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.      )

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    Check the appropriate box:    
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    o       Soliciting Material Pursuant to §240.14a-12    

Cimarex Energy Co.
(Name of Registrant as Specified in Its Charter)

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

 

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LOGO

1700 Lincoln Street, Suite 3700
Denver, CO 80203

2021 ANNUAL MEETING

§
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
    TIME AND DATE   9:00 a.m. Mountain Daylight Time on Wednesday, May 12, 2021    
       
    PLACE   The Annual Meeting of Cimarex Energy Co. ("Cimarex" or the "Company") will be held virtually at www.viewproxy.com/cimarex/2021.    

 

 

 

 

Because of continuing health and safety concerns and government recommendations and restrictions relating to the COVID-19 pandemic, we are not holding an in-person Annual Meeting. We anticipate allowing for in-person annual meetings in the future when health and regulatory issues allow. While you will be able to vote your shares and ask questions at the virtual meeting, we encourage you to vote your shares prior to the annual meeting. For more information, see "Questions and Answers—2. How do I attend and vote shares at the virtual Annual Meeting?"

 

 
       
    ITEMS OF BUSINESS   Item 1. Election of Directors    

 

 

 

 

Item 2. Advisory Vote to Approve Executive Compensation

 

 

 

 

 

 

Item 3. Approve Amended and Restated 2019 Equity Incentive Plan to Increase the Number of Shares of Common Stock Authorized for Issuance Under the Plan by 6,900,000

 

 

 

 

 

 

Item 4. To Consider a Proposal to Amend and Restate Our Certificate of Incorporation to Provide for the Annual Election of All Directors

 

 

 

 

 

 

Item 5. Ratification of Independent Auditors

 

 

 

 

 

 

Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting

 

 
       
    RECORD DATE   March 16, 2021    
       
    MAILING DATE TO SHAREHOLDERS   March 26, 2021    
       
    MATERIALS TO REVIEW   This booklet contains our Notice of 2021 Annual Meeting and Proxy Statement. Our 2020 Annual Report is available on our website at www.cimarex.com.    
       
    PROXY VOTING   It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 97 of this proxy statement or you may attend virtually and vote your shares electronically at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the vote is taken by following the instructions on page 99 of this proxy statement.    
    March 26, 2021   Francis B. Barron, Corporate Secretary    

Table of Contents

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY   1

ITEM 1: ELECTION OF DIRECTORS

 

8
Election Process   8
Director Nominations   8
2021 Nominees for Class I Directors   9
Continuing Directors   12
Summary of Director Core Competencies and Composition Highlights   19

CORPORATE GOVERNANCE

 

20
Corporate Governance Highlights   20
Shareholder Engagement   20
Director Qualifications and Recruitment   21
Board of Directors and its Committees   22
Other Governance Matters   27

COMPENSATION DISCUSSION AND ANALYSIS

 

31
Executive Summary of Compensation Discussion and Analysis ("CD&A")   31
Section 1   35

Our Compensation Framework

  35

Competitive Positioning

  37

2020 Compensation Peer Group

  37

2020 Stock Performance Peer Group

  38
Section 2   39

Summary of 2020 and Early 2021 Compensation Decisions

  39

Response to 2020 Say-on-Pay Vote

  40

Key 2020 Compensation Actions

  41

Alignment of CEO Compensation to Total Shareholder Return ("TSR")

  51

Early 2021 Compensation Decisions

  55
Section 3   56

Role of Compensation Consultant and Management in Compensation Decisions

  56

Other Compensation Arrangements

  57

Other Compensation Policies

  58

Compensation Committee Report

  59

EXECUTIVE COMPENSATION TABLES

 

60
Summary Compensation Table   60
2020 Grants of Plan-Based Awards   61
Outstanding Equity Awards at December 31, 2020   63
2020 Option Exercises and Restricted Stock Vested   64
2020 Nonqualified Deferred Compensation   65
CEO Pay Ratio   66
Potential Payments Upon Change in Control or Termination   66
Director and Officer Indemnification Agreements   72


NON-EMPLOYEE DIRECTOR COMPENSATION

 

73

SECURITY OWNERSHIP

 

76
Management, Directors and Certain Beneficial Owners   76
Section 16(a) Beneficial Ownership Reporting Compliance   77

ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

78

ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN

 

79

ITEM 4: AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS

 

90

ITEM 5: RATIFICATION OF INDEPENDENT AUDITORS

 

92
Audit and Non-Audit Fees   92
Approval of Audit, Audit-Related and Tax Services   92
Report of Audit Committee   93

GENERAL INFORMATION

 

94
Information Available Online   94
Communications with Cimarex's Directors   94
Director Nominations for the 2022 Annual Meeting of Shareholders   94
Shareholder Proposals for the 2022 Annual Meeting of Shareholders   94
Complaint and Reporting Procedures   95

QUESTIONS AND ANSWERS

 

96
Proxy Materials and Voting Information   96

APPENDIX A: AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN

 

A-1

APPENDIX B: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CIMAREX ENERGY CO.

 

B-1

APPENDIX C: AMENDED AND RESTATED BYLAWS OF CIMAREX ENERGY CO.

 

C-1

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Proxy Statement Summary

This section highlights certain important information presented in this Proxy Statement and is intended to assist you in evaluating the matters to be voted on at the meeting. We encourage you to read the Proxy Statement in its entirety before you cast your vote. For more information regarding Cimarex's 2020 performance, please review Cimarex's Annual Report on Form 10-K for the year ended December 31, 2020.

Voting Matters and Board Recommendations

            Voting Recommendation   Page
Reference
   
  Item 1:   Election of Directors   FOR each Director Nominee   8    
    Item 2:   Advisory Vote to Approve Executive Compensation   FOR   78    
  Item 3:   Approve Amended and Restated 2019 Equity Incentive Plan   FOR   79    
    Item 4:   To Consider a Proposal to Amend and Restate Our Certificate of Incorporation to Provide for the Annual Election of All Directors   FOR   90    
  Item 5:   Ratification of Independent Auditors   FOR   92    

Advance Voting Methods

Even if you plan to virtually attend the 2021 Annual Meeting of Shareholders, please vote right away using one of the following advance voting methods (see page 97 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions.

You can vote in advance in one of three ways:

GRAPHIC   Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET

GRAPHIC

 

Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE

GRAPHIC

 

Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL

Voting at our 2021 Annual Meeting of Shareholders

All shareholders of record may vote electronically at the 2021 Annual Meeting of Shareholders, which will be held virtually on Wednesday, May 12, 2021 at 9:00 a.m., Mountain Daylight Time, at www.viewproxy.com/cimarex/2021. Beneficial owners may vote electronically at the virtual Meeting if they have a legal proxy, as described in the response to question 2 on page 96 of "Questions and Answers about the Meeting and Voting."

Cimarex Energy Co.

 

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Governance Highlights (page 20)

Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, fosters management accountability, and helps build public trust in Cimarex.

þ   8 of 9 continuing Directors are independent   þ   Disclosure Committee for financial reporting
             
þ   Majority voting for Directors resignation policy   þ   Board and Audit Committee risk oversight
             
þ   Proposing Declassification of Board   þ   Compensation risk assessment
             
þ   Combined Chairman and CEO   þ   Review of related party transactions
             
þ   Independent Lead Director   þ   Non-hedging and non-pledging policies
             
þ   Diverse Board skills and experience   þ   Clawback policy
             
þ   Annual Board and committee self-evaluations   þ   Management and Director stock ownership guidelines
             
þ   Periodic consultant review of Board skills   þ   No tax gross-ups
             
þ   Annual equity grants to Directors   þ   Proxy access
             
þ   Annual Board education   þ   Active shareholder engagement
             
þ   Board refreshment efforts with five new directors since 2012   þ   Increased gender and ethnic diversity of Board

As highlighted above, the Company is proposing declassifying the Board and provide that all directors be elected annually beginning with our 2024 annual meeting. This proposal is an outcome of our shareholder engagement efforts, and demonstrates our commitment to enhancing our corporate governance policies.

In addition, to support the Company's elevated focus on environmental and safety performance, our Board of Directors established a new Environmental, Health and Safety Committee. The committee has oversight of the Company's approach to health, safety and environmental (HSE) policies and programs and key HSE risks, as well as overseeing our corporate disclosures.

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Director Nominees and Current Committee Memberships

                                  Committee Memberships
(Independent Directors Only)
   

 

DIRECTOR NOMINEES

      AGE       DIRECTOR
SINCE


      TERM
EXPIRES


      Audit       Compensation       Nominating
and
Corporate
Governance
   
                           

 

Kathleen A. Hogenson  (Independent Director)
President and Chief Executive Officer, Zone Oil & Gas LLC


 
  60     2019     2021     ·         ·    

 

Lisa A. Stewart (Independent Director)
Executive Chairman and former President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners

      63       2015       2021               ·       ·    

 

Continuing Directors

                                                 

 

                                                       
                           

 

Paul N. Eckley (Independent Director)
Retired, former Senior Vice President—Investments, State Farm


 
  66     2019     2023         ·     ·    

 

Hans Helmerich (Independent Director)
Chairman and former Chief Executive Officer, Helmerich & Payne, Inc.

      62       2002       2022               ·       ·    
                           

 

Thomas E. Jorden
Chairman, Chief Executive Officer and President, Cimarex


 
  63     2011     2023                

 

Harold R. Logan, Jr. (Independent Director)
Independent Lead Director and Chair of Nominating and Corporate Governance Committee of Cimarex

      76       2009       2022       ·               Chair    
                           

 

Floyd R. Price (Independent Director)
Chair of Compensation Committee of Cimarex; Retired, former executive officer, Apache Corporation


 
  72     2012     2023         Chair     ·    

 

Monroe W. Robertson (Independent Director)
Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co.

      71       2005       2022       Chair               ·    
                           

 

Frances M. Vallejo (Independent Director)
Retired, former Vice President, ConocoPhillips


 
  55     2017     2023     ·         ·    

Cimarex Energy Co.

 

3


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2020 Executive Compensation (page 31)

Below is the 2020 compensation for each Named Executive Officer ("NEO") as determined under the Securities and Exchange Commission ("SEC") rules. See the notes accompanying the 2020 Summary Compensation Table on page 60 for more information.

                Stock Awards ($)                      

Name and
Principal Position

    Salary     Bonus     Performance-
based
    Time
Vested
    2020 Annual
Cash Incentive
Award
    All Other
Comp.
    Total    

  Thomas E. Jorden
Chairman, Chief Executive
Officer (CEO) and President (Principal Executive Officer)

  $ 934,870   $   $ 4,250,000   $ 4,250,000   $ 1,240,000   $ 106,223   $ 10,781,093    

  G. Mark Burford
Senior Vice President and
Chief Financial Officer (CFO) (Principal Financial Officer)



 
$ 495,849   $   $ 1,150,000   $ 1,150,000   $ 490,000   $ 81,181   $ 3,367,030    

  John A. Lambuth
Executive Vice President—Exploration

  $ 566,803   $   $ 1,550,000   $ 1,550,000   $ 570,000   $ 67,453   $ 4,304,256    

  Stephen P. Bell
Executive Vice President—Business Development


 
$ 518,379   $   $ 1,500,000   $ 1,500,000   $ 520,000   $ 66,031   $ 4,104,410    

  Francis B. Barron
Senior Vice President—General Counsel, Corporate Secretary

  $ 444,434   $   $ 1,000,000   $ 1,000,000   $ 440,000   $ 78,121   $ 2,962,555    

  Joseph R. Albi
Former Executive Vice President—Operations, Chief Operating Officer (COO)


 
$ 346,097   $   $   $   $ 310,000   $ 65,935   $ 722,032    

Response to Say-on-Pay Vote

In response to the advisory vote to approve executive compensation, or "say-on-pay," at our May 2019 and May 2020 annual meetings of shareholders and our shareholder engagement, we made the following changes to our compensation programs:

§
Reduced potential vesting of 2019 performance equity awards by 50% if the Company's share price declines over the performance period;
§
Added objective, formula-based metrics to short-term incentives for 2020; and
§
Added objective emissions and flaring reduction metrics to short-term incentives for 2020 and 2021.

A Significant Portion of our CEO's 2020 Compensation is at Risk

The accompanying graph illustrates our CEO's 2020 at risk compensation. With 91% of total compensation at risk, the majority of our CEO's compensation is an incentive for future performance and realized only if

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2021 Notice of Annual Meeting and Proxy Statement


Table of Contents

Cimarex meets certain performance measures and delivers value to shareholders. (Percentages in the following table do not add to 100% due to rounding.)

GRAPHIC

How CEO Pay is Tied to Cimarex's Performance (page 51)

Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also provide competitive total direct compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and operational objectives. Our Compensation Committee considers performance in two primary ways:

§
Cimarex's operating performance, with an increased focus on emissions performance in 2020 and 2021; and
§
Return to shareholders over time, on both an absolute basis and a relative basis compared to other companies in our Stock Performance Peer Group and in our Compensation Peer Group (see page 38).

2020 Financial and Operational Highlights

§
Responded to the highly transmissible and pathogenic coronavirus known as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the disease known as COVID-19 and the oil and gas demand destruction caused by the COVID-19 pandemic as well as the March 2020 oil price war between Saudi Arabia and Russia by, among other things:
§
Implementing safety protocols to protect employees and contractors from COVID-19
§
Announcing a reduction in our 2020 capital investment budget of 55-60% from our original guidance of $1.25-$1.35 billion and implementing cost-cutting measures to align business operations with lower commodity price environment
§
Reducing base salary of our CEO by 25% and base salaries of the other executive officers by 15% and the cash compensation of directors by 20% from June 1, 2020 until December 1, 2020
§
Maintaining our common stock dividend at $0.22 per share per quarter ($0.88 per year)
§
Reduced Permian Basin flaring volume levels as a percentage of our Permian Basin gross operated gas production from 1.97% in 2019 to 0.90% in 2020, a 54% decrease.

Cimarex Energy Co.

 

5

Table of Contents

§
Reduced methane intensity company-wide (the gross volume of our natural gas emissions divided by the gross operated volume of our natural gas production) from 0.258% in 2019 to 0.187% in 2020, a 28% decrease.
§
Decreased exploration and development expenditures by 56% to $544.9 million in 2020 compared to $1.24 billion in 2019, while year-over-year average daily production decreased 9% to 252.5 thousand barrels of oil equivalent ("MBOE") per day in 2020 compared to 278.5 MBOE per day in 2019. The decreases in expenditures and production were primarily the result of reducing development activities and shutting in wells due to demand destruction from the COVID-19 pandemic.
§
Year-over-year production revenues decreased 35% to $1.51 billion, which were negatively affected by decreased production and declining commodity prices.
§
Incurred a net loss of $1.967 billion in 2020 compared to a net loss of $124.6 million in 2019, primarily from the non-cash ceiling test impairment described below and a goodwill impairment.
§
Recognized a $1.638 billion non-cash ceiling test impairment of our oil and gas properties primarily due to decreases in the 12-month average trailing commodity prices used in calculating the ceiling test.
§
Generated cash flow from operating activities of $904.2 million, which was 33% lower than in 2019.
§
Our Operations group continued optimizing our production and maximizing well profitability. As a result, our production expense declined 7% from $3.34 per barrels of oil equivalent ("BOE") in 2019 to $3.09 per BOE in 2020.
§
Increased cash on hand to $273.1 million at year-end 2020, up from $94.7 million at year-end 2019.
§
Estimated proved reserves at year-end 2020 were 14% lower than at year-end 2019 after additions, positive and negative revisions, and production.
§
Our stock price decreased 29% from $52.49 at year-end 2019 to $37.51 at year-end 2020. The decrease in our stock price led to a lower value for NEOs' long-term equity awards that vested in 2020 compared to the grant date fair value ("GDFV") of those awards in 2017, with the vested shares for NEOs (other than a retired NEO) having a value equal to 20% of the GDFV, which demonstrates the alignment of interests of our NEOs.

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Return to Shareholders

The following chart shows how a December 31, 2015 investment of $100 in Cimarex common stock would have a value of $44.43 on December 31, 2020, which includes dividends reinvested quarterly, for those who wish to consider Total Shareholder Return when evaluating executive compensation. The chart also compares the Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 Index, the Dow Jones U.S. Exploration & Production Index, and the S&P Oil & Gas Exploration & Production Index over the same time period.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

GRAPHIC

 

  12/31/2015   12/31/2016   12/31/2017   12/31/2018   12/31/2019   12/31/2020    

 

Cimarex Energy Co.

  $ 100.00   $ 152.64   $ 137.42   $ 69.88   $ 60.39   $ 44.43    



 


S&P 500


 

$

100.00

 

$

111.96

 

$

136.40

 

$

130.42

 

$

171.49

 

$

203.04

 

 

               



 


Dow Jones U.S. Exploration & Production


 

$

100.00

 

$

124.48

 

$

126.10

 

$

103.69

 

$

115.51

 

$

76.64

 

 



 


S&P Oil & Gas Exploration & Production


 

$

100.00

 

$

132.86

 

$

124.48

 

$

100.20

 

$

112.25

 

$

72.49

 

 

               

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Cimarex Energy Co.

 

7


Table of Contents

ITEM 1: ELECTION OF DIRECTORS

ITEM 1: ELECTION OF DIRECTORS

Election Process

Our current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes: Class I, Class II and Class III Directors. At each Annual Meeting, a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each Director holds office until his or her successor is elected and qualifies.

The term of three Class I Directors, Joseph R. Albi, Kathleen A. Hogenson and Lisa A. Stewart, will expire at the 2021 Annual Meeting. The Nominating and Corporate Governance Committee, at its February 2021 meeting, nominated Ms. Hogenson and Ms. Stewart for election as Class I Directors, to serve until the 2024 Annual Meeting. Mr. Albi is retiring as a Director following the 2021 Annual Meeting and will serve as Director Emeritus for up to two years.

If prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute nominee(s) designated by our Board or its Nominating and Corporate Governance Committee. As of the mailing of these proxy materials, the Board has no reason to believe any Director nominee would not be available to serve.

A nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board's acceptance of such resignation. If a nominee fails to receive more favorable votes than votes cast against him or her, the Nominating and Corporate Governance Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the Director's resignation. The Nominating and Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director's resignation. The Director whose resignation is under consideration must abstain from participating in any decision regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance of his or her resignation within 90 days after the results of the election are certified. If the Board does not accept the resignation, the Director will continue to serve as a Director until his or her successor is elected and qualified. If the Board accepts the resignation, then the Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in compliance with the Certificate of Incorporation.

Director Nominations

The Nominating and Corporate Governance Committee is responsible for identifying and evaluating potential Director nominees and for recommending to the Board a slate of nominees for election at each Annual Meeting. Directors, members of management, shareholders or a third-party search firm may suggest potential nominees.

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ITEM 1: ELECTION OF DIRECTORS

While the Nominating and Corporate Governance Committee will consider Director nominees suggested by shareholders, it did not receive any shareholder nominations for the 2021 Annual Meeting prior to the deadline for such nominations.

2021 Nominees for Class I Directors

Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Kathleen A. Hogenson and Lisa A. Stewart for election as Class I Directors, to serve until the 2024 Annual Meeting. The Board has determined that each of Ms. Hogenson and Ms. Stewart is independent under the New York Stock Exchange ("NYSE") corporate governance rules. Each of the Director nominees currently serves on the Board. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected.

The Board believes the combination of the various qualifications, skills and experiences of the 2021 Director nominees will contribute to an effective and well-functioning Board. The Board also believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business, quality advice and counsel to Cimarex.

Included in each Director nominee's biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above.

    GRAPHIC     The Board of Directors recommends a vote FOR the election of each of the Director nominees.  

Cimarex Energy Co.

 

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ITEM 1: ELECTION OF DIRECTORS

About the Director Nominees

GRAPHIC   KATHLEEN A. HOGENSON

Director Since 2019 | Age 60 | Independent

Committees of the Board:

§

Audit

§

Nominating and Corporate Governance

Current Public Company Directorships:

§

First Quantum Minerals Ltd.

§

Verisk Analytics Inc.

Former Public Company Directorships

(within the last five years):

§

Petrofac Ltd.

 


Core Competencies:

§

Exploration and Development

§

Information Technology

§

Environmental, Health and Safety

§

Financial Reporting Experience

§

Executive Compensation

§

Finance/Investment Banking

§

Public Company Executive Experience

§

Corporate Governance

Ms. Hogenson has served since February 2007 as President and Chief Executive Officer at Zone Oil & Gas LLC, an independent oil and gas advisory firm focused on acquisition, exploration, development, production optimization and the operation of oil and gas properties. In 2007, she co-founded Zone Energy LLC, an upstream oil and gas operations company that was sold in 2015.

Since 2017, Ms. Hogenson has served as a Director for First Quantum Minerals Ltd., a public Canadian-based mining and metals company traded on the Toronto Stock Exchange. Since 2016, she also has served as a Director for Verisk Analytics Inc. a publicly traded company on the Nasdaq. From 2013 to 2016, Ms. Hogenson served as a Director of Petrofac Ltd., an international oilfield services company listed on the London Stock Exchange. From 2001 to 2007, Ms. Hogenson served as President and Chief Executive Officer of Santos USA Corp, the U.S. subsidiary of a publicly traded Australian natural gas producer. From 1998 to 2001, Ms. Hogenson held various positions at Unocal Corp., including Vice President of Technology, Global Chief Engineer Reservoir, and Manager, Global Reservoir Technology.

Key Attributes, Experience and Skills

Ms. Hogenson's over 35 years of experience in the oil and gas industry and extensive leadership roles are key attributes that make her well qualified to serve as a Director of the Company.
   

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ITEM 1: ELECTION OF DIRECTORS
GRAPHIC   LISA A. STEWART

Director Since 2015 | Age 63 | Independent

Committees of the Board:

§

Compensation

§

Nominating and Corporate Governance

Current Public Company Directorships:

§

Jadestone Energy

§

Western Midstream Partners, LP

Former Public Company Directorships

(within the last five years):

§

Talisman Energy, Inc.

 


Core Competencies:

§

Exploration and Development

§

Environmental, Health and Safety

§

Financial Reporting Experience

§

Executive Compensation

§

Finance/Investment Banking

§

Public Company Executive Experience

§

Investor Relations

Ms. Stewart is Executive Chairman of Sheridan Production Partners, a privately-owned oil and gas operating company she founded in 2006. From its founding in 2006 to April 2020, Ms. Stewart served as Chairman and Chief Investment Officer, and also served as President and Chief Executive Officer from December 2016 to April 2020. Since September 2020, Ms. Stewart has served as a Director of the general partner of Western Midstream Partners, LP, a publicly traded master limited partnership formed to acquire, own, develop and operate midstream energy assets. Since December 2019, Ms. Stewart has served as a Director of Jadestone Energy, an upstream oil and gas company in the Asia Pacific region, which focuses on production and near-term development assets. Jadestone Energy is headquartered in Singapore and is publicly traded on the Alternative Investment Market, a sub-market of the London Stock Exchange. From 2009 until its acquisition in May 2015, Ms. Stewart served as a Director on the Board of Talisman Energy, Inc., a Canadian oil and gas exploration and production company traded publicly on the NYSE and the Toronto Stock Exchange. From 2004 to 2006, Ms. Stewart served as Executive Vice President of El Paso Corporation and President of El Paso E&P. From 1984 to 2004, Ms. Stewart served Apache Corporation in various capacities, including most recently as Executive Vice President, with responsibilities in Apache Corporation's reservoir engineering, business development, land, environmental, health and safety, and corporate purchasing departments.

In September 2019, Sheridan Holding Company II LLC and eight related debtors filed a Chapter 11 bankruptcy case in the Southern District of Texas. In March 2020, Sheridan Holding Company I LLC and eight related debtors filed a Chapter 11 bankruptcy case in the South District of Texas. Both cases were concluded in the first quarter of 2020. These entities are related to Sheridan Production Partners and Ms. Stewart was Executive Chairman, and was President, Chief Executive Officer and Chief Investment Officer of the debtor entities at the time of the bankruptcy filing.

Key Attributes, Experience and Skills

Ms. Stewart's nearly 40 years of experience in the oil and gas industry, including in reservoir engineering, business development, land and EH&S, and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director.
   

Cimarex Energy Co.

 

11

Table of Contents

ITEM 1: ELECTION OF DIRECTORS

Continuing Directors – Class II – Term Expires 2022

GRAPHIC   HANS HELMERICH

Director Since 2002 | Age 62 | Independent

Committees of the Board:

§

Compensation

§

Nominating and Corporate Governance

Current Public Company Directorships:

§

Chairman of Helmerich & Payne, Inc.

Former Public Company Directorships

(within the last five years):

§

Atwood Oceanics, Inc.

 


Core Competencies:

§

Oilfield Services

§

Exploration and Development

§

Corporate Governance

§

Public Company Executive Experience

§

Executive Compensation

Mr. Helmerich has served as Chairman of Helmerich & Payne, Inc. ("H&P") since March 2012 and as a Director since 1987. H&P is a publicly held company primarily engaged in contract drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P's exploration and production business was merged into Cimarex in 2002.

Mr. Helmerich served as Director of Atwood Oceanics, Inc., an international offshore drilling company traded on the NYSE, located in Houston, Texas, from 1989 to 2017 prior to its merger with Ensco plc. From 2006 to 2020, Mr. Helmerich served as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin.

Key Attributes, Experience and Skills

Mr. Helmerich's background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex's business that represents a significant expenditure in Cimarex's capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex's Board and on the Compensation Committee. In addition, his service as a Director and Chairman of H&P, as a Trustee of The Northwestern Mutual Life Insurance Company and his former service as a Director of Atwood Oceanics, Inc. provides him with additional experience and knowledge to serve as a Director.
   

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ITEM 1: ELECTION OF DIRECTORS
GRAPHIC   HAROLD R. LOGAN, JR. (Lead Director)

Director Since 2009 | Age 76 | Independent

Committees of the Board:

§

Audit

§

Nominating and Corporate Governance (Chair)

Current Public Company Directorships:

§

Board of Supervisors of Suburban Propane Partners, L.P.

Former Public Company Directorships

(within the last five years):

§

Graphic Packaging Holding Co.

§

Chairman of InfraREIT, Inc.

 


Core Competencies:

§

Corporate Governance

§

Financial Reporting Experience

§

Executive Compensation

§

Finance/Investment Banking

§

Public Company Executive Experience

§

Midstream

Mr. Logan currently serves as a Director of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a Director of that company since 1996. From January 2007 to January 2021 he served as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. Mr. Logan also is a Director of one private company – Hart Energy Publishing (publisher of Oil and Gas Investor and other energy publications). From 2003 to 2017, Mr. Logan served as a Director of Graphic Packaging Holding Co., a publicly held company located in Atlanta, Georgia, and predecessor companies. From 2008 until it sold its last investment and closed in 2018, he served as Director of Basic Materials and Services LLC, a privately held company that invested in companies providing specialized services for the pipeline construction and sand/silica industries. From February 2018 until its sale in June 2019, Mr. Logan served as Chairman of InfraREIT, Inc., a publicly held real estate investment trust that owned utility assets (electric transmission lines) in Texas. From 2015 to February 2018 he had served as Lead Director for InfraREIT, Inc.

Mr. Logan was a co-founder of TransMontaigne in Denver, Colorado in 1995 and was its Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a Director of TransMontaigne from 1995 to 2006 and Chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a Director of Associated Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc.

Since 1998, Mr. Logan has been a Director of ten public companies and has served on numerous audit, compensation, and governance committees.

Key Attributes, Experience and Skills

Mr. Logan's education and his over 40 years of investment banking/venture capital and financial management experience provide him with a comprehensive understanding of business and finance. Mr. Logan's expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of public companies, and are of particular benefit to his roles as Cimarex's Lead Director and as a member of Cimarex's Audit Committee.
   

Cimarex Energy Co.

 

13

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ITEM 1: ELECTION OF DIRECTORS

GRAPHIC   MONROE W. ROBERTSON

Director Since 2005 | Age 71 | Independent

Committees of the Board:

§

Audit (Chair)

§

Nominating and Corporate Governance

Former Public Company Directorships:

(within the last five years):

§

Earthstone Energy, Inc. (formerly named Basic Earth Science System)

 


Core Competencies:

§

Corporate Governance

§

Financial Reporting Experience

§

Executive Compensation

§

Finance/Investment Banking

§

Public Company Executive Experience

§

Exploration and Development

Mr. Robertson retired from Key Production Company, Inc. ("Key") (one of two companies whose merger created Cimarex in 2002) after co-founding and serving for 10 years with Key. While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three other public energy companies: Apache Corporation, Gulf Oil Corporation and Terra Resources, Inc.

Mr. Robertson was a Director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a Director of Earthstone Energy, Inc., he was Chair of the Audit Committee and a member of the Compensation and Nominating Committee.

Key Attributes, Experience and Skills

Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business and experience as the Principal Financial Officer of Key, which is of considerable value in his service as Chairman of the Audit Committee.
   

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ITEM 1: ELECTION OF DIRECTORS

Continuing Directors – Class III – Term Expires 2023

GRAPHIC   PAUL N. ECKLEY

Director Since 2019 | Age 66 | Independent

Committees of the Board:

§

Compensation

§

Nominating and Corporate Governance

 


Core Competencies:

§

Corporate Governance

§

Financial Reporting Experience

§

Executive Compensation

§

Finance/Investments

§

Public Company Executive Experience

§

Risk Management

Mr. Eckley was Senior Vice President – Investments at State Farm® Corporate Headquarters in Bloomington, Illinois from 1998 until his retirement in September 2020. Mr. Eckley joined State Farm in 1977 as an investment analyst. He was promoted to Investment Officer in 1990 and then Vice President – Common Stocks in 1995.

Mr. Eckley was a Director of the Emerging Markets Growth Fund owned by the Capital Group from 2005 until November 2016, including serving as Chairman of the Board of that Fund from January 2014 through November 2016.

Key Attributes, Experience and Skills

Mr. Eckley's 43 years of experience in investments in public and private companies, including companies in the oil and gas industry, and extensive leadership roles are key attributes that make him well qualified to serve as a Director of the Company.
   

Cimarex Energy Co.

 

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ITEM 1: ELECTION OF DIRECTORS

GRAPHIC   THOMAS E. JORDEN

Director since 2011 | Age 63

Chairman, Chief Executive Officer and President, Cimarex Energy Co.

 


Core Competencies:

§

Exploration and Development

§

Environmental, Health and Safety

§

Government and Regulatory

§

Industry Background

§

Investor Relations

§

Public Company Executive Experience

§

Risk Management

Mr. Jorden is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected Chief Executive Officer in September 2011 after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on the Board of Trustees of the Colorado School of Mines and other private boards.

Key Attributes, Experience and Skills

Mr. Jorden brings to the Board over 35 years of experience in the oil and gas exploration and production industry and, as our Chief Executive Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board creates an important link between management and the Board.
  

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ITEM 1: ELECTION OF DIRECTORS
GRAPHIC   FLOYD R. PRICE

Director Since 2012 | Age 72 | Independent

Committees of the Board:

§

Compensation (Chair)

§

Nominating and Corporate Governance

Current Public Company Directorships:

§

Tamarack Valley Energy Ltd.

 


Core Competencies:

§

Exploration and Development

§

Financial Reporting Experience

§

Executive Compensation

§

Finance/Investment Banking

§

Public Company Executive Experience

§

Corporate Governance

Mr. Price held various positions with Apache Corporation from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, Apache International; and Exploration Manager. Apache Corporation, with headquarters in Houston, Texas, is an oil and gas exploration and production company with domestic and international operations. Since 2010, Mr. Price has served as Chairman of the Board and as a member of the audit, reserves and compensation/governance committees of Tamarack Valley Energy Ltd. ("Tamarack"), Calgary, Alberta, Canada, a publicly held company traded on the Toronto Stock Exchange. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian sedimentary basin. From June 2010 to January 2013, Mr. Price served as a Director and Chairman of the Board of Gastar Exploration, Inc. ("Gastar"), then a publicly held company located in Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the Board at Gastar.

Key Attributes, Experience and Skills

Mr. Price has over 40 years of domestic and international experience in the exploration and production business. Mr. Price has held leadership positions with a large public oil and gas company. His experience during the past ten years serving as a Director of public and private companies also provides him with invaluable board skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex's Board and the Compensation Committee.
   

Cimarex Energy Co.

 

17

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ITEM 1: ELECTION OF DIRECTORS

GRAPHIC   FRANCES M. VALLEJO

Director Since 2017 | Age 55 | Independent

Committees of the Board:

§

Audit

§

Nominating and Corporate Governance

Current Public Company Directorships:

§

Crestwood Equity Partners LP

 


Core Competencies:

§

Exploration and Development

§

Financial Reporting Experience

§

Corporate Finance

§

Mergers and Acquisitions

§

Risk Management

§

Corporate Governance

§

Corporate Planning and Budgets

§

Public Company Executive

§

NACD Governance Fellow

Ms. Vallejo is a former executive officer of ConocoPhillips, an independent exploration and production company. Beginning in 1987, she held various positions with both ConocoPhillips and Phillips Petroleum Company, which merged with Conoco Inc. to form ConocoPhillips in August 2002. She served as Vice President Corporate Planning and Development from April 2015 until December 2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager – Corporate Planning and Budgets, Vice President Upstream Planning & Portfolio Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. Since February 2021, Ms. Vallejo has served as a director of the general partner of Crestwood Equity Partners LP, a publicly traded master limited partnership that owns and operates oil and gas midstream assets located primarily in the Bakken Shale, Delaware Basin, Powder River Basin, Marcellus Shale and Barnett Shale. From 2010 until 2016, Ms. Vallejo served as a member of the Board of Trustees of Colorado School of Mines and she currently serves or has served on boards of other charitable associations. Ms. Vallejo also serves on the Executive Committee (fiduciary body) of the Colorado School of Mines Foundation.

Key Attributes, Experience and Skills

Ms. Vallejo's over 30 years of experience in the oil and gas industry and extensive leadership roles in corporate planning, budgeting, and treasury are key attributes that make her well qualified to serve as a Cimarex Director and a member of the Audit Committee.
   

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ITEM 1: ELECTION OF DIRECTORS

Summary of Director Core Competencies and Composition Highlights

The following chart summarizes the competencies that the Board considers valuable to effective oversight of the Company and illustrates how the current Board members individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean that the Director does not possess that qualification, skill or experience. While each Director is knowledgeable in these areas, the indicator represents a core competency that the Director brings to our Board.

GRAPHIC

Cimarex Energy Co.

 

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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and helps build public trust. Cimarex's website (www.cimarex.com) includes materials that are helpful in understanding our corporate governance practices:

§

  Corporate Governance Guidelines  

§

  Corporate Bylaws

§

  Code of Business Conduct and Ethics  

§

  Stock Ownership Guidelines

§

  Complaint and Reporting Procedures  

§

  Background and Experience of our Board of Directors

§

  Committee Charters  

§

  Background and Experience of Executive Management

§

  Proxy Access    

Corporate Governance Highlights

GRAPHIC   8 of 9 continuing Directors are independent   GRAPHIC   Disclosure Committee for financial reporting
GRAPHIC   Majority voting for Directors resignation policy   GRAPHIC   Board and Audit Committee risk oversight
GRAPHIC   Proposing Declassification of Board   GRAPHIC   Compensation risk assessment
GRAPHIC   Combined Chairman and CEO   GRAPHIC   Review of related party transactions
GRAPHIC   Independent Lead Director   GRAPHIC   Non-hedging and non-pledging policies
GRAPHIC   Diverse Board skills and experience   GRAPHIC   Clawback policy
GRAPHIC   Annual Board and committee self-evaluations   GRAPHIC   Management and Director stock ownership guidelines
GRAPHIC   Periodic consultant review of Board skills   GRAPHIC   No tax gross-ups
GRAPHIC   Annual equity grants to Directors   GRAPHIC   Proxy access
GRAPHIC   Annual Board education   GRAPHIC   Active shareholder engagement
GRAPHIC   Board refreshment efforts with five new directors since 2012   GRAPHIC   Increased gender and ethnic diversity of Board

As highlighted above, the Company is proposing declassifying the Board and provide that all directors be elected annually beginning with our 2024 annual meeting. This proposal is an outcome of our shareholder engagement efforts, and demonstrates our commitment to enhancing our corporate governance policies.

In addition, to support the Company's elevated focus on environmental and safety performance, our Board of Directors established a new Environmental, Health and Safety Committee. The committee has oversight of the Company's approach to health, safety and environmental (HSE) policies and programs and key HSE risks, as well as overseeing our corporate disclosures.

Shareholder Engagement

Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues that may affect our business or other aspects of our operations, and shape corporate and governance policies.

At the 2020 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular shareholder

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CORPORATE GOVERNANCE

engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and environmental, social and governance ("ESG") issues. In the first quarter of 2021, we reached out to 11 shareholders owning approximately 36% of our outstanding common stock to discuss ESG issues. Six of those shareholders holding 18% of our common stock accepted our invitation and participated in calls. The feedback from these meetings was provided to the Board of Directors and the Compensation Committee considered the feedback when reviewing executive compensation practices and ESG issues.

The Compensation Committee considered the results of the advisory votes on executive compensation in 2019 and 2020 and the discussions with shareholders. Based on these results and discussions, the Committee believes our shareholders generally support the Committee's compensation decisions in 2019 and early 2020, which addressed concerns raised in connection with the 2019 shareholder advisory vote on executive compensation, and shareholders are satisfied with Cimarex's executive compensation programs. See "CD&A—Key 2020 Compensation Actions" below.

Based on shareholder engagement in previous years, we did the following:

§
Enhanced our executive compensation program and disclosures;
§
Enacted the "proxy access" shareholder proposal acted upon in 2015;
§
Added disclosures concerning methane emissions to our website in response to a shareholder proposal concerning fugitive methane reporting that was made in December 2015 and subsequently withdrawn;
§
Updated our disclosures concerning environmental, social and governance ("ESG") issues, including air quality, hydraulic fracturing, seismicity, spill prevention, water resource management, safety and health, community impact, community support, employee and Board diversity, and shareholder protection measures;
§
Added short term incentive compensation metrics based on reducing emissions beginning in 2019;
§
Proposed at 2021 annual meeting of shareholders to amend and restate our certificate of incorporation to provide for the annual election of all directors;
§
Established Environmental, Health and Safety Committee; and
§
Proposed declassifying the Board of Directors.

Director Qualifications and Recruitment

The Board is committed to recruiting and nominating directors for election who will collectively provide the Board with the necessary diversity of skills, backgrounds and experiences to meet Cimarex's ongoing needs and support oversight of our business strategy and priorities. In its assessment of each potential candidate, the Nominating and Corporate Governance Committee considers the nominee's judgment, integrity, experience, independence, understanding of Cimarex's business or related industries and such other factors that the Nominating and Corporate Governance Committee determines are pertinent in light of the needs of the Board. The Nominating and Corporate Governance Committee also considers the ability of a nominee to devote the time and effort necessary to fulfill his or her responsibilities to Cimarex. Our Nominating and Corporate Governance Committee Charter specifically includes diversity of gender and ethnic background in the list of desirable attributes sought in our Board composition. The Nominating and Corporate Governance Committee has focused on Board refreshment with five new Directors being recruited since 2012, with increased gender and ethnic diversity.

Cimarex Energy Co.

 

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CORPORATE GOVERNANCE

Although all current Directors have extensive oil and gas experience, either as company executives or investors, their experience is with companies with widely different operating strategies than those of Cimarex. This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance.

§
Shareholder Nominations of Director Candidates

Cimarex's Bylaws permit a group of up to 20 shareholders collectively beneficially owning more than 3% of Cimarex's outstanding shares for at least three consecutive years to nominate up to two candidates for inclusion in Cimarex's proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws (the "Proxy Access Policy"). For more information on proxy access and other procedures to recommend candidates to Cimarex's Board of Directors, see "General Information—Director Nominations for the 2022 Annual Meeting of Shareholders."

Board of Directors and its Committees

Cimarex is governed by its Board of Directors, which is led by our Chairman of the Board and CEO, and its three committees. Cimarex also has a Lead Director, who is chosen annually by the Board from our independent Directors. The structure of the Board and the responsibilities of its committees are described in detail below.

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CORPORATE GOVERNANCE
§
Our Board

                                  Committee Memberships
(Independent Directors Only)
   

 

DIRECTOR NOMINEES

      AGE       DIRECTOR
SINCE


      TERM
EXPIRES


      Audit       Compensation       Nominating
and
Corporate
Governance
   
                           

 

Kathleen A. Hogenson(Independent Director)
President and Chief Executive Officer, Zone Oil & Gas LLC


 
  60     2019     2021     ·         ·    

 

Lisa A. Stewart(Independent Director)
Executive Chairman and former President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners

      63       2015       2021               ·       ·    
                           

 

Continuing Directors

                           

                             

 

Paul N. Eckley (Independent Director)
Retired, former Senior Vice President—Investments, State Farm

      66       2019       2023               ·       ·    
                           

 

Hans Helmerich (Independent Director)
Chairman and former Chief Executive Officer, Helmerich & Payne, Inc.


 
  62     2002     2022         ·     ·    

 

Thomas E. Jorden
Chairman, Chief Executive Officer and President, Cimarex Energy Co.

      63       2011       2023                            

 

Harold R. Logan, Jr. (Independent Director)
Independent Lead Director and Chair of Nominating and Corporate Governance Committee of Cimarex; Chairman, Suburban Propane Partners, L.P.


 
  76     2009     2022     ·         Chair    

 

Floyd R. Price (Independent Director)
Chair of Compensation Committee of Cimarex; Retired, former executive officer, Apache Corporation

      72       2012       2023               Chair       ·    
                           

 

Monroe W. Robertson (Independent Director)
Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co.


 
  71     2005     2022     Chair         ·    

 

Frances M. Vallejo (Independent Director)
Retired, former Vice President, ConocoPhillips

      55       2017       2023       ·               ·    

Cimarex Energy Co.

 

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CORPORATE GOVERNANCE

§
Board Leadership Structure
Chairman of the Board: Duties and Responsibilities
         
   

§

Preside over Board meetings.

 

§

Call special meetings of the Board.

   

§

Approve agenda for Board meetings with input from the Lead Director.

 

§

Preside over shareholder meetings.

   

§

Facilitate and participate in formal and informal communications with and among Directors.

   
         
Lead Director: Duties and Responsibilities
         
   

§

Preside over all Board meetings at which the Chairman of the Board is not present.

 

§

Act as Chairman of the Nominating and Corporate Governance Committee.

   

§

Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board.

 

§

Act as liaison between the Chairman and the Directors and facilitate communication among the full Board.

   

§

Call meetings of non-management Directors and, as appropriate, set the agenda.

 

§

Review shareholder communications directed to the Board and take appropriate action.

   

§

Preside over all meetings of non-management Directors and over all executive sessions of non-management Directors.

 

§

Retain outside advisors and consultants, who report directly to the Board on Board-wide issues.

The Board believes having a combined Chairman/CEO and an independent Lead Director, who have the duties described above, best serve the interests of our shareholders because this structure provides an appropriate balance between strategy development and independent oversight of management.

Thomas Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities of the Board on matters most relevant to the success of Cimarex.

The Compensation Committee is comprised entirely of independent Directors. When the Board acts on the Compensation Committee's recommendation for compensation of the Chairman/CEO, it acts without the Chairman/CEO being present.

The substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our Lead Director, provide the Board with a strong and independent point of view.

§
Board Committees

The committees of the Board are comprised entirely of independent Directors. The primary responsibilities of the committees are described below. The committees are governed by Board-approved charters stating

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the committees' responsibilities. Copies of the committees' charters are available on our website at www.cimarex.com.

  Audit Committee   Primary Responsibilities:   Meetings in 2020: 8    
   

§

Appoints independent auditors;

       
  Members:

Monroe W. Robertson

(Chair)

 

§

Approves the nature and scope of services of independent auditors and reviews the range of fees for such services;

     
  Kathleen A. Hogenson

Harold R. Logan, Jr.

 

§

Assists the Board in oversight and monitoring the performance of the internal audit function;

     
  Frances M. Vallejo  

§

Reviews qualifications and independence of the auditors;

     
   

§

Reviews and discusses with independent auditors (i) the auditors' responsibilities and management's responsibilities in the audit process, (ii) the overall audit strategy, (iii) the scope and timing of annual audit, and (iv) any significant risks identified during the independent auditors' risk assessment procedures;

     
   

§

Assists the Board in monitoring the integrity of financial statements;

     
   

§

Monitors compliance with legal and regulatory requirements;

     
   

§

Reviews and reports to Board on corporate and financial risk processes;

     
   

§

Monitors the process related to ongoing litigation matters; and

     
   

§

With the Company's management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company's annual process of estimating and reporting quantities of oil and gas reserves.

     

 

 


 

The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of Ms. Hogenson, Mr. Logan, Mr. Robertson and Ms. Vallejo is an "audit committee financial expert" as defined by the SEC's rules.

 


 

 
   

Cimarex Energy Co.

 

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  Compensation   Primary Responsibilities:   Meetings in 2020: 10    
  Committee  

§

Recommends CEO and executive officer cash compensation for approval by the Board;

     
  Members:

Floyd R. Price
(Chair)
Paul N. Eckley
Hans Helmerich

Lisa A. Stewart

 

§

Recommends Director compensation for approval by the Board;

§

Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement;

§

Determines amount and terms of equity awards;

§

Reviews and approves long-term incentive plans;

§

Reviews relationship of compensation to risk;

§

Approves the nature and scope of services of independent compensation consultants; and

§

Develops plans for managerial succession.

       

 

 


 

As part of its compensation functions, the Compensation Committee has increased its oversight of compensation of all employees, including its review of the Company's practices to ensure compensation is equitable.

 


 

 
   

Compensation Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Compensation Committee, was an executive officer of Cimarex from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly-owned subsidiary of Helmerich & Payne, Inc. ("H&P") for the purpose of facilitating a spinoff by H&P of its oil and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time Mr. Helmerich resigned as an executive officer.

  Nominating and   Primary Responsibilities(Nominating Functions):   Meetings in 2020: 4    
  Corporate
Governance
Committee


Members:

Harold R. Logan, Jr.
(Chair)
Paul N. Eckley

Hans Helmerich
Kathleen A. Hogenson
Floyd R. Price
Monroe W. Robertson
Lisa A. Stewart
Frances M. Vallejo

 

§

Determines desired Board skills and attributes;

§

Recommends candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings;

§

Considers shareholder nominees for election to the Board; and

§

Recommends Board committee appointments.

Primary Responsibilities (Governance Functions):

§

Develops and implements policies and processes regarding corporate governance matters; and

§

Oversees annual Board and Committee evaluations.

     
   

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CORPORATE GOVERNANCE
  Environmental,   Primary Responsibilities:   Meetings in 2020: NA    
  Health and Safety Committee

Members:

Paul N. Eckley
Hans Helmerich
Kathleen A. Hogenson
Harold R. Logan, Jr.
Floyd R. Price
Monroe W. Robertson
Lisa A. Stewart
Frances M. Vallejo

 

§

Provide assistance to the Board of Directors' oversight of the Company's policies, programs and initiatives on the environment, health and safety;

§

Overseeing and providing recommendations to the Board of Directors regarding environmental, health and safety policies and programs, including technological innovations and related risks;

§

Monitoring and reviewing environmental matters and trends in such matters that affect the Company's activities and performance;

§

Reviewing and providing input to management and the Board of Directors regarding the Company's compliance with laws, regulations, policies, programs and practices with regard to environmental, health and safety matters;

§

Consulting with the Board of Directors and internal and external advisers of the Company, as appropriate, regarding the management of the Company's health, safety and environmental programs, trends in environmental compliance and the economic effect and risks of such trends on the Company's business; and

§

Reviewing with management reports regarding the Company's efforts to gather data and communicate externally regarding its environmental, health and safety programs, initiatives and outcomes.

     
   

Other Governance Matters

§
Environmental, Social and Governance ("ESG")

While some ESG matters are reviewed by Board Committees, the Board has overall responsibility for the oversight of ESG matters. The Board discusses environmental and safety matters at its regular meetings, receives reports on social matters from management and provides input to management on social issues, and receives reports on governance matters from the Nominating and Corporate Governance Committee, which is comprised of all non-management directors. The Lead Director, who serves as Chair of the Nominating and Corporate Governance Committee, solicits governance topics for presentations to that Committee and the full Board. To assist the Board in its ESG oversight, in February 2021, the Board formed the Environmental, Health and Safety Committee ("EHS Committee"). The EHS Committee is comprised of all independent Directors and plans to meet periodically between quarterly Board meetings to perform the duties described above. A copy of the EHS Committee's charter is available on our website.

Cimarex Energy Co.

 

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CORPORATE GOVERNANCE

§
Director Education

Directors are encouraged to attend continuing education programs designed to enhance the performance and competencies of individual Directors and the Board of Directors. Directors have participated in various corporate director and compliance programs held by governance organizations, including the NYSE and the National Association of Corporate Directors ("NACD"). Ms. Vallejo, a member of our Board, Audit Committee and Nominating and Corporate Governance Committee, became a NACD Governance Fellow in 2019. NACD Fellowship is a comprehensive and continuous program of study that empowers directors with the latest insights, intelligence, and leading boardroom practices.

§
Director Attendance

During 2020, the Board of Directors met 16 times. The increased number of meetings compared to prior years was due to the Board's increased oversight of matters related to the COVID-19 pandemic and the oil and gas demand destruction resulting from the pandemic as well as the March 2020 oil price war between Saudi Arabia and Russia. During 2020, the Board had three Committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. During 2020, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he or she served. All Board members are expected to attend the Annual Meeting and all directors attended the May 2020 Annual Meeting.    Also, both Director Emeriti attended greater than 75% of the Board meetings.

§
Executive Sessions

The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2020, 10 executive sessions were held, without the CEO or any member of management present, and all of the independent Directors attended each session that occurred. These sessions allow independent Directors to review the CEO's performance and compensation and to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning management.

§
Risk Oversight

The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report to the Board with respect to:

§
Processes Cimarex follows to mitigate corporate risks, including operational risks, such as environmental, health and safety (EHS), pipeline takeaway, technology and cyber security, legal, and capital investment risk;
§
Guidelines and processes pertaining to financial risk assessment, including market risk from commodity price volatility, climate change, counterparty exposure and liquidity, and accounting risks such as accurate reserve exposure, financial reporting and internal controls;
§
Steps management takes to measure, monitor and control financial risk exposures; and
§
Management's conclusion as to the effectiveness of the guidelines and processes utilized to mitigate such corporate and financial risks and exposures.

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CORPORATE GOVERNANCE

In addition, at each of the Board's four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex's operations, financial results, risks and risk mitigation efforts, and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers, are brought to the Board for deliberation and, as appropriate, decisions. In 2020, the Board enhanced its risk oversight role in response to the impacts of the COVID-19 pandemic and oil and gas demand destruction as well as the March 2020 oil price war between Saudi Arabia and Russia on the world economy and the Company's business. The Board held 8 special meetings at which it reviewed risks to the Company and its employees including:

§
Protecting employee and contractor health in the face of COVID-19;
§
Protecting the Company's financial position in the face of falling commodity prices;
§
Ensuring continuity of oil and gas production;
§
Protecting information technology infrastructure from increased risks of remote working; and
§
Ensuring compliance with applicable laws and contracts.

The Audit Committee, at its December 3, 2020 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and Cimarex's processes for mitigation of these risks.

§
Compensation Risk Oversight

In February 2021, the Compensation Committee performed a thorough review of the possible connection between compensation and excessive risk taking. The Compensation Committee's review covered Cimarex's compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices encourage excessive risk taking by employees. The Committee's analysis included a review and discussion of the following:

§
The metrics for determining incentive awards;
§
Participants in the Company's compensation programs;
§
How the Company determines compensation pools and individual awards;
§
The maximum individual award potential (maximum individual incentive to take risk);
§
The maximum possible cost if awards were paid at maximum levels (maximum cost exposure);
§
The decision-making and approval process; and
§
The systemic limitations through Company business processes on the ability of employees to take excessive risks in order to influence compensation.

The Compensation Committee determined that the risks from Cimarex's compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect on Cimarex.

§
Director Independence and Related Person Transactions

Our Corporate Governance Guidelines require that a majority of our Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations.

Cimarex Energy Co.

 

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CORPORATE GOVERNANCE

The Nominating and Corporate Governance Committee is responsible annually to review the independence of our Directors and any related party transactions. On the basis of this review, the Committee delivers a report to the Board, and the Board makes independence determinations based on the Committee's report.

As a result of this review, the Board has determined that Paul N. Eckley, Hans Helmerich, Kathleen A. Hogenson Harold R. Logan, Jr., Floyd R. Price, Monroe W. Robertson, Lisa A. Stewart and Frances M. Vallejo, representing eight of our nine continuing Directors, are independent of Cimarex and its management. Thomas E. Jorden is not independent because of his employment as CEO of Cimarex.

In making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors are or have been affiliated. As a result of the Committee's review, certain relationships and transactions are not considered to be material transactions that would impair a Director's independence, including the following:

§
The Director is an employee of another company that does business with Cimarex, and our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or
§
The Director is a director (but not an employee) of another company that does business with Cimarex.

Hans Helmerich is the non-executive Chairman of the Board, and until March 5, 2014 was the CEO, of Helmerich & Payne, Inc. ("H&P"), a company with which Cimarex engages in the ordinary course of business transactions. As non-executive Chairman, Mr. Helmerich currently is not an employee of H&P. During H&P's fiscal year ended September 30, 2020, Cimarex paid H&P $36 million for drilling rigs services in arms' length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that provide similar services. The aggregate amount of the payments represented 2.0% of H&P's revenue during that period. The Nominating and Corporate Governance Committee reviewed these transactions and concluded: (i) the transactions are proper and not material when compared to Cimarex's total drilling and completions costs and H&P's total revenues; (ii) the transactions occurred in the ordinary course of business and at arms' length; (iii) the Board does not review or approve drilling service contracts or arrangements; (iv) Mr. Helmerich ceased being an employee of H&P in 2014; and (v) Mr. Helmerich's relationship with H&P does not interfere with his independent judgment as a Director of Cimarex.

§
Communications with Directors

Shareholders and other interested parties may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director's review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern.

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COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY OF COMPENSATION DISCUSSION AND ANALYSIS ("CD&A")

OVERVIEW

§
2020 BUSINESS AND FINANCIAL PERFORMANCE

Oil prices fluctuated dramatically throughout 2020 beginning at $61.06 per barrel on January 1, 2020, dropping dramatically as a result of COVID-19 demand destruction and the oil price war between Saudi Arabia and Russia, trading at negative prices in April 2020, and recovering to $48.52 per barrel at December 31, 2020. Natural gas prices quoted at Henry Hub were also volatile during 2020, beginning the year at $2.19 per Mcf, bottoming below $1.60 per Mcf before increasing to $2.53 per Mcf on December 31, 2020 and continuing to increase in the first few months of 2021. Given declining commodity prices and volatility, the Compensation Committee continued to focus on performance objectives that preserve Cimarex's strong balance sheet, core properties and organization while also stressing improving health, safety and environment metrics. For 2020, specific goal targets and weightings have been added to improve transparency of Compensation Committee decision-making. These goals and our performance are summarized below under "Section 2—Annual Cash Incentive Awards." It is through this hybrid microeconomic and macroeconomic lens that the Committee considered the following 2020 business and financial performance overview when making compensation decisions:

§
Responded to the highly transmissible and pathogenic coronavirus known as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the disease known as COVID-19 and the oil and gas demand destruction caused by the COVID-19 pandemic as well as the March 2020 oil price war between Saudi Arabia and Russia by, among other things:
§
Implementing safety protocols to protect employees and contractors from COVID-19
§
Announcing a reduction in our 2020 capital investment budget of 55-60% from our original guidance of $1.25-$1.35 billion and implementing cost-cutting measures to align business operations with lower commodity price environment
§
Reducing base salary of our CEO by 25% and base salaries of the other executive officers by 15% and the cash compensation of directors by 20% from May 1, 2020 until December 1, 2020
§
Maintaining our common stock dividend at $0.22 per share per quarter ($0.88 per year)
§
Reduced Permian Basin flaring volume levels as a percentage of our Permian Basin gross operated gas production from 1.97% in 2019 to 0.90% in 2020, a 54% decrease.
§
Reduced methane intensity company-wide (the gross volume of our natural gas emissions divided by the gross operated volume of our natural gas production) from 0.258% in 2019 to 0.187% in 2020, a 28% decrease.
§
Decreased exploration and development expenditures by 56% to $544.9 million in 2020 compared to $1.242 billion in 2019, while year-over-year average daily production decreased 9% to 252.5 thousand barrels of oil equivalent ("MBOE") per day in 2020 compared to 278.5 MBOE per day in 2019. The decreases in expenditures and production were primarily the result of reducing development activities and shutting in wells due to demand destruction from the COVID-19 pandemic.
§
Year-over-year production revenues decreased 35% to $1.51 billion, which were negatively affected by decreased production and declining commodity prices.

Cimarex Energy Co.

 

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COMPENSATION DISCUSSION AND ANALYSIS

§
Incurred a net loss of $1.967 billion in 2020 compared to a net loss of $124.6 million in 2019, primarily from the non-cash ceiling test impairment described below and a goodwill impairment.
§
Recognized a $1.638 billion non-cash ceiling test impairment of our oil and gas properties primarily due to decreases in the 12-month average trailing commodity prices used in calculating the ceiling test.
§
Generated cash flow from operating activities of $904.2 million, which was 33% lower than in 2019.
§
Our Operations group continued optimizing our production and maximizing well profitability. As a result, our production expense declined 7% from $3.34 per barrels of oil equivalent ("BOE") in 2019 to $3.09 per BOE in 2020.
§
Increased cash on hand to $273.1 million at year-end 2020, up from $94.7 million at year-end 2019.
§
At year-end 2020, our estimated proved reserves were 14% lower than at year-end 2019 after additions, positive and negative revisions, and production.
§
Our stock price decreased 29% from $52.49 at year-end 2019 to $37.51 at year-end 2020. The decrease in our stock price led to a lower value for NEOs' long-term equity awards that vested in 2020 compared to the grant date fair value ("GDFV") of those awards in 2017, with the vested shares for NEOs (other than a retired NEO) having a value equal to 20% of the GDFV, which demonstrates the alignment of interests of our NEOs.

§
HIGHLIGHTS OF EXECUTIVE COMPENSATION PROGRAM POLICIES AND PRACTICES
 
  What We Do
  What We Don't Do
  GRAPHIC   Link majority of compensation to performance   GRAPHIC   No hedging or pledging of Company securities by officers or Directors
    GRAPHIC   Double-trigger change in control severance benefits   GRAPHIC   No tax gross-up payments upon change in control
  GRAPHIC   Maintain stock ownership guidelines   GRAPHIC   No excessive perquisites
    GRAPHIC   Retain an independent compensation consultant   GRAPHIC   No performance metrics that encourage excessive risk taking
  GRAPHIC   Hold annual say-on-pay advisory vote for stockholders    
    GRAPHIC   Maintain a clawback policy for cash and equity incentive awards        
  GRAPHIC   Incorporate objective goals and specific metrics, including environmental performance metrics, in annual cash incentive awards    
    GRAPHIC   Undertake pay equity analyses        

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§
2020 EXECUTIVE COMPENSATION

                              Stock Awards ($) (1)               % of Total

Name

      2020 Salary (1)(2)       Year End
2020 Base Salary
      2020 Annual Cash
Incentive Award (1)
      Performance-
based
      Time Vested       Total
Compensation (1)(2)(3)
      Compensation
at Risk (2)(4)