced our next generation Canrig® Sigma top drive

 

Increased higher-margin integrated tubular running services work

 

 

 

(1)

Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities and cash paid for dividends. Free cash flow after dividends is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. Please refer to Annex A to this Proxy Statement for a reconciliation of this non-GAAP financial measure to cash flow provided by operations, which is a GAAP measure.

(2)

“Adjusted EBITDA” is calculated by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the consolidated company based on several criteria, including adjusted EBITDA, because we believe that this financial measure, along with adjusted operating income, accurately reflect our ongoing profitability and performance. Please refer to Annex A to this Proxy Statement for a reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a GAAP measure.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

(3)

“Net debt” is calculated as total debt minus the sum of cash and cash equivalents and short-term investments. Net debt is a non-GAAP measure and should not be used in isolation or as a substitute for amounts reported in accordance with GAAP. Please refer to Annex A to this Proxy Statement for a reconciliation of this non-GAAP measure to total debt, which is a GAAP measure.

Notwithstanding the above accomplishments, Nabors is facing some of the most difficult economic conditions experienced in years. The combination of the COVID-19 pandemic and an ongoing price war in the oil sector is impacting our activity levels in the U.S. and overseas. We expect these trends to worsen and to have a material effect on our activity levels through the remainder of the year. Rest assured that the Company and the Board are engaged and taking appropriate measures to address these extraordinary circumstances, including the recent amendment to our common share capital to effect a reverse stock split of our outstanding common shares. In addition, we have instituted Company-wide cost savings measures involving, among other things, planned reductions to 2020 capital expenditures and reductions to Board and executive compensation. The Board’s retainer has been reduced by 20 percent, and the base salaries of the CEO and CFO have been reduced by approximately 31 percent from the amounts set forth in their respective employments agreements for the period from March 23, 2020 through the end of the year, and by approximately 26 percent and 24 percent for all of 2020.

The Compensation Committee hopes that shareholders will consider the Company’s accomplishments in 2019, as well as recent actions taken in light of challenges facing our industry, when casting their say-on-pay votes at the 2019 annual general meeting of shareholders.

CEO “Reported” vs. “Realized” Compensation

Any discussion of our executive compensation program would be incomplete without first understanding the structure, design and long-term impact of the equity-based compensation program for our CEO. In that regard, it may be helpful to better understand how our CEO’s compensation, as reported in our proxy statements, compares to the value actually realized by him in subsequent years. It also is important to understand that virtually all annual cash bonus and equity compensation is performance based. The Compensation Committee believes this better aligns executive compensation with shareholder returns.

Virtually all equity awards granted to our CEO prior to 2020 fell into only one of two categories – TSR Shares and Performance Shares. The value that ultimately may be realized for these awards is conditioned upon CEO and Company performance. The target grant date value shown for the TSR Shares and Performance Shares granted to our CEO each year is not necessarily the actual compensation received by our CEO in respect of those awards. In addition, Performance Shares granted after the satisfaction of the applicable performance goals vest ratably over three years following the grant date, subject to our CEO’s continued employment with us (and subject to certain exceptions in connection with involuntary employment terminations). In effect, the Performance Shares serve as a ‘‘Golden Handcuff’’ which yields vesting over a three-year period even though the performance goals have been met. As per the tables below, the value actually realized by our CEO for the TSR Share awards that he received in 2014, 2015, 2016, 2017 and 2018 (the most recent years for which all such awards have vested, or in the case of 2018 that was forfeited), and for the Performance Share awards that he received in 2014, 2015, and 2016 (the most recent years for which all such awards have vested in full), was significantly lower than the grant date value of the awards.

 

   
  TSR Shares      Key Features

 

 

•  These are performance-based contingent shares, with the value shown in the Summary Compensation Table based on the probable outcome of the percentage of vesting of such shares using a Monte Carlo multiple probability simulation model

 

•  Vesting based on the Company’s TSR performance relative to the peer group measured over a three-year period

 

•  Minimum performance criteria must be met in order for any TSR Shares to vest

 

•  Number of shares that may vest at end of performance period are capped at target if Nabors’ TSR performance is negative

 
             

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

         

Year Reported

   Reported
Grant Date
Value
     Percentage
of Shares
that Vested
at End of
Performance
Period
    Realized Value
of Shares
that Vested
at End of
Performance
Period(1)
   

% Change from

Reported Value

                                   

2018

   $ 4,048,267        0 %(2)    $ 0 (2)   

LOGO

  decrease
in value

2017

   $ 3,558,119        40   $ 377,415    

LOGO

  decrease
in value

2016

   $ 3,353,662        25   $ 328,877     LOGO   decrease
in value

2015

   $ 3,787,224        40   $ 1,203,745     LOGO   decrease
in value

2014

   $ 3,356,826        60   $ 2,895,473     LOGO   decrease
in value

 

(1)

Values shown do not take into account shares tendered back to the Company to cover tax withholdings.

(2)

On December 31, 2018, the Compensation Committee approved a transaction pursuant to which Mr. Petrello voluntarily forfeited these TSR Shares. In exchange for such forfeiture, Mr. Petrello received an award of 750 restricted shares, having a grant date fair value of $1,500, that vests in equal installments on the first three anniversaries of the date of grant.

 

   
  Performance Shares      Key Features

 

 

•  Number of restricted shares granted based upon the achievement of certain pre-determined financial or operational performance goals measured over the one-year performance period prior to the year such shares are granted (i.e., the 2019 Performance Share grant was based on achievement of performance goals during 2018)

 

•  Once earned and granted, Performance Shares remains subject to a 3-year vesting period following the grant date, with shares vesting in equal increments subject to employment, even though the applicable performance goals were met

 

•  Minimum performance threshold applies before any Performance Shares can be granted

 

•  Subject to a maximum award amount

 
             

 

       

Year Reported

   Reported
Grant Date
Value
     Aggregate
Value Realized
on Vesting(1)
    % Change from
Reported Value
                           

2017

   $ 5,839,601      $ 1,537,138 (2)   

LOGO

 

decrease

in value

 

2016

   $ 7,455,107      $ 6,660,473 (3)   

LOGO

 

decrease

in value

 

2015

   $ 5,201,428      $ 4,297,337 (4)    LOGO  

decrease

in value

 

2014

   $ 6,460,000      $ 4,312,719 (5)    LOGO  

decrease

in value

 

 

(1)

Values shown do not take into account shares tendered back to the Company to cover tax withholdings.

(2)

Amount includes: 127,141 shares that vested on February 17, 2018 at $6.62 per share; 127,142 shares that vested on February 17, 2019 at $3.20 per share; and 127,141 shares that vested on February 17, 2020 at $2.27 per share.

(3)

Amount includes: 361,197 shares that vested on June 7, 2017 at $8.84 per share; 361,197 shares that vested on June 7, 2018 at $7.25 per share; and 361,197 shares that vested on June 7, 2019 at $2.35 per share.

(4)

Amount includes: 153,888 shares that immediately vested on February 20, 2015 at $13.52 per share; 76,943 shares that vested on February 20, 2016, at $6.88 per share; 76,945 shares that vested on February 20, 2017, at $15.31 per share; and 76,945 shares that vested on February 20, 2018 at $6.62 per share.

(5)

Amount includes: 120,771 shares that vested on February 21, 2015, at $13.52 per share; 120,769 shares that vested on February 21, 2016, at 6.88 per share; and 120,771 shares that vested on February 21, 2017 at $15.31 per share.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Because of the timing difference between the grant date and the vesting date of equity awards, the compensation reported for our CEO over each of the last three years is significantly different, and in aggregate is significantly greater over the three-year period, than the compensation actually realized by him over the same time period. Reported pay refers to the value reported in the compensation tables required under Item 402 of Regulation S-K, which we calculate based on applicable SEC rules and guidance. Realized pay refers to the value of compensation actually received by the executive during the year, and includes the following:

 

 

base salary, cash awards under the Non-Equity Incentive Plan, and special cash bonuses (no such special cash bonuses have been awarded in the last three years);

 

 

the value of share awards that actually vested during the year;

 

 

the value, if any, realized upon the exercise of stock options during the year; and

 

 

the value of all perquisites and other personal benefits, to the extent they were includible in the named executive officer’s gross income or otherwise resulted in imputed income for tax purposes.

The table below reflects the realized pay of our CEO for the years 2019, 2018 and 2017 compared to the total compensation reported below under “Executive Compensation Tables—2019 Summary Compensation Table” for the corresponding years.

 

                     

Year

  Salary($)     Bonus($)     Stock
Awards($)
    Exercised
Option
Awards($)
    Non-Equity
Incentive
Plan
Compensation($)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings($)
    All Other
Compensation($)
    Total
Realized
Pay($)
    Total
Reported
Pay($)
    %
Difference
 

2019

    1,575,000       0       2,465,417 (1)      0       1,600,777       225,644       1,481,784       7,348,622       14,042,823       (48 )% 

2018

    1,750,000       0       6,520,875 (2)      0       1,659,604       109,931       1,304,924       11,345,334       14,742,873       (23 )% 

2017

    1,750,000       0       11,173,242 (3)      0       1,464,516       79,669       1,430,806       15,898,233       14,122,711       13

 

(1)

This is the value of the shares that vested during the year, and includes the following: 150,172 TSR Shares from the 2016 Share grant that vested on January 2, 2019, at $2.19 per share; 127,142 Performance Shares from the 2017 Performance Share grant that vested on February 17, 2019, at $3.20 per share; 283,921 Performance Shares from the 2018 Performance Share grant that vested on February 23, 2019, at $3.10 per share; 361,197 Performance Shares from the 2016 Performance Share grant that vested on June 7, 2019, at $2.35 per share; and 250 restricted shares from the 2018 grant that vested on December 31, 2019, at $2.87 per share.

(2)

This is the value of the shares that vested during the year, and includes the following: 174,709 TSR Shares from the 2015 TSR Share grant that vested on February 23, 2018, at $6.89 per share; 76,945 Performance Shares from the 2015 Performance Share grant that vested on February 20, 2018, at $6.62 per share; 174,534 restricted shares from the 2015 Special Equity grant that vested on April 24, 2018, at $7.72 per share; 361,197 Performance Shares from the 2016 Performance Share grant that vested on June 7, 2018, at $7.25 per share; and 127,141 Performance Shares from the 2017 Performance Share grant that vested on February 17, 2018, at $6.62 per share.

(3)

This is the value of the shares that vested during the year, and includes the following: 189,123 TSR Shares from the 2014 TSR Share grant that vested on February 17, 2017, at $15.31 per share; 120,771 Performance Shares from the 2014 Performance Share grant that vested on February 21, 2017, at 15.31 per share; 76,945 Performance Shares from the 2015 Performance Share grant that vested on February 20, 2017, at $15.31 per share; 174,534 restricted shares from the 2015 Special Equity grant that vested on April 24, 2017, at $11.79 per share; and 361,197 Performance Shares from the 2016 Performance Share grant that vested on June 7, 2017, at $8.84 per share.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

The chart below provides a comparison of our CEO’s reported compensation to his realized compensation for each year(1):

 

LOGO

 

(1)

Comparison excludes reported and realized compensation from the following categories in the applicable Summary Compensation Table for the applicable years: (a) Change in Pension Value and Nonqualified Deferred Compensation Earnings, and (b) All Other Compensation.

Beginning in 2020 the Compensation Committee has granted Performance Share Units in response to shareholder requests that our CEO and CFO incentive compensation be made to more closely resemble that of our peers.

 

   
  Performance Share Units (Redesigned for 2020)      Key Features

 

 

•  For 2020 performance, replaced Performance Shares with Performance Share Units (or PSUs)

 

•  Unvested PSUs granted at the beginning of the performance period

 

•  PSUs are only earned to the extent the performance goals established by the Compensation Committee for the performance period have been achieved.

 

•  Any PSUs ultimately earned upon completion of performance goals vest ratably on each of the first three anniversaries of the date of grant, subject to the executive’s continued employment on the applicable vesting date.

 
             

Shareholders should be aware that the shift from Performance Shares to PSUs in 2020 may result in higher-than-normal compensation for our CEO and CFO in our proxy statement next year. That is because the compensation table will include both the Performance Share Award received by each of them in January 2020, based on achievement of performance goals in 2019, and PSUs granted in January 2020 that will be earned based on achievement of performance goals for 2020. This will be a one-time anomaly associated with the shift from Performance Shares to PSUs.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Compensation Principles and Practices

In 2019, we continued to adhere to compensation practices that strengthen the alignment between the compensation of our executive officers, Company performance and shareholder returns:

 

WHAT WE DO              WHAT WE DON’T DO
                 

 

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  Independent Compensation Committee – We have oversight by a Compensation Committee comprised of only independent non-employee directors    

 

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  No excessive perquisites without a compelling business rationale
                 
       

 

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  Independent Compensation Consultant – Our Compensation Committee engages an independent compensation consultant    

 

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  No repricing of underwater stock options without shareholder approval
                 
       

 

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  Pay for performance – The vast majority of executive compensation is tied to performance with specific, measurable financial and operational objectives    

 

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  No excise tax gross-ups in connection with a change-of-control, and it is our policy not to include any such tax gross-ups in any future executive officer agreements
                 
       

 

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  Capped TSR Shares – TSR Share award payouts are capped at target if Nabors’ absolute TSR is negative during the relevant performance period    

 

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  No discretionary bonuses except in the case of extraordinary specific developments that materially enhance the value of the Company
                 
       

 

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  Capped Severance – Severance payments are limited in our executive agreements to 2.99 times the sum of average base salary and bonus for 3 years prior to termination    

 

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  Target individual elements of compensation or total compensation to a certain percentile within a peer group
                 
       

 

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  Annual Say-on-Pay Vote – We conduct an annual say-on-pay advisory vote    

 

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  Employ peer group analysis in determining the compensation of our employees other than the CEO and CFO
                 
       

 

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  Market Referencing – Review executive compensation disclosures of peer group companies, or published compensation survey sources, and review market information and survey data to understand how our aggregate executive compensation compares to competitive norms      
                 
       

 

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  Share Ownership Policy – Our executive Share Ownership Policy aligns the interests of the CEO and CFO with those of the shareholders      
                 
       

 

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  Shareholder Feedback – We regularly reach out to shareholders to discuss a variety of corporate governance topics and to hear investors’ specific views on our executive compensation programs      
                 
       

 

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Key Components of Executive Compensation

An appropriate mix of key compensation components, which are discussed in more detail below, enables us to remain competitive within our industry while ensuring that our executive officers are appropriately incentivized to deliver shareholder value.

 

     

Compensation

Element

  Link to Compensation
Philosophy
  Key Design Features
         
   

Base Salary

 

•  Enables the Company to attract and retain top talent

 

•  Rewards the skill and expertise that our executive officers contribute to the Company on a day-to-day basis

 

•  CEO base salary aligned with median market levels based on Peer Group (as defined later in this CD&A)

 

•  Determined based on a variety of considerations, including contractual obligations, performance, experience level, additional responsibilities, internal equity, and retention risk

         
   

Annual Cash Incentive
(the “Incentive Plan”)

 

•  Focuses executive officers on achieving specific performance measures and to reward successful financial outcomes

 

•  Competitive opportunity aids with attraction and retention of top talent

 

•  Aligns executives with shareholders by placing a significant portion of annual compensation at risk for achievement of key near-term strategic and financial performance goals that are critical to long-term growth

 

Mr. Petrello & Mr. Restrepo

 

•  For 2019, again based 100% on adjusted EBITDA

 

•  Threshold: $616 Million

 

•  Target: $880 Million

 

•  Maximum: $1,056 Million

 

•  No award will be earned unless threshold level performance is achieved.

 

•  Mr. Andrews’ annual cash incentive bonus is determined based on quantitative goals established by the Committee at the beginning of each annual performance period.

         
   

Performance Shares

 

•  Aligns executives with shareholders by tying a significant portion of compensation to achievement of strategic objectives critical to long-term growth

 

•  Reinforces alignment by awarding compensation in the form of equity

 

•  Reinforces retention by vesting earned awards over a three year period

 

•  Shares earned based on achievement of applicable performance goals during the prior year

 

•  Only granted to the extent the applicable performance criteria established for the 1-year performance period have been achieved

 

•  Once earned and granted, awards vest over an additional three year term subject to continued employment with the Company

         
   

TSR Shares

 

•  Aligns executives with shareholders by tying a significant portion of compensation to achievement of strong relative total shareholder return performance over a multi-year period

 

•  Reinforces shareholder alignment by awarding compensation in the form of equity

 

•  Shares earned based upon TSR performance relative to our peers over the three years following the grant date

 

•  No shares are earned if relative performance is below the peer group 25th percentile

 

•  Capped at target if absolute TSR is negative

         
   

Time-based Restricted Shares (Mr. Andrews only)

 

•  Supports leadership retention goals

 

•  Reinforces alignment with shareholders by awarding compensation in the form of equity

 

•  Annual equity grant determined by multiplying annual cash incentive bonus award by a multiple determined for Mr. Andrews based upon his position and attainment of performance metrics determined at the beginning of the annual performance period

 

•  Awards vest ratably over 4 years

         

During 2019, the Compensation Committee engaged Pearl Meyer to review our CEO’s target total direct compensation in comparison to Peer Group CEOs. Upon careful review, the Compensation Committee recommended to the independent members of the Board that no action be taken to terminate our CEO’s employment agreement at the end its term in 2019. As a result, the employment agreement extended automatically for another year. The Compensation Committee and the CEO did, however, amend the employment agreement to continue the reduction in the CEO’s base salary by 10%, from $1.75 million to $1.575 million. In addition, the Compensation Committee and Mr. Petrello agreed to reduce the number of

 

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TSR Shares he was entitled to receive at the beginning of 2020 by two-thirds, resulting in a grant-date value reduction of $3.5 million.

The Compensation Committee also agreed to amend and restate the employment agreement of our CFO, Mr. Restrepo (the “Amended Agreement”). The Amended Agreement, which became effective at the beginning of this year, includes terms largely consistent with his previous agreement (the “Prior Agreement”), other than the following: (i) the term of employment runs from January 2, 2020 until June 1, 2022; (ii) automatic twelve (12) month renewal of the Amended Agreement following the applicable expiration date or extension date, as applicable, unless written notice is given (a) by either the Company or Mr. Restrepo at least ninety (90) days prior to such date or (b) by Mr. Restrepo at least two hundred (200) days prior to his voluntary retirement, if such retirement occurs after June 1, 2022 (a “Qualifying Retirement”); (iii) the Performance Peer Group applicable to each TSR Award (as such terms are defined in agreement) shall consist of those entities determined from time to time by the Compensation Committee in consultation with the Chief Executive Officer; and (iv) upon Mr. Restrepo’s Qualifying Retirement, he will be eligible to receive the same severance payments and benefits previously available to him only in the case of his termination of employment following the expiration date of the Prior Agreement as a result of his death, Disability, Constructive Termination without Cause or by the Company without cause (as such terms are defined in the Amended Agreement), except that in the event of Mr. Restrepo’s Qualifying Retirement, all unvested TSR Shares outstanding as of the date of the agreement expiration notice shall become vested as if the performance goals with respect to relative Total Shareholder Return set forth in the applicable award agreements were achieved at maximum levels rather than target levels.

More recently, in light of the Coronavirus pandemic and the sharp drop in oil prices, the Company has instituted broad-based salary reductions. Commencing March 23, 2020, the salaries of all U.S., corporate and expatriate employees making in excess of $100,000 per year were reduced by 10 percent. Further salary reductions were put in place beginning April 6, 2020. As a result, our CEO and CFO have received reductions in base salaries, in the aggregate, of approximately 31 percent from the amounts set forth in their respective employments agreements for the period from March 23, 2020, through the end of the year, and approximately 26 percent and 24 percent, respectively, for all of 2020.

How We Determine Annual Base Salary

Base salary is a fixed element of an executive’s annual cash compensation. The Compensation Committee determines an appropriate level of base salary for our CEO and CFO by taking into account competitive and other factors and conducting a compensation comparison against a pre-selected peer group (the “Peer Group”), which is discussed later in this CD&A. The Compensation Committee makes this initial determination of base salary upon the executive’s initial appointment and periodically reviews its determination, as it deems appropriate, taking into account various factors, including the Company’s performance, market data, industry conditions and shareholder feedback.

The Compensation Committee may also take into account certain competitive factors, which sometimes include:

 

 

Compensation levels of similarly-situated executives of other drilling contractors and in the oilfield services sector at companies in our Peer Group;

 

 

Necessary levels of compensation to attract and retain highly talented executives from outside the industry; and

 

 

A newly hired executive’s salary at his or her most recent place of employment.

    2019 Annual Base Salary

Our CEO’s and CFO’s initial annual base salaries were reflected in each of their respective employment agreements as $1.70 million and $650,000, respectively. In 2014, Mr. Petrello received a 3% increase in his annual base salary to $1.75 million. In 2019, our CEO agreed to a one-year 10 percent reduction in base salary, which was extended for another year at the beginning of 2020. On March 23, our CEO received a further reduction in base salary of 10 percent, and our CFO and our Corporate Secretary received reductions in their base salaries of 20 percent and 10 percent, respectively. Further salary reductions were put in place beginning April 6, 2020. As a result, our CEO and CFO have received reductions in base salaries, in the aggregate, of approximately 31 percent from the amounts set forth in their respective employments agreements for the period from March 23, 2020, through the end of the year, and approximately 26 percent and 24 percent, respectively, for all of 2020.

How We Determine Annual Performance Bonus

At the beginning of each year, the Compensation Committee approves objective performance measures for the Company as a whole and establishes corresponding performance goals for each participant under the Incentive Plan, including our named executive officers. In structuring the performance measures and goals, the Compensation Committee sets targets for achieving those goals:

 

 

Minimum threshold before any annual performance bonus can be earned;

 

 

Target award dollar amount to incentivize a specific desired performance level; and

 

 

Maximum goal which sets an appropriate limit on the potential annual performance bonus that can be earned.

 

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Following the end of the fiscal year, the Compensation Committee determines whether the performance goals have been attained and approves any cash payment amount based upon the level of achievement of the pre-established annual performance goals.

    2019 ANNUAL CASH PERFORMANCE BONUS

All of Mr. Petrello’s and Mr. Restrepo’s annual cash performance bonuses are based on performance metrics. Pursuant to their respective employment agreements, Mr. Petrello’s annual cash performance bonus is targeted at 100 percent of his base salary, exclusive of reductions ($1.75 million for 2019) and capped at twice his base salary ($3.5 million). Mr. Restrepo’s annual performance bonus is targeted at 100 percent of his base salary, exclusive of any reductions ($650,000 for 2019) and capped at twice his base salary ($1.3 million). In each case, the target opportunity is determined by the Compensation Committee at the beginning of the applicable performance year.

For 2019, Mr. Petrello’s and Mr. Restrepo’s annual cash performance bonus was based on the Company’s targets for adjusted EBITDA. This performance measure was selected by the Compensation Committee to ensure focus on efficient and profitable operations, preservation of shareholder value through a challenging industry environment, improvement in our competitive position, and to help ensure that we remain properly positioned to capitalize on opportunities for growth. Adjusted EBITDA is a significant consideration used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s share price. The adjusted EBITDA target was calculated to achieve the stated goal of positive cash flow for the year.

The Compensation Committee established the following targets for the 2019 annual performance bonus for each of Mr. Petrello and Mr. Restrepo:

 

         

Objective

  Weight   Target Ranges   Performance
Achieved
  Cash Bonus Earned
                 
       

Adjusted

EBITDA

  100%  

Threshold: $616 Million

 

Target: $880 Million

 

Maximum: $1,056 Million

 

Achieved at 91.2% of Target

 

The Company’s adjusted EBITDA for 2018 was $802.7 million

  Because the actual performance falls between payout levels, the bonus is prorated to approximately $1.601 million for Mr. Petrello and approximately $0.595 million for Mr. Restrepo
                 

If actual performance results fall between payout levels, the annual performance bonus is prorated accordingly. In addition, adjustments to targets are permitted as deemed appropriate by the Board to account for significant events that warrant an adjustment. Actual performance for 2019 fell between the threshold and target and the actual payout was calculated using straight line interpolation between these two points. No adjustments to the target were made for 2019.

Mr. Andrews’ annual cash performance bonus is based on the achievement of quantitative performance goals established at the beginning of the annual performance period. For 2019, Mr. Andrews’ performance goals included corporate governance disclosure improvements, enhancements to the Company’s stock plan administration and captive insurance programs and improvements to corporate compliance programs, particularly with EU Economic Substance requirements. Mr. Andrews’ cash bonus for 2019 was $75,000.

Long-Term Equity Incentives

Pursuant to their employment agreements, our CEO and CFO are eligible to earn equity awards that are performance based – TSR Shares and Performance Shares. The TSR Shares are earned based on our relative TSR achievement over three years, and the Performance Shares are earned based on achievement of annual performance goals. It is important to note that, in reading the 2019 Summary Compensation Table appearing elsewhere in this proxy statement, compensation amounts represented by Performance Shares appearing in the table represent amounts awarded for performance achieved in the prior year, whereas compensation amounts represented by TSR Shares appearing in the table represent only amounts that may be earned in the future. Mr. Andrews receives only time-based restricted shares based on his performance in the previous year.

    How We Determine Our Performance-Based TSR Shares

In accordance with his employment agreement, Mr. Petrello was granted a maximum award opportunity of 2,091,633 TSR Shares in January 2019. This number was calculated by multiplying Mr. Petrello’s base salary (exclusive of any reductions) on the first day of the performance period of $1.75 million by three, then dividing that number by the 20 day average closing price of $2.51 on December 31, 2018. In accordance with his employment agreement, Mr. Restrepo was granted a maximum award opportunity of 517,928 TSR Shares, calculated by multiplying Mr. Restrepo’s base salary on the first day

 

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of the performance period of $650,000 by two, then dividing that number by the 20 day average closing price of $2.51 on December 31, 2018. Pursuant to their respective employment agreements, the target number of TSR Shares is valued at (i) 150% of base salary on the first day of the performance period for Mr. Petrello, and (ii) 100% of base salary on the first day of the performance period for Mr. Restrepo.

TSR Shares will not vest until the end of the applicable three-year performance period, with the level of vesting based on the Company’s TSR ranking compared to the TSR ranking of the companies in the Peer Group measured over this three year period. TSR for the common shares of Nabors and each Peer means the difference between (x) the average closing price for the 30 consecutive trading days prior to the start of the performance period, and (y) the average closing price for the last 30 consecutive trading days during such performance period, as adjusted for dividends paid during such performance cycle.

For TSR Shares granted in 2019, the target number of TSR Shares will vest if the Company ranks at the median of the Peer Group for TSR during the period 2019 through 2021. If the Company ranks in the first quintile, TSR Shares will vest at the maximum level, and the Company must rank at least in the fourth quintile for any TSR Shares to vest (at 25% of maximum). Other rankings yield proportionate results. However, the vesting of TSR Shares is capped at target if the Company’s absolute TSR is negative. Any TSR Shares that have not vested at the end of the performance period are immediately forfeited.

The percentage of maximum shares that can be earned based on three-year TSR rank (subject to the cap at target is TSR is negative) is shown in the table below:

 

   
TSR Rank    Percentage of Maximum
Shares Earned
      

1, 2 or 3

   100%

4

   80%

5

   70%

6

   60%

7

   55%

8

   50%

9

   45%

10

   40%

11

   30%

12

   25%

13, 14

   0%

For purposes of our TSR Share awards, the Compensation Committee, in consultation with Pearl Meyer, determined the Peer Group for 2019-2021 by:

 

 

Reviewing the Peer Group to determine whether any companies should be eliminated to the extent there are companies whose operations, although requiring similar management skills, were nevertheless not comparable to the Company’s business lines and therefore did not provide a meaningful basis for measuring relative share performance; and

 

 

Determining whether to add other significant competitors in each of the Company’s business lines to provide a comprehensive means for evaluating TSR.

The Compensation Committee has discretion to adjust the composition of the Peer Group and to set the threshold, target and maximum performance criteria to reflect current circumstances. Our 2019 Peer Group (which is substantially the same as the Peer Group established on January 1, 2016) is discussed in more detail on page 47.

Vesting of TSR Shares Granted in 2017 (For Performance Period of 2017-2019)

Based on the Company’s share performance for the 2017-2019 performance period, the Company’s ranking for TSR Shares granted in 2017 was 10, which (as shown in the chart above) falls below the median of the Peer Group. Accordingly, the number of TSR Shares vested for our CEO and CFO were:

 

 

Mr. Petrello: 127,505, or 40% of maximum payout; and

 

 

Mr. Restrepo: 31,537, or 40% of maximum payout.

 

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    How We Determine Our Performance Shares

The Compensation Committee pre-determines at the beginning of each one-year performance cycle the specific financial and operational performance metrics for Performance Shares applicable to each executive officer in order to tailor long-term incentives to the specific goals and needs of the Company at such time. The restricted shares earned based on performance over the prior year historically have been granted after the end of the one-year performance cycle. For example, the Compensation Committee determined the applicable performance metrics for the 2018 performance cycle at the beginning of 2018. The number of Performance Shares earned by our executive officers for their performance in the 2018 performance cycle was not determined until February 22, 2019. Accordingly, these awards are disclosed as compensation for 2019, as set forth under “Executive Compensation Tables—2019 Summary Compensation Table”.

Pursuant to their respective employment agreements:

 

Mr. Petrello has the opportunity to receive an award of Performance Shares in respect of each fiscal year targeted at 200% of base salary, exclusive of reductions ($3,500,000), with a maximum award of twice that amount ($7,000,000).

 

 

Mr. Restrepo has the opportunity to receive an award of Performance Shares for each fiscal year targeted at 100% of base salary, exclusive of reductions ($650,000), with a maximum award of twice that amount ($1,300,000).

Performance Shares are earned on a pro-rated basis based on the number of goals (or overall percentage of all goals) achieved, and historically each goal has been given equal weighting. For the 2019 performance cycle:

 

 

Threshold performance required the achievement of two goals (or 40% of all goals);

 

 

Target performance required the achievement of three goals (or 60% of all goals); and

 

 

Maximum performance required achievement of all five goals (or 100% of all goals).

No Performance Shares would have been earned in the event that less than 40% of the executive’s goals had been achieved. Once earned and granted, Performance Shares are subject to an additional vesting period of three years following the grant date.

    2018 Performance Shares (Granted in February 2019 based on 2018 Performance)

A portion of the compensation appearing below in the stock awards column of the 2019 Summary Compensation Table for Mr. Petrello and Mr. Restrepo consists of Performance Shares earned by each of them during the 2018 performance cycle and granted in February 2019. For the 2018 performance cycle, Mr. Petrello had the following five performance goals related to his Performance Shares (the first three of which were shared with Mr. Restrepo):

 

     

Goal#

  Performance Goal and Reason    Degree of Achievement Determined
by Compensation Committee
          
    

1

 

US Lower 48 rig margin per day at least 95 percent of average of three identified US competitors on a normalized basis by end of 2018

 

Reason: Improve per rig profitability and competitiveness in the important US Lower 48 market.

   100%
          
    

2

 

Implement a transaction to improve meaningfully the Company’s leverage; Implement a global inventory control system

 

Reason: Compensate for equity erosion and thereby remain in compliance with the net debt to capitalization covenant of our 2012 revolving credit facility; and ensure more efficient use of Company assets.

   100%
          
    

3

 

Grow non-rig drilling services adjusted EBITDA so that the fourth quarter adjusted EBITDA annualized would be $110 million

 

Reason: Generate profits via NDS in an increasingly competitive market, by offering services on both Nabors and third-party rigs.

   84%
          
    

 

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Goal#

  Performance Goal and Reason    Degree of Achievement Determined
by Compensation Committee
          
    

4

 

Improve operational management in the Eastern Hemisphere

 

Reason: Ensure that in a worldwide enterprise, corporate goals are understood and operations are run efficiently.

   50%
          
    

5

 

Develop and deploy a new commercial big data offering on at least 10 rigs by the fourth quarter of 2018

 

Reason: Increase rig safety, reliability and efficiency using increasingly important automation and advanced analytics.

   100%
          

The CEO’s Performance Share goals listed above were achieved as follows:

 

  1

Nabors reported average daily rig margins in the U.S. Lower 48—$9,428 (up from $4,978 at the end of 2017); Average U.S. Lower 48 rig margin of three identified competitors—$9,417 (up from $7,753 at the end of 2017); Nabors US Lower 48 daily rig margin was 100.1% of the daily rig margins of the three identified competitors at the end of 2018, compared to 83.1% at the end of 2017. Goal completed at 100%.

 

  2

Nabors completed an offering of common and preferred shares for net proceeds of approximately $580 million, virtually all of which went to debt reduction. Nabors introduced MyBITTM enterprise business intelligence platform which, among other things, allows for the viewing of data across company, business unit, region/district, department and rig/cost center. Goal completed at 100%.

 

  3

Nabors reported non-rig drilling services adjusted EBITDA for the fourth quarter of 2018 of $23.025 million, for an annualized amount of $92.1 million. Goal achieved at 84%.

 

  4

New Eastern Hemisphere management structure implemented. Goal achieved at 50%.

 

  5

Deployed MyWellsTM Analytics, an app that provides a data-driven approach to improve well drilling operations and drive performance, with access to pre-made dashboards and reports and easy-to-configure dashboards and reports. Goal achieved at 100%.

The overall percentage achievement is the average of the percentage completed for each goal, or 86.8 percent. As a result of the 86.8% achievement level of the applicable performance goals, the Compensation Committee approved a Performance Share award for Mr. Petrello valued at 86.8% of his maximum award value, or $6.1 million. As a result, the Compensation Committee granted Mr. Petrello a Performance Share award of 1,998,684 shares, determined on February 22, 2019, based upon the average daily closing price of our shares on each of the preceding 20 business days. The vesting of these Performance Shares is subject to an additional three-year vesting period following the grant date, subject to continued employment.

 

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For the 2018 performance cycle, Mr. Restrepo had the following five performance goals:

 

     

Goal#

  Performance Goal and reason    Degree of Achievement Determined
by Compensation Committee
          
    

1

 

Improvements to US Lower 48 rig margins as a percentage of competition’s margins

 

Reason: Improve per rig profitability and competitiveness in the important US Lower 48 market.

   100%
          
    

2

 

Implement a transaction to improve meaningfully the Company’s leverage; Implement a global inventory control system

 

Reason: Compensate for equity erosion and thereby remain in compliance with the net debt to capitalization covenant of our 2012 revolving credit facility; and ensure more efficient use of Company assets.

   100%
          
    

3

 

Grow non-rig drilling services adjusted EBITDA so that the fourth quarter adjusted EBITDA annualized would be $110 million

 

Reason: Generate profits via NDS in an increasingly competitive market, by offering services on both Nabors and third-party rigs.

   84%
          
    

4

 

Realize Tesco synergies of $35 million run rate by the fourth quarter of 2018

 

Reason: Ensure that the acquisition is completed profitably and efficiently.

   100%
          
    

5

 

Achieve certain tax initiatives

 

Reason: The nature of the goal on tax initiatives requires that details remain confidential.

   100%
          

The CFO’s Performance Share goals listed above were achieved as follows:

 

  1

Nabors reported average daily rig margins in the U.S. Lower 48—$9,428 (up from $4,978 at the end of 2017); Average U.S. Lower 48 rig margin of three identified competitors—$9,417 (up from $7,753 at the end of 2017); Nabors US Lower 48 daily rig margin was 100.1% of the daily rig margins of the three identified competitors at the end of 2018, compared to 83.1% at the end of 2017. Goal completed at 100%.

 

  2

Nabors completed an offering of common and preferred shares for net proceeds of approximately $580 million, virtually all of which went to debt reduction. Nabors introduced MyBITTM enterprise business intelligence platform which, among other things, allows for the viewing of data across company, business unit, region/district, department and rig/cost center. Goal completed at 100%.

 

  3

Nabors reported non-rig drilling services adjusted EBITDA for the fourth quarter of 2018 of $23.025 million, for an annualized amount of $92.1 million. Goal achieved at 84%.

 

  4

Synergies of $36.1 million were achieved in the first 100 days of 2018. Goal completed at 100%.

 

  5

The nature of this goal requires that details remain confidential. Goal achieved at 100%.

The overall percentage achievement is the average of the percentage completed for each goal, or 96.8 percent. As a result of the 96.8% achievement level of the applicable performance goals, the Compensation Committee approved a Performance Share award for Mr. Restrepo valued at 96.8% of his maximum award value, or $1.3 million. As a result, the Compensation Committee granted Mr. Restrepo a Performance Share award of 413,947 shares, determined on February 22, 2019, based upon the average daily closing price of our shares on each of the preceding 20 business days. The vesting of these Performance Shares is subject to an additional three-year vesting period following the grant date, subject to continued employment.

 

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While Performance Shares granted in February 2019 were based on the 2018 performance cycle, because the Performance Shares were not granted until 2019, they appear as 2019 compensation to the named executive officer in the Company’s 2020 proxy statement. Likewise, as noted above, the Performance Shares granted in February 2018 in respect of the 2017 performance cycle appear as 2018 compensation to the named executive officers, because those Performance Shares were granted in 2018.

Mr. Andrews receives his long-term equity-based compensation awards in the form of restricted shares that vest over time. For 2018, Mr. Andrews received a long-term equity incentive award in the form of restricted shares on February 23, 2018, the number of which was determined by applying a multiplier of 0.75 to his annual performance bonus for 2017, which was $73,150, and dividing the product by $6.89, which was the value of our shares on the grant date. Based on this calculation, he was granted 7,963 restricted shares, with restrictions lapsing ratably over four years.

    2019 Performance Shares (Granted in January 2020 based on 2019 Performance)

For the 2019 performance cycle, Mr. Petrello had the following five performance goals:

 

     

Goal#

  Performance Goal and Reason    Degree of Achievement Determined
by Compensation Committee
          
    

1

 

Generate free cash flow after dividends of at least $225.0 million

 

Reason: Show ability to generate cash flow necessary to pay liabilities and to maintain or expand our asset base.

   100%
          
    

2

 

No more than one division that fails to achieve it 2019 adjusted EBITDA budget by more than 10 percent of threshold

 

Reason: Ensure that all divisions are attempting to maximize performance.

   100%
          
    

3

 

Two-part goal: (i) grow non-rig drilling services adjusted EBITDA so that the fourth quarter adjusted EBITDA annualized would be at least $130 million, and (ii) achieve $100 million adjusted EBITDA for all of 2019

 

Reason: Generate profits via NDS in an increasingly competitive market, by offering services on both Nabors and third-party rigs.

   84.45%
          
    

4

 

Two part goal: (i) complete transactions of at least $400 million, which will add incremental equity to the balance sheet, and (ii) reduce outstanding notes due 2020 to below $300 million before December 31, 2019

 

Reason: Compensate for equity erosion and thereby remain in compliance with the net debt to capitalization covenant of our 2012 revolving credit facility.

   100%
          
    

5

 

Implement company-wide marketing and sales plan to increase/strengthen key customer relationships

 

Reason: Strengthen key relationships to ensure the Company a place at the table as customers allocate funds to drilling-related expenses from ever tighter budgets.

   100%
          

 

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The CEO’s Performance Share goals listed above were achieved as follows:

 

  1

The Company generated $279 million in free cash flow after dividends for 2019. Goal completed at 100%.

 

  2

Only one division failed to achieve budgeted adjusted EBITDA by more than 10 percent. Goal completed at 100%.

 

  3

Annualized 2019 Q4 non-rig drilling services adjusted EBITDA was $100 million, or 76.9 percent of target, and 2019 full-year non-rig drilling services adjusted EBITDA was $92 million, or 92 percent of target. Weighting both halves of this goal at 50 percent, the overall goals was completed at 84.45%.

 

  4

The first part of this goal was accomplished by: (i) entering into a $250 million A/R Sales Agreement, permitting the Company to reduce debt; (ii) accomplishing the release of a $32 million valuation allowance; and (iii) completing an amendment to the 2018 revolving credit facility providing permanent relief from the equity-based covenant. The second part of the goal was accomplished by reducing the outstanding bonds due 2020 to $280 million by year end. Overall goal completed at 100%.

 

  5

This goal was accomplished by: (i) completing a company-wide marketing and sales plan, including the identification of top customers, customer influencers, product features and benefits, and multi-level marketing process; (ii) formulated and executed a marketing strategy with clearly defined roles and responsibilities; (iii) submitted conference white papers and/or speaking abstracts to all conferences with the intent of attending only if accepted (achieving substantial cost savings); (iv) completed a number of speaking engagements with top 20 customers in attendance; (v) initiated and completed 5 Subject Matter Expert Spotlight Series; and (vi) accomplished all of the foregoing without incremental third-party costs and while achieving internal cost reductions. Goal completed at 100%.

The overall percentage achievement is the average of the percentage completed for each goal, or 96.89 percent. As a result of the 96.89% achievement level of the applicable performance goals, the Compensation Committee approved a Performance Share award for Mr. Petrello valued at 96.89% of his maximum award value, or $6.782 million. As a result, the Compensation Committee granted Mr. Petrello a Performance Share award of 2,549,737 shares, determined on January 2, 2020, based upon the average daily closing price of our shares on each of the preceding 20 business days. The vesting of these Performance Shares is subject to an additional three-year vesting period following the grant date, subject to continued employment.

For the 2019 performance cycle, Mr. Restrepo had the following five performance goals:

 

     

Goal#

  Performance Goal    Degree of Achievement Determined
by Compensation Committee
             
          

1

 

Generate free cash flow after dividends(1) of at least $225.0 million

 

Reason: Show ability to generate cash flow necessary to pay liabilities and to maintain or expand our asset base.

   100%
          
    

2

 

Reduce Selling, General & Administration expense, excluding bonuses, by 10 percent from 2018 levels

 

Reason: Show capital discipline by reducing expenses that touch nearly every aspect of the enterprise.

   50%
          
    

3

 

Two-part goal: (i) grow non-rig drilling services adjusted EBITDA so that the fourth quarter adjusted EBITDA annualized would be at least $130 million, and (ii) achieve $100 million adjusted EBITDA for all of 2019

 

Reason: Generate profits via NDS in an increasingly competitive market, by offering services on both Nabors and third-party rigs.

   84.45%
          
    

 

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Goal#

  Performance Goal    Degree of Achievement Determined
by Compensation Committee
             
          

4

 

Two part goal: (i) complete transactions of at least $400 million, which will add incremental equity to the balance sheet, and (ii) reduce outstanding notes due 2020 to below $300 million before December 31, 2019

 

Reason: Compensate for equity erosion and thereby remain in compliance with the net debt to capitalization covenant of our 2012 revolving credit facility.

   100%
          
    

5

 

Achieve certain internal audit goals

 

Reason: The nature of the internal audit goal requires that the details remain confidential.

   100%
          

The CFO’s Performance Share goals listed above were achieved as follows:

 

  1

The Company generated $279 million in free cash flow after dividends for 2019. Goal completed at 100%.

 

  2

SG&A for 2019 was only reduced by five percent from 2018 levels. Goal completed at 50%.

 

  3

Annualized 2019 Q4 non-rig drilling services adjusted EBITDA was $100 million, or 76.9 percent of target, and 2019 full-year non-rig drilling services adjusted EBITDA was $92 million, or 92 percent of target. Weighting both halves of this goal at 50 percent, the overall goals was completed at 84.45%.

 

  4

The first part of this goal was accomplished by: (i) entering into a $250 million A/R Sales Agreement, permitting the Company to reduce debt; (ii) accomplishing the release of a $32 million valuation allowance; and (iii) completing an amendment to the 2018 revolving credit facility providing permanent relief from the equity-based covenant. The second part of the goal was accomplished by reducing the outstanding bonds due 2020 to $280 million by year end. Overall goal completed at 100%.

 

  5

The nature of the internal audit goal requires that details remain confidential. Goal completed at 100%.

The overall percentage achievement is the average of the percentage completed for each goal, or 86.89 percent. As a result of the 86.89 percent achievement level of the applicable performance goals, the Compensation Committee approved a Performance Share award for Mr. Restrepo valued at 86.89 percent of his maximum award value, or $1.130 million. As a result, the Compensation Committee granted Mr. Restrepo a Performance Share award of 424,650 shares, determined on January 2, 2020, based upon the average daily closing price of our shares on each of the preceding 20 business days. The vesting of these Performance Shares is subject to an additional three-year vesting period following the grant date, subject to continued employment.

While Performance Shares granted in January 2020 were based on the 2019 performance cycle, because the Performance Shares were not granted until 2020, they will appear as 2020 compensation to the named executive officer in the Company’s 2021 proxy statement. Likewise, as noted above, the Performance Shares granted in February 2019 in respect of the 2018 performance cycle appear as 2019 compensation to the named executive officers, because those Performance Shares were granted in 2019.

Mr. Andrews receives his long-term equity-based compensation awards in the form of restricted shares that vest over time. For 2019, Mr. Andrews received a long-term equity incentive award in the form of restricted shares on February 22, 2019, the number of which was determined by applying a multiplier of 0.75 to his annual performance bonus for 2018, which was $68,200, and dividing the product by $3.10, which was the value of our shares on the grant date. Based on this calculation, he was granted 16,500 restricted shares, with restrictions lapsing ratably over four years.

    Performance Share Units (redesigned for 2020)

In January 2020, the Compensation Committee awarded unvested Performance Share Units (“PSU”) to Messrs. Petrello and Restrepo having a grant date value of $3,894,737 and $723,308, respectively, in satisfaction of the Performance Shares that each would otherwise have been eligible to earn under his employment agreement with respect to 2020 performance metrics established by the Compensation Committee. The Compensation Committee believes these PSU awards more closely resemble the types of awards given to NEOs of our peers. In addition, by granting the PSU awards at the beginning of the performance period, rather than at the end as is currently the case with the Performance Shares, the awards are now “forward looking” and more clearly demonstrate the performance-based nature of the awards.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Shareholders should be aware that the shift from Performance Shares to PSUs in 2020 may result in higher-than-normal compensation for our CEO and CFO in our proxy statement next year. This is because the compensation table will include both the Performance Share Award received by each of them in January 2020, based on achievement of performance goals in 2019, and PSUs granted in January 2020 that will be earned based on achievement of performance goals for 2020. This will be a one-time anomaly associated with the shift from Performance Shares to PSUs.

Setting Executive Compensation

Our Compensation Committee, independent consultant and other resources each play an important role in determining our executive compensation structure.

Role of the Compensation Committee

The Compensation Committee, which consists of three independent non-employee directors, performs the following compensation-related functions:

 

 

Oversees the compensation of our executive officers and other key management comprising our senior leadership team;

 

 

Evaluates the performance of our CEO and reviews the performance of our other executive officers, drawing on its own judgment and observations and those of our CEO in evaluating the performance of such officers;

 

 

Administers our equity-based programs for executive officers, key management personnel, and reviews and approves all forms of compensation (including equity grants);

 

 

Approves financial and business measures and goals that are tied to the Company’s performance for long-term equity incentive awards;

 

 

Oversees employment agreements, including severance and change-in-control agreements, between the Company and the executive officers; and

 

 

Considers input from the Risk Oversight Committee and Audit Committee with respect to risk management considerations in evaluating performance objectives and incentives.

The Compensation Committee has discretion to decrease formula-driven awards or provide additional incentive compensation based on executive retention considerations. It also has discretion to provide additional incentive compensation (i.e., special bonuses) in recognition of extraordinary specific developments that materially enhance the value of the Company. To a lesser extent, the Compensation Committee exercises subjective judgment in making compensation decisions with respect to executive officers, primarily as to equity awards, when such officer’s compensation is not determined pursuant to an employment agreement. See “Equity Based Award Policy” below for a brief discussion of authority delegated to the CEO with respect to employee equity grants.

Role of the Independent Compensation Consultant

The Compensation Committee engaged Pearl Meyer as its independent consultant to advise and assist the committee with its responsibilities. For 2019, the scope of Pearl Meyer’s engagement included:

• providing advice and analysis on executive compensation trends and norms;

• advising on potential Peer Group members to evaluate our CEO’s and CFO’s compensation;

 

 

reviewing and analyzing Peer Group information to assist with setting of executive compensation;

 

 

updating the Compensation Committee periodically on legislative and regulatory developments impacting executive compensation; and

 

 

providing additional assistance, as requested by the Compensation Committee.

The Compensation Committee evaluated Pearl Meyer’s independence by considering, among other things, the following six factors identified by the SEC and the NYSE:

 

 

The provision of other services to the Company by Pearl Meyer;

 

 

The amount of fees received from the Company by Pearl Meyer as a percentage of Pearl Meyer’s total revenue;

 

 

Pearl Meyer’s policies and procedures designed to prevent conflicts of interest;

 

 

The existence and nature of business and personal relationships of Pearl Meyer with a member of the Compensation Committee;

 

 

Any Company stock owned by Pearl Meyer; and

 

 

The existence and nature of business or personal relationship of Pearl Meyer with an executive officer of the Company.

Based on its evaluation, the Compensation Committee concluded there were no independence or conflict-of-interest concerns related to Pearl Meyer’s engagement.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Role of Management

Certain of our executive officers and senior management provide input on business strategy and short- and long-term business objectives, which assists the Compensation Committee in establishing performance goals in connection with long-term components of our executive compensation program. In addition, the Compensation Committee consults with the CEO in setting the compensation of other executive officers upon their hiring with the Company and periodically thereafter as deemed appropriate by the Compensation Committee. The CEO also provides a subjective performance assessment of other executive officers, which is reviewed and considered by the Compensation Committee in determining each executive officer’s performance and resulting compensation.

Determination of Peer Group

For purposes of the Peer Group, the Compensation Committee, in consultation with its independent compensation consultant, considers potential peer companies for inclusion based on the following criteria:

 

 

Significant competitor in the Company’s lines of business;

 

 

Comparable size, scope and/or complexity;

 

 

Competition for executive talent; and/or

 

 

Similar operations in the industry and market.

The Compensation Committee determined that the following companies comprise the Peer Group for purposes of compensation benchmarking in 2019, and for purposes of performance measurement for the TSR Shares granted in 2019.

 

 

Baker Hughes Company

Diamond Offshore Drilling, Inc.

Valaris plc

TechnipFMC plc

Halliburton Company

Helmerich & Payne, Inc.

National-Oilwell Varco, Inc.

  

Noble Corporation plc

Patterson–UTI Energy, Inc.

Schlumberger Limited

Superior Energy Services, Inc.

Transocean Ltd.

Weatherford International plc

 
                

Equity-Based Award Policy

The Company has established an Equity-Based Award Policy that applies to the grant of all long-term equity incentive awards, including to our executive officers. Here is how this policy works in practice:

 

 

The policy does not restrict the timing of awards, although the Compensation Committee typically makes awards to our executive officers and senior leadership at or before its first meeting each year, which usually occurs in February.

 

 

The Compensation Committee delegated authority to the CEO, subject to predetermined caps, to approve equity awards to employees at other times during the year, such as in connection with new hires and promotions, or in connection with the appraisal review and compensation adjustment process for employees. In connection with the appraisal review and compensation adjustment process for 2019, the CEO was delegated authority to grant up to an aggregate of $7.65 million in restricted shares to employees.

 

 

All awards granted by the CEO are required to be reported to the Compensation Committee at its next regularly scheduled meeting.

Other Benefits and Perquisites

All of our employees, including our executive officers, may participate in health, pension and welfare benefit and other plans. Our executive officers and certain other employees may also receive company-sponsored club memberships as part of their overall compensation package. In addition, Messrs. Petrello and Restrepo receive additional benefits under the terms of their respective agreements, as described below.

Severance and Other Payments

Severance protection can play a valuable role in attracting and retaining key executive officers and ensuring that they remain focused on the interests of the Company and our shareholders. Accordingly, we provide such protection for Messrs. Petrello and Restrepo under various circumstances.

Termination Resulting from Death or Disability. Mr. Petrello’s employment agreement provides that in the event of his death or Disability: (i) all restricted shares outstanding (including all Performance Shares, but excluding unvested TSR shares) shall vest; (ii) all outstanding options shall vest and remain exercisable for the remainder of the term; (iii) any amounts previously earned but unpaid, including a pro-rated portion of his annual performance bonus shall be payable;

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

(iv) unvested TSR Shares shall vest at target; and (v) he and his family shall remain covered under Company health plans until the later of the date he receives equivalent coverage under another employer or the death of him and his spouse. Mr. Petrello also will continue to be eligible for certain other benefits for three years following his termination resulting from Disability.

Mr. Restrepo’s Amended Agreement is substantially similar to Mr. Petrello’s employment agreement, except that he will not be entitled to continued health insurance coverage or other benefits.

Termination by Executive for Constructive Termination without Cause, or by the Company without Cause. In the event of a Constructive Termination without Cause, or if he is terminated by the Company without Cause, Mr. Petrello’s employment agreement provides for severance benefits substantially similar to those set forth above under “Termination Resulting from Death or Disability.” In addition, he would be entitled to 2.99 times the average of his base salary and annual performance bonus paid during each of the last three completed fiscal years. Mr. Restrepo’s Amended Agreement is similar to Mr. Petrello’s, except that he and his family are entitled to receive continued health coverage until the earlier of (a) the date that he or another member of his family receives health coverage by a subsequent employer; (b) three years from the date of the termination of his employment; or (c) the date of his or his spouse’s death.

Termination by the Company for Cause or by Written Voluntary Resignation. Mr. Petrello’s employment agreement provides for: (i) base salary through the date of termination; (ii) vesting of all unvested restricted stock that was granted in connection with the annual performance bonus; (iii) all unvested options shall vest and remain exercisable for the remainder of its term; (iv) unvested TSR Shares shall be forfeited; (v) payment of all amounts previously earned but unpaid; and (vi) continuation of health benefits for him and his family until the death of him and his spouse.

Mr. Restrepo’s Amended Agreement provides for: (i) base salary through the date of termination; (ii) forfeiture of unvested TSR Shares; and (iii) payment of all amounts previously earned but unpaid.

Termination after Expiration of Employment Agreement. Mr. Restrepo’s Amended Agreement provides that if he remains employed beyond the expiration date, and his employment is then terminated as a result of his death or Disability, or by the Company without Cause, he shall be entitled to the following: (i) vesting of all unvested restricted shares (other than TSR Shares) and options; (ii) vesting of TSR Shares at target; and (iii) continuation of health coverage until the earlier of (a) the date that he or another member of his family receives health coverage by a subsequent employer; (b) three years from the date of the termination of his employment; or (c) the date of his or his spouse’s death. Mr. Petrello’s Agreement does not include a similar provision.

Termination due to Qualified Retirement. If Mr. Restrepo remains employed until June 1, 2022, and thereafter terminates due to voluntary retirement with at least 200 days’ notice to the Company, he shall be entitled to the following: (i) vesting of all unvested restricted shares (other than TSR Shares) and options; (ii) vesting of TSR Shares at maximum levels; and (iii) continuation of health coverage until the earlier of (a) the date that he or another member of his family receives health coverage by a subsequent employer; (b) three years from the date of the termination of his employment; or (c) the date of his or his spouse’s death. Mr. Petrello’s Agreement does not address this scenario. Mr. Petrello’s agreement does not include a similar provision.

Change in Control. In the event of a Change in Control with no termination of employment, Mr. Petrello’s agreement provides that all unvested equity awards shall vest, with Performance Shares and TSR Shares earned at maximum levels. Mr. Restrepo’s Amended Agreement provides that his unvested TSR shares shall vest at maximum level, and other equity awards shall be treated in a manner consistent with other executive direct reports of the Chief Executive Officer.

Additional information regarding severance benefits is included in the table under “Executive Compensation Tables—2019 Potential Payments Upon Termination or Change in Control” below.

Life Insurance And Other Perquisites

In addition to salary and bonus, Mr. Petrello receives group life insurance, various split-dollar life insurance policies, reimbursement of business-related expenses, and various perquisites (including personal use of company aircraft subject to income imputation rules). Premium payments under the split-dollar life insurance policies were suspended in 2002. Under Mr. Petrello’s employment agreement, the Company is obligated to make contributions during the term of his employment in the amounts necessary to maintain the face value of the insurance coverage. If the Company is not legally permitted to make such contributions to the policies, it will pay an additional bonus to Mr. Petrello equal to the amount required to permit him to lend sufficient funds to the insurance trusts that own the policies to keep them in force. Mr. Restrepo also receives group life insurance, reimbursement of business-related expenses and various perquisites available to senior leaders of the Company generally.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Retirement Plans

Our executive officers are eligible to participate in the following retirement plans:

 

 

401(k) Plan—a tax-qualified defined contribution plan, which covers substantially all our employees; and

 

 

Deferred Compensation Plan—a nonqualified deferred compensation plan, which allows certain employees to defer an unlimited portion of their cash compensation and receive Company-matching contributions.

Collectively, these plans facilitate retention and provide our executive officers an opportunity to accumulate assets for retirement.

Executive Plan

Messrs. Petrello and Restrepo also are eligible to participate in the Executive Deferred Compensation Plan (the “Executive Plan”).

Pursuant to Mr. Petrello’s employment agreement, at the end of each calendar quarter through March 31, 2019, the Company credited $300,000 to an account for Mr. Petrello under this plan. These credits continued after March 31, 2019, outside of his employment agreement but in accordance with the terms of the plan. These deferred amounts, together with earnings thereon, will be distributed to Mr. Petrello when (1) he reaches age 70 or (2) earlier (a) when he reaches age 62, to the extent of any quarterly contributions in excess of $250,000, together with accumulated deemed earnings thereon or (b) upon termination of employment for any reason other than cause. Mr. Petrello will forfeit his account balance under this plan upon termination of employment for cause. Since 2016, in order to comply with certain tax code provisions, Mr. Petrello annually has received certain of these distributions as a result of his turning age 62.

Mr. Restrepo is also eligible to participate in the Executive Plan on the same basis as other senior leaders. The Compensation Committee elected to credit $400,000 to Mr. Restrepo’s account under the Executive Plan in 2019.

Information regarding our Deferred Compensation Plan and Executive Plan, as well as the terms of their participation, can be found under “2019 Nonqualified Deferred Compensation” below.

Term Of Employment

Mr. Petrello’s current employment agreement provides for an initial term of five years, through December 31, 2017, with automatic one-year extensions at the end of each term, unless either party provides notice of termination 90 days prior to such anniversary. If the Company provides notice of termination to Mr. Petrello, then provided that he remains employed with the Company for a period of up to six months as specified by the Company to assist with the transition of management, the termination will be treated as a Constructive Termination without Cause. Neither Mr. Petrello nor the Company has provided notice of termination. As a result, Mr. Petrello’s employment agreement has automatically extended to December 31, 2020.

Mr. Restrepo’s Amended Agreement has an initial term through June 1, 2022, with automatic one-year extensions at the end of the initial term and each renewal term, unless either party provides notice of termination 90 days prior to such anniversary, or Mr. Restrepo gives notice at least 200 days prior to his voluntary retirement after June 1, 2022. Notice of termination by the Company does not constitute a Constructive Termination without Cause under Mr. Restrepo’s Amended Agreement.

Share Ownership Policy

We encourage our executive officers to own the Company’s shares to further align their interests with those of other shareholders.

Mr. Petrello’s employment agreement requires that he own Company common shares with a minimum acquisition value of five times his base salary. As noted in the table under “Corporate Governance Beneficial Ownership of Company Common Shares”, as of the record date for the annual general meeting of shareholders Mr. Petrello owns 14,936,431 common shares (inclusive of mandatory convertible preferred shares convertible at the minimum conversion ratio and vested but unexercised stock options and exclusive of 314,236 common shares for which Mr. Petrello disclaims beneficial ownership) as of the record date, which represent approximately 3.55 percent of our outstanding common shares and nearly 25 times the required minimum ownership.

Mr. Restrepo’s Amended Agreement requires that he own Company common shares with a minimum acquisition value of three times his base salary. As noted in the table under “Corporate Governance—Beneficial Ownership of Company Common Shares”, as of the record date for the annual general meeting of shareholders, Mr. Restrepo currently owns 3,107,269 common shares (inclusive of mandatory convertible preferred shares converted at the minimum conversion ratio) and nearly 10 times the required minimum ownership.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

In 2019, Mr. Andrews was not subject to a minimum share ownership requirement.

“Acquisition value” for purposes of our share ownership requirement means, for shares, the market closing price on the date of grant or purchase. For stock options, it means the Black Scholes value on the date of grant. Acquisition value was chosen by our Compensation Committee as an appropriate measure because of the volatility of stock prices in our industry and the complications that may arise from the use of a fluctuating valuation method.

Hedging Policy and Practices

The Company does not have a policy on hedging per se. However, the Company’s Insider Trading Policy prohibits all officers, directors and employees from trading in put and call options on, and short sales of, the Company’s shares.

Risk Assessment

The Compensation Committee reviews with management the design and operation of our incentive compensation arrangements, including the performance objectives and the mix of short- and long-term performance horizons used in connection with incentive awards, to ensure that these arrangements do not encourage our executives to engage in business activities or other behavior that would impose unnecessary or excessive risk to the value of our Company or the investments of our shareholders.

Tax Considerations – Section 162(m)

Section 162(m) of the Internal Revenue Code of 1986 (as amended, the “Code”) limits to $1 million the amount of compensation that we may deduct in any year with respect to the Company’s “covered employees” as defined under Section 162(m). An exception to this deduction limitation was previously available for compensation that qualified as “performance-based compensation”, so long as such compensation met certain requirements set forth in Section 162(m) and the applicable regulations. As a result of tax legislation that went into effect on December 22, 2017, the exception for performance-based compensation is no longer available effective for taxable years beginning after December 31, 2017, unless the compensation is paid pursuant to a written, binding contract in effect as of November 2, 2017, that qualifies for transition relief under the new tax legislation. As a result, compensation paid in excess of $1 million to individuals who, following December 31, 2017, are subject to Section 162(m) is not expected to be deductible.

Historically, the Compensation Committee has striven to structure certain of its compensation arrangements to qualify as performance-based compensation. For example, in the past we have designed our Annual Incentive Plan and certain performance-based awards under our 2013 and 2016 Stock Plans with the intent that such amounts qualify as performance-based compensation. However, the Compensation Committee retained the flexibility to pay incentive compensation or other compensation that was not intended to qualify as performance-based compensation to the extent the Compensation Committee determined it was in the Company’s best interests to do so.

Although the new tax legislation does provide for transition relief that may be available with respect to certain contracts, given the uncertainty that currently exists as to the application and interpretation of Section 162(m) and the applicable regulations, we are not able to ascertain whether, or guarantee that, amounts intended to qualify as performance-based compensation will in fact qualify as such, and certain amounts that were expected to be tax deductible to the Company in the future may in fact not be. Although the Compensation Committee will continue to analyze the impact of Section 162(m), the Compensation Committee continues to retain the flexibility to make decisions with respect to the Company’s compensation programs that are based on factors other than Section 162(m) and related tax consequences. Such factors may include, among other things, the Company’s current business strategies and goals, current market conditions with respect to the industries in which the Company competes, retention elements and alignment with shareholder interests.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board has reviewed and discussed with management the CD&A provided above. Based on that review and discussion, the Compensation Committee has recommended to the Board that the CD&A be included in this Proxy Statement and incorporated by reference into the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Respectfully submitted,

THE COMPENSATION COMMITTEE

Michael C. Linn, Chairman

Tanya S. Beder

John P. Kotts

 

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COMPENSATION COMMITTEE INTERLOCKS

AND INSIDER PARTICIPATION

The Compensation Committee for 2019 was comprised of Messrs. Linn (Chairman), Kotts, and Crane (until July 25, 2019), and Ms. Tanya Beder from and after July 25, 2019, all of whom were determined by the Board to be independent non-employee directors. None of these directors has ever served as an officer or employee of the Company or participated in any transaction during the last fiscal year required to be disclosed pursuant to the SEC’s proxy rules, except as to Mr. Crane, as described above under “Certain Relationships and Related-Party Transactions”. No executive officer of the Company serves as a member of the compensation committee of the board of directors of any entity that has one or more of its executive officers serving as a member of our Compensation Committee or as a director. In addition, none of our executive officers serves as a member of the compensation committee of the board of directors of any entity that has one or more of its executive officers serving as a member of our Board.

 

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EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by each of our named executive officers for the fiscal years ended December 31, 2019, 2018 and 2017.

 

                   

Name and Principal Position

  Year     Salary
($)(1)
    Bonus
($)
    Stock
Awards
($)(2)
    Option
Awards
($)
    Non-Equity
Incentive
Plan
Compensation
($)(3)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
    All Other
Compensation
($)(5)
    Total ($)(6)  
                                                                         
                 

Anthony G. Petrello

Chairman of the Board,

President and CEO

    2019       1,575,000         9,159,618         1,600,777       225,644       1,481,784       14,042,823  
    2018       1,750,000       —         9,918,414       —         1,659,604       109,931       1,304,924       14,742,873  
    2017       1,750,000       —         9,397,720       —         1,464,516       79,669       1,430,806       14,122,711  
                                                                         
                 

William J. Restrepo

CFO

    2019       650,000         2,017,104         594,574       45,599       450,591       3,757,868  
    2018       650,000       —         2,092,322       —         616,424       34,714       473,547       3,867,007  
    2017       650,000       —         2,113,433       —         543,963       19,997       429,458       3,756,851  
                                                                         
                 

Mark D. Andrews

Corporate Secretary

    2019       220,000         51,150         75,000             123,573       469,723  
    2018       220,000       —         54,865       —         68,200             94,660       437,725  
    2017       220,000       —         94,363       —         73,150             94,445       481,958  
                                                                         

Note: Pursuant to SEC rules, the 2018 amounts above for our CEO do not reflect the transaction, approved by the Compensation Committee, pursuant to which Mr. Petrello voluntarily forfeited TSR Shares having a grant date fair value of approximately $4,000,000 in exchange for an award of 750 restricted shares, having a grant date fair value of $1,500, that vests in equal installments on the first three anniversaries of the date of grant. Had we been permitted to reflect the transaction, the value of his stock awards for 2018 would have been $5,870,147, and his total compensation would have only been $10,694,606.

 

 

(1)

A portion of Mr. Petrello’s contractual salary is deemed to include payment for his service as a director of the Company. In 2019, Mr. Petrello agreed to a 10% reduction in base salary, which reduction was continued for 2020. Furthermore, in light of the coronavirus pandemic and the recent sharp drop in oil prices, on March 23, 2020 (a) Mr. Petrello received a further 10 percent reduction in the base salary stated in his employment agreement, on top of the 10 percent reduction that has been in place since the beginning of 2019, (b) Mr. Restrepo’s salary was reduced by 20 percent below the amount stated in his amended and restated employment agreement, and (c) Mr. Andrews’s salary reduced by 10%. Further salary reductions were put in place beginning April 6, 2020. As a result, Messrs. Petrello and Restrepo have received reductions in base salaries, in the aggregate, of approximately 31 percent from the amounts set forth in their respective employments agreements for the period from March 23, 2020, through the end of the year, and approximately 26 percent and 24 percent, respectively, for all of 2020.

 

(2)

Except as otherwise described below, the amounts shown in this column reflect the value of restricted share awards based on the grant date closing price of our common shares. Dividends on stock awards are not shown in the table because those amounts are factored into the grant date fair value.

 

  

In accordance with their respective employment agreements, the number of TSR Shares and Performance Shares to be granted to each of Messrs. Petrello and Restrepo is calculated using a per share value equal to the average daily closing price of the Company’s shares on the NYSE on each of the twenty (20) trading days prior to the date of calculation. As a result, the contractually determined value may be higher or lower than the amount set forth in the Summary Compensation Table and other tables in this proxy statement, which for TSR Shares is determined using the Monte Carlo model using the assumptions detailed in the footnotes of our audited financial statements, and which for Performance Shares is determined using the closing price on the date of grant approval.

 

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The amounts shown in this column for Messrs. Petrello and Restrepo consist of the following:

 

   
     Stock Award  

Executive

   Year      Performance
Shares($)(a)
    TSR
Shares($)(b)
   Other
Awards($)
     Total($)  
                                                         
                 

Mr. Petrello

     2019        6,195,920 (c)      2,963,698     (d)       N/A          9,159,618  
     2018        5,868,647 (e)      4,048,267     (f)        1,500       (g  )       9,918,414  
     2017        5,839,601 (h)      3,558,119     (i)       N/A          9,397,720  
                                                         
                 

Mr. Restrepo

     2019        1,283,236 (j)      733,868     (k)       N/A          2,017,104  
     2018        1,089,895 (l)      1,002,427     (m)       N/A          2,092,322  
     2017        1,232,378 (n)      881,055     (o)       N/A          2,113,433  
                                                         

Note: Pursuant to SEC rules, the 2018 amounts above for our CEO do not reflect the transaction, approved by the Compensation Committee, pursuant to which Mr. Petrello voluntarily forfeited the TSR Shares in exchange for the restricted shares valued at $1,500 listed under “Other Awards”. Had we been permitted to reflect the transaction, the 2018 amount under TSR Shares would have been $0 and the total amount for 2018 would have been $5,870,147.

 

  (a)

Performance Shares are granted based upon the achievement of certain pre-determined financial or operational performance goals measured over the one-year performance period prior to the year such shares are granted. A minimum performance threshold applies before any Performance Shares are granted. Even though the performance objectives were achieved and the Performance Shares earned, vesting of Performance Shares remains subject to an additional 3-year vesting period.

 

  (b)

Pursuant to their respective employment agreements, the maximum number of TSR shares eligible to vest are granted at the beginning of the performance period. TSR Shares are not time-based awards; they represent only amounts that may be earned in the future. TSR Shares only vest to the extent that our relative TSR performance meets certain threshold levels, and any shares that do not vest are forfeited. Vesting is based on our TSR performance relative to the Peer Group measured over a 3-year period. If minimum performance criteria are not met, the TSR Shares will not vest. In addition, the employment agreements of Messrs. Petrello and Restrepo have been amended to, among other things, cap the potential payout of TSR Share awards (previously issued but unvested as well as future awards) at target if the Company’s absolute total shareholder return for the applicable performance period is negative.

 

  (c)

Mr. Petrello achieved 86.8% of his 2018 performance criteria, and as a result he earned a Performance Share award for 2019 valued at 86.8% of 2x his maximum non-equity incentive award ($7,000,000), or $6,076,000, calculated in accordance with the terms of his employment agreement. Accordingly, on February 22, 2019, the Compensation Committee granted a Performance Share award of 1,998,684 shares to Mr. Petrello, based upon the average daily closing price of our shares on each of the preceding 20 business days prior to that date. The amount reflected in the table is the value of the Performance Share award calculated using the closing price of our common shares on February 22, 2019.

 

  (d)

These TSR Shares were granted to Mr. Petrello on January 2, 2019. The grant-date fair value set forth in the table was calculated using the Monte Carlo method. Had the grant been valued based on the average closing price of our shares on each of the 20 calendar days preceding the calculation date, as determined in accordance with his employment contract, the TSR Share award would have been valued at $5,250,000 for Maximum or $2,625,000 at Target.

 

  (e)

Mr. Petrello achieved 88.34% of his 2017 performance criteria, and as a result he earned a Performance Share award for 2018 valued at 88.34% of 2x his maximum non-equity incentive award ($7,000,000), or $6,183,800, calculated in accordance with the terms of his employment agreement. Accordingly, on February 23, 2018, the Compensation Committee granted a Performance Share award of 851,763 shares to Mr. Petrello, based upon the average daily closing price of our shares on each of the preceding 20 business days prior to that date. The amount reflected in the table is the value of the Performance Share award calculated using the closing price of our common shares on February 23, 2018.

 

  (f)

These TSR Shares were granted to Mr. Petrello on January 2, 2018. The grant-date fair value set forth in the table was calculated using the Monte Carlo method. Had the grant been valued based on the average closing price of our shares on each of the 20 calendar days preceding the calculation date, as determined in accordance with his employment contract, the TSR Share award would have been valued at $5,250,000 for Maximum or $2,625,000 at Target. On December 31, 2018, the Compensation Committee approved a transaction pursuant to which Mr. Petrello voluntarily forfeited these TSR Shares. In exchange for such forfeiture, Mr. Petrello received an award of 750 restricted shares, having a grant date fair value of $1,500, that vests in equal installments on the first three anniversaries of the date of grant.

 

  (g)

This award of restricted shares was granted to Mr. Petrello on December 31, 2018, in exchange for the forfeiture of his TSR Shares granted on January 2, 2018. Mr. Petrello initiated the exchange of his 2018 TSR Shares for this time-based restricted shares to reduce his total compensation for 2018.

 

  (h)

Mr. Petrello achieved 88% of his 2016 performance criteria, and as a result he earned a Performance Share award for 2017 valued at 88% of 2x his maximum non-equity incentive award ($7,000,000), or $6,160,000, calculated in accordance with the terms of his employment agreement. Accordingly, on February 17, 2017, the Compensation Committee granted a Performance Share award of 381,424 shares to Mr. Petrello, based upon the average daily closing price of our shares on each of the preceding 20 business days prior to that date. The amount reflected in the table is the value of the Performance Share award calculated using the closing price of our common shares on February 17, 2017.

 

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  (i)

These TSR Shares were granted to Mr. Petrello on January 3, 2017. The grant-date fair value set forth in the table was calculated using the Monte Carlo method. Had the grant been valued based on the average closing price of our shares on each of the 20 calendar days preceding the calculation date, as determined in accordance with his employment contract, the TSR Share award would have been valued at $5,250,000 for Maximum or $2,625,000 at Target.

 

  (j)

Mr. Restrepo achieved 96.8% of his 2018 performance criteria, and as a result he earned a Performance Share award for 2019 valued at 96.8% of 2x his target non-equity incentive award ($1,300,000), or $1,258,400, calculated in accordance with the terms of his employment agreement. Accordingly, on February 22, 2019, the date of determination, the Compensation Committee granted a Performance Share award of 413,947 shares to Mr. Restrepo, based upon the average daily closing price of our shares on each of the preceding 20 business days prior to that date. The amount reflected in the table is the value of the Performance Share award calculated using the closing price of our common shares on February 22, 2019.

 

  (k)

These TSR Shares were granted to Mr. Restrepo on January 2, 2019. The grant-date fair value set forth in the table is calculated using the Monte Carlo method. Had the grant been valued based on the average closing price of our shares on each of the 20 calendar days preceding the calculation date, as determined in accordance with his employment contract, the TSR Share award would have been valued at $1,300,000 for Maximum or $650,000 at Target.

 

  (l)

Mr. Restrepo achieved 88.34% of his 2017 performance criteria, and as a result he earned a Performance Share award for 2018 valued at 88.34% of 2x his target non-equity incentive award ($1,300,000), or $1,148,420, calculated in accordance with the terms of his employment agreement. Accordingly, on February 23, 2018, the date of determination, the Compensation Committee granted a Performance Share award of 158,947 shares to Mr. Restrepo, based upon the average daily closing price of our shares on each of the preceding 20 business days prior to that date. The amount reflected in the table is the value of the Performance Share award calculated using the closing price of our common shares on February 23, 2018.

 

  (m)

These TSR Shares were granted to Mr. Restrepo on January 2, 2018. The grant-date fair value set forth in the table is calculated using the Monte Carlo method. Had the grant been valued based on the average closing price of our shares on each of the 20 calendar days preceding the calculation date, as determined in accordance with his employment contract, the TSR Share award would have been valued at $1,300,000 for Maximum or $650,000 at Target.

 

  (n)

Mr. Restrepo achieved all of his 2016 performance criteria, and as a result he earned a Performance Share award for 2017 valued at 2x his target non-equity incentive award, or $1,300,000, calculated in accordance with the terms of his employment agreement. Accordingly, on February 17, 2017, the Compensation Committee granted a Performance Share award of 80,495 shares to Mr. Restrepo, based upon the average daily closing price of our shares on each of the preceding 20 business days prior to that date. The amount reflected in the table is the value of the Performance Share award calculated using the closing price of our common shares on February 17, 2017.

 

  (o)

These TSR Shares were granted to Mr. Restrepo on January 3, 2017. The grant-date fair value set forth in the table is calculated using the Monte Carlo method. Had the grant been valued based on the average closing price of our shares on each of the 20 calendar days preceding the calculation date, as determined in accordance with his employment contract, the TSR Share award would have been valued at $1,300,000 for Maximum or $650,000 at Target.

 

(3)

The annual performance bonuses of our named executive officers are governed by our Incentive Plan, as described above under “Compensation Discussion and Analysis—Key Components of Executive Compensation—How We Determine the Annual Performance Bonus.” Amounts shown in the table above reflect the amounts earned for the particular year shown, even though such amounts are paid in the following year.

 

(4)

The amounts in this column are attributable to above-market earnings in the Executive Plan. For 2019, above-market earnings represent the difference between the 6% interest rate earned under this plan and 3.98%, which is 120% of the Internal Revenue Service Long-Term Applicable Federal Rate as of December 31, 2019. Nonqualified deferred compensation activity for 2019 is detailed in the table under “2019 Nonqualified Deferred Compensation” below.

 

(5)

The amounts in the “All Other Compensation” column of this table consist of the following:

 

               

Name

   Years      Insurance
Benefits(a)
     Club
Membership
     Imputed
Life
Insurance(b)
     Other(c)      401(k)
Company
Match
     Total  
                                                                
                    

Anthony G. Petrello

Chairman of the Board,

President and CEO

     2019        0        32,694        10,254        1,424,836        14,000        1,481,784  
     2018        0        28,252        11,389        1,251,533        13,750        1,304,924  
     2017        0        26,617        11,389        1,379,300        13,500        1,430,806  
                                                                
                    

William J. Restrepo

CFO

     2019        0        14,710        3,129        418,752        14,000        450,591  
     2018        0        13,765        2,596        443,436        13,750        473,547  
     2017        0        13,362        2,596        400,000        13,500        429,458  
                                                                
                    

Mark D. Andrews

Corporate Secretary

     2019        0        0        0        123,573        0        123,573  
     2018        0        0        0        94,660        0        94,660  
     2017        0        0        0        94,445        0        94,445  
                                                                

 

  (a)

The economic benefit related to a split-dollar life insurance arrangement was $34,321 for Mr. Petrello for 2019. These amounts are reimbursed to the Company. The benefit as projected on an actuarial basis was a gain of $1,018,769 before taking into

 

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  account any reimbursements to the Company. We have used the economic-benefit method for purposes of disclosure in the Summary Compensation Table. Nabors suspended premium payments under these policies in 2002.

 

  (b)

Represents value of life insurance premiums for coverage in excess of $50,000 for Messrs. Petrello and Restrepo.

 

  (c)

For 2019, the amount in this column for Mr. Petrello includes contributions to the Executive Plan of $1,200,000 and unreimbursed incremental variable operating costs to the Company attributable to his personal use of corporate aircraft of $224,836. For 2018, the amount in this column for Mr. Petrello includes contributions to the Executive Plan of $1,200,000 and unreimbursed incremental variable operating costs to the Company attributable to his personal use of corporate aircraft of $51,533. For 2017, the amount in this column for Mr. Petrello includes contributions to the Executive Plan of $1,200,000 and unreimbursed incremental variable operating costs to the Company attributable to his personal use of corporate aircraft of $179,300.

 

    

For 2019, the amount in this column for Mr. Restrepo includes contributions to the Executive Plan of $400,000 and unreimbursed incremental variable operating costs to the Company attributable to his personal use of corporate aircraft of $18,752. For 2018, the amount in this column for Mr. Restrepo includes contributions to the Executive Plan of $400,000 and unreimbursed incremental variable operating costs to the Company attributable to his personal use of corporate aircraft of $43,436. For 2017 the amount attributable in this column for Mr. Restrepo includes contributions to the Executive Plan of $400,000. The amount in this column for Mr. Andrews for each of 2019, 2018, and 2017 includes a housing allowance of $48,000, respectively, as well as reimbursement of Bermuda payroll taxes, company matching contributions to a Bermuda pension plan, and reimbursement of dependent education, club membership, and Bermuda health and social insurance premiums, none of which individually exceeds the greater of $25,000 or 10% of the total amount of these benefits for Mr. Andrews. Grants Of Plan-Based Awards

Grants Of Plan-Based Awards

The table below shows information about plan-based awards, including possible payouts for performance bonuses under the Incentive Plan, TSR Shares, and Performance Shares, in each case as granted during the year ended December 31, 2019.

 

             

Name

 

Grant
Date

    Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
    Estimated Possible Payouts
Under Equity Incentive
Plan Awards(3)
   

All
Other
Stock
Awards
Number of
Shares of

Stock(4)
(#)

   

Grant-Date
Fair Value
of Stock
and
Option

Awards
($)

 
  Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 
                                                                                                 
                       
       

Anthony G. Petrello

      1,225,000       1,750,000       3,500,000       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A  
    1/2/2019       N/A       N/A       N/A       522,908       1,045,817       2,091,633       N/A       N/A       N/A       N/A       2,963,698  
    2/22/2019       N/A       N/A       N/A       N/A       N/A       N/A       460,526       1,151,316       2,302,632       N/A       6,195,920  
                                                                                               
                       
       

William J. Restrepo

      455,000       650,000       1,300,000       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A  
    1/2/2019       N/A       N/A       N/A       129,482       258,964       517,928       N/A       N/A       N/A       N/A       733,868  
    2/22/2019       N/A       N/A       N/A       N/A       N/A       N/A       85,526       213,816       427,632       N/A       1,283,236  
                                                                                                 
                       
       

Mark D. Andrews

      17,600       44,000       88,000       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A  
    2/222019       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       16,500       51,150  
                                                                                                 

 

(1)

Amounts represent a range of possible payouts for performance bonuses under the Incentive Plan. As described under “Compensation Discussion and Analysis” above, the Compensation Committee sets target performance bonus amounts at the beginning of the fiscal year under our Incentive Plan. Possible performance bonus payouts under the Incentive Plan for Messrs. Petrello and Restrepo are based on targets set by the Compensation Committee with respect to adjusted EBITDA. If the threshold performance level is not achieved, no payout would be made. The amount set forth in the “Threshold” column above represents the amount payable if the executive achieved the threshold performance level. The amount set forth in the “Target” column above represents the amount payable if the executive achieved the target performance. The amount set forth in the “Maximum” column above represents the amount payable if the executive achieved the maximum performance. If actual performance falls between Threshold and Target levels, or Target and Maximum levels, the annual performance bonus is prorated. In addition, adjustments are permitted as deemed appropriate by the Board to account for significant events that warrant an adjustment. The actual amounts paid for fiscal year 2019 are set forth above in the “2019 Summary Compensation Table” in the “Non-Equity Incentive Plan Compensation” column.

 

(2)

Pursuant to Messrs. Petrello and Restrepo’s employment agreements, these TSR Shares are eligible to vest in 2022 based upon the Company’s relative share performance measured over 2019-2021.

 

(3)

Amounts represent the threshold, target and maximum payouts for Performance Shares granted to each of Messrs. Petrello and Restrepo. The Performance Shares earned by Messrs. Petrello and Restrepo in February 2019 pursuant to their respective employment agreements were based upon the achievement of certain objectives for the 2018 year and were granted in February 2019. Mr. Petrello achieved 86.8% of his goals and therefore received 1,998,684 restricted shares scheduled to vest in three (3) equal annual installments beginning on the first anniversary of the date of the award. Mr. Restrepo achieve 96.8% of his goals and therefore received 413,947 restricted shares scheduled to vest ratably over a three-year period.

 

(4)

In February 2019, Mr. Andrews received 16,500 restricted shares relating to 2018 performance, which are scheduled to vest ratably over a four-year period.

 

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Option Exercises And Shares Vested

The following table shows stock options exercised by the named executive officers and restricted share awards vested during 2019.

 

     

Name

   Option Awards      Share Awards  
  

Number of Shares

Acquired on Exercise

    

Value Realized

on Exercise

($)

    

Number of Shares

Acquired on Vesting
(#)(2)

    

Value Realized

on Vesting

($)

 
                                     
           

Anthony G. Petrello(1)

     0        0        922,682        2,465,417  
                                     
           

William J. Restrepo(2)

     0        0        183,824        488,389  
                                     
           

Mark D. Andrews

     0        0        7,724        24,643  
                                     

 

(1)

Mr. Petrello’s and Mr. Restrepo’s share awards include TSR Shares earned for the three-year performance cycle that ended on December 31, 2018. The Company’s TSR performance relative to the applicable Performance Peer Group for TSR Shares granted in 2016 ranked at 12, or below Target, and resulted in a multiplier of 12.5% being applied to the target grant of TSR Shares. In February 2019, 150,172 and 37,186 shares of the TSR Shares granted in 2016 to Mr. Petrello and Mr. Restrepo vested following a determination by the Compensation Committee. The remaining shares were forfeited.

 

(2)

Mr. Petrello tendered shares to satisfy tax withholding obligations upon vesting of these share awards, and, accordingly, received fewer shares than shown in the table.

 

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Outstanding Equity Awards At Fiscal Year End

The table below shows unexercised options, restricted share awards that have not vested, and equity incentive plan awards for each named executive officer outstanding as of December 31, 2019. The amounts reflected as market value are based on the closing price of our common shares of $2.88 on December 31, 2019 as reported on the NYSE.

 

     
     Option Awards      Stock Awards  
 

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable
     Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares
That Have
Not Vested
(#)
  Market
Value of
Shares
That Have
Not Vested
($)
     Equity
Incentive
Plan Awards
Number of
Unearned
Shares That
Have Not
Vested
(#)
  Equity
Incentive
Plan Awards
Market or
Payout Value
of Unearned
Shares That
Have
Not Vested
($)