National Fuel Gas Co 8-K, filed Dec 11, 2024
National Fuel Gas Co (NFG)
About this 8-K
National Fuel Gas Co filed this 8-K on December 11, 2024, reporting on events of December 5, 2024.
Items reported
- Item 5.02: Director or officer change, or executive pay
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| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On December 5, 2024, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of National Fuel Gas Company (the “Company”) made long-term incentive grants of performance shares and restricted stock units (“RSUs”) to the principal executive officer, principal financial officer, and other named executive officers of the Company, and awarded short-term incentive opportunities for fiscal year 2025 to such officers. To calculate the number of performance shares and RSUs to be awarded, the Compensation Committee divides the target dollar amount of each award by a discounted share price. In general, the Compensation Committee discounts the current market price of the Company’s stock by an amount equal to the present value of estimated forgone dividends over the vesting period of the award. The Company has not paid dividend equivalents as awards have been earned and paid.
Performance Shares with Emissions Reduction Performance Goal
On December 5, 2024, the Compensation Committee made the following grants of performance shares with a performance goal related to methane intensity and greenhouse gas emissions reductions (“Emissions Performance Shares”) to the principal executive officer, principal financial officer, and other named executive officers of the Company: D. P. Bauer, 2,990; T. J. Silverstein, 511; R. C. Kraemer, 1,808; J. I. Loweth, 1,523; and D. L. DeCarolis, 706. The grants were made under the National Fuel Gas Company 2010 Equity Compensation Plan, as amended and restated (the “2010 Plan”). A brief description of the principal terms and conditions of the Emissions Performance Shares is provided below.
The number of Emissions Performance Shares awarded to an officer is referred to as the officer’s “Emissions Target Opportunity.” The performance cycle for the Emissions Performance Shares is January 1, 2025 through December 31, 2027, consistent with the Company’s calendar-year reporting of greenhouse gas emissions. Each Emissions Performance Share will make the officer eligible to receive, no later than September 30, 2028 but in any event as soon as practicable after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Compensation Committee), provided that the Emissions Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved.
The performance goal for the January 1, 2025 to December 31, 2027 performance cycle consists of two parts: reductions in the rates of intensity of methane emissions for each of the Company’s operating segments, and reduction of the consolidated Company’s total greenhouse gas emissions. The Compensation Committee set specific target levels for calendar year 2027 methane intensity rates and total greenhouse gas emissions. The performance goal is intended to incentivize and reward performance to the extent management achieves methane intensity and greenhouse gas reduction targets making progress towards or exceeding the Company’s 2030 goals.
The number of Emissions Performance Shares that will vest and be paid will depend upon the number of methane intensity segment targets achieved, and whether the Company meets the total greenhouse gas emissions target, as reflected in the following table.
Performance Level |
Percentage of Emissions Target Opportunity Paid | ||||
2 of 4 segment targets achieved |
50% | ||||
3 of 4 segment targets achieved |
100% | ||||
4 of 4 segment targets achieved |
150% | ||||
4 of 4 segment targets achieved and total greenhouse gas emissions goal achieved |
200% | ||||
Emissions Performance Shares that do not vest will be automatically forfeited when the Compensation Committee makes its determination as to the extent to which the performance goal has been achieved, but no later than September 30, 2028.
Performance Shares with Relative Total Return on Capital Performance Goal
On December 5, 2024, the Compensation Committee made the following grants of performance shares with a performance goal related to relative total return on capital (“ROC Performance Shares”) to the principal executive officer, principal financial officer, and other named executive officers of the Company: D. P. Bauer, 23,422; T. J. Silverstein, 4,004; R. C. Kraemer, 21,698; J. I. Loweth, 11,929; and D. L. DeCarolis, 8,471. The grants were made under the 2010 Plan. A brief description of the principal terms and conditions of the ROC Performance Shares is provided below.
The number of ROC Performance Shares awarded to an officer is referred to as the officer’s “ROC Target Opportunity.” The performance cycle for the ROC Performance Shares is October 1, 2024 through September 30, 2027. Each ROC Performance Share will make the officer eligible to receive, no later than March 15, 2028 but in any event as soon as practicable after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Compensation Committee), provided that the ROC Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved.
The performance goal for the October 1, 2024 to September 30, 2027 performance cycle is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (the “Report Group”). The Report Group consists of the following companies:
Antero Midstream Corporation
Atmos Energy Corporation
CNX Resources Corporation
Coterra Energy Inc.
DT Midstream, Inc.
EQT Corporation
Gulfport Energy Corporation
MDU Resources Group, Inc.
National Fuel Gas Company
New Jersey Resources Corporation
ONE Gas, Inc.
Range Resources Corporation
SM Energy Company
Southwest Gas Holdings, Inc.
Spire, Inc.
UGI Corporation
Total return on capital for a given company means the average of the company’s returns on capital for each twelve-month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the company in the Bloomberg database at the time of analysis (or, if the Bloomberg database ceases to be available, such alternative publication or service as the Compensation Committee shall designate).
The number of ROC Performance Shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group, and not upon the absolute level of return achieved by the Company. The Compensation Committee established five percentile rankings that will determine the number of ROC
Performance Shares to vest and be paid: (i) less than 25th, (ii) 25th, (iii) 50th, and (iv) 100th. These percentile rankings will result in vesting and payment of a percentage of the ROC Target Opportunity, as follows: (i) 0%, (ii) 50%, (iii) 100%, and (iv) 200%, respectively. For example, if the Company’s performance were to place it at the 50th percentile of the Report Group, then 100% of the ROC Target Opportunity would vest and be paid. For performance between two established performance levels, the percentage of ROC Performance Shares to vest and be paid will be determined by mathematical interpolation. Notwithstanding the above, if the Company’s total return on capital is negative, then the percentage of the ROC Target Opportunity to be paid will be capped at 100%. ROC Performance Shares that do not vest will be automatically forfeited when the Compensation Committee makes its determination as to the extent to which the performance goal has been achieved, but no later than March 15, 2028.
Performance Shares with Relative Total Shareholder Return Performance Goal
On December 5, 2024, the Compensation Committee made the following grants of performance shares with a performance goal related to relative total shareholder return (“TSR Performance Shares”) to the principal executive officer, principal financial officer, and other named executive officers of the Company: D. P. Bauer, 23,422; T. J. Silverstein, 4,004; R. C. Kraemer, 21,698; J. I. Loweth, 11,929; and D. L. DeCarolis, 8,471. The grants were made under the 2010 Plan. A brief description of the principal terms and conditions of the TSR Performance Shares is provided below.
The number of TSR Performance Shares awarded to an officer is referred to as the officer’s “TSR Target Opportunity.” The performance cycle for the TSR Performance Shares is October 1, 2024 through September 30, 2027. Each TSR Performance Share will make the officer eligible to receive, no later than March 15, 2028 but in any event as soon as practicable after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Compensation Committee), provided that the TSR Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved.
The performance goal for the October 1, 2024 to September 30, 2027 performance cycle is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group. Three-year total shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database at the time of analysis (or, if the Bloomberg database ceases to be available, such alternative publication or service as the Compensation Committee shall designate).
The number of TSR Performance Shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group, and not upon the absolute level of return achieved by the Company. The Compensation Committee established five percentile rankings that will determine the number of TSR Performance Shares to vest and be paid: (i) less than 25th, (ii) 25th, (iii) 50th, and (iv) 100th. These percentile rankings will result in vesting and payment of a percentage of the TSR Target Opportunity, as follows: (i) 0%, (ii) 50%, (iii) 100%, and (iv) 200%, respectively. For example, if the Company’s performance were to place it at the 50th percentile of the Report Group, then 100% of the TSR Target Opportunity would vest and be paid. For performance between two established performance levels, the percentage of TSR Performance Shares to vest and be paid will be determined by mathematical interpolation. Notwithstanding the above, if the Company’s three-year total shareholder return is negative, then the percentage of the TSR Target Opportunity to be paid will be capped at 100%. TSR Performance Shares that do not vest will be automatically forfeited when the Compensation Committee makes its determination as to the extent to which the performance goal has been achieved, but no later than March 15, 2028.
Restricted Stock Units
On December 5, 2024, the Compensation Committee made a grant of 24,076 RSUs to D. P. Bauer, a grant of 12,262 RSUs to J. I. Loweth, and a grant of 4,115 RSUs to T. J. Silverstein. The grants were made under the 2010 Plan. A brief description of the principal terms and conditions of the RSUs is provided below.
An RSU is a right to receive one share of common stock of the Company (or the equivalent value in cash or in a combination of shares and cash, as determined by the Compensation Committee) at the end of a specified period of time (the “restricted period”). Except as otherwise specified in the 2010 Plan or determined by the Compensation Committee, the restricted period will lapse, and the RSUs will vest, in three annual installments, commencing on December 5, 2025. If an officer retires prior to a vesting date, the portion of the officer’s RSU grant associated with that vesting date and with all subsequent vesting dates will be automatically forfeited.
Annual At Risk Compensation Incentive Plan
On December 5, 2024, the Compensation Committee awarded bonus opportunities for fiscal year 2025 under the 2012 Annual At Risk Compensation Incentive Plan (“AARCIP”) to the principal executive officer, principal financial officer, and other named executive officers of the Company. These executives will earn cash compensation in fiscal 2025 under the AARCIP depending upon their performance relative to their goals. Target compensation is 125% of fiscal-year salary for Mr. Bauer, 80% of fiscal-year salary for Mr. Silverstein, 100% of fiscal-year salary for Mr. Kraemer, 95% of fiscal-year for Mr. Loweth, and 80% of fiscal-year salary for Ms. DeCarolis. Compensation amounts pursuant to these arrangements generally can range up to $2,000,000 for Mr. Bauer, up to 160% of fiscal-year salary for Mr. Silverstein, up to 200% of fiscal-year salary for Mr. Kraemer, up to 190% of fiscal-year salary for Mr. Loweth, and up to 160% of fiscal-year salary for Ms. DeCarolis, in each case subject to limitation based upon the averaging of performance on earnings-related goals over two fiscal years, as described below. The Compensation Committee may approve other compensation or awards at its discretion.
For fiscal 2025, the Compensation Committee has established certain financial performance goals, operations performance goals, and environmental, social and governance (“ESG”) performance goals. The financial performance goals focus on EBITDA (as defined below) of (i) the consolidated Company, (ii) the Company’s pipeline and storage subsidiaries and utility subsidiary, (iii) the Company’s exploration and production subsidiary, and (iv) the Company’s gathering subsidiary. The operations performance goals focus on lease operating expense, finding and development costs, and general and administrative expenses; compression reliability; and customer service. The ESG performance goals focus on corporate responsibility and sustainability matters, including environmental stewardship, the reduction of greenhouse gas emissions, safety, and diversity and inclusion among the Company’s workforce.
The goals for Mr. Bauer and Mr. Silverstein relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Company’s pipeline and storage subsidiaries and utility subsidiary (weighted as 20% of the formula), EBITDA of the Company’s exploration and production subsidiary (weighted as 10% of the formula), EBITDA of the Company’s gathering subsidiary (weighted as 10% of the formula), finding and development costs (weighted as 10% of the formula), operational safety measures and emissions reduction (weighted as 5% of the formula), safety (weighted as 15% of the formula), and diversity and inclusion (weighted as 5% of the formula).
The goals for Mr. Kraemer relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Company’s pipeline and storage subsidiaries and utility subsidiary (weighted as 25% of the formula), EBITDA of the Company’s exploration and production subsidiary (weighted as 10% of the formula), EBITDA of the Company’s gathering subsidiary (weighted as 5% of the formula), compression reliability (weighted as 5% of the formula), customer service (weighted as 5% of the formula), pipeline emissions reduction (weighted as 5% of the formula), safety (weighted as 15% of the formula), and diversity and inclusion (weighted as 5% of the formula).
The goals for Mr. Loweth relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Company’s exploration and production subsidiary (weighted as 20% of the formula), EBITDA of the Company’s gathering subsidiary (weighted as 10% of the formula), lease operating expense per Mcfe (weighted as 10% of the formula), finding and development costs (weighted as 10% of the formula), general and administrative expenses (weighted as 5% of the formula), exploration and production emissions reduction (weighted as 5% of the formula), safety (weighted as 10% of the formula), and diversity and inclusion (weighted as 5% of the formula).
The goals for Ms. DeCarolis relate to Company EBITDA (weighted as 30% of the formula), EBITDA of the Company’s pipeline and storage subsidiaries and utility subsidiary (weighted as 35% of the formula), customer service (weighted as 10% of the formula), operational safety measures and emissions reduction (weighted as 5% of the formula), safety (weighted as 15% of the formula), and diversity and inclusion (weighted as 5% of the formula).
In general, for purposes of the goals, EBITDA is defined, subject to certain exclusions and adjustments, as operating income plus depreciation, depletion and amortization, plus any period-end impairment charges. For each officer, in determining performance on each earnings goal, the current fiscal year’s performance level achievement is averaged with the prior fiscal year’s performance level achievement. As a result, earnings performance in any given year will impact compensation over two years, mitigating against a potential incentive to pursue short-term results at the expense of longer-term value.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NATIONAL FUEL GAS COMPANY | ||
| By: | /s/ Michael W. Reville | |
Michael W. Reville General Counsel and Secretary | ||
Dated: December 11, 2024