DEF 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.
C. 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
 
 
Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐
Check the appropriate box:
 
 
Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Under §240.14a-12
APA CORPORATION
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
  No fee required
  Fee paid previously with preliminary materials
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
 
 
 


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LOGO


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OUR

PURPOSE

  

The world faces a dual challenge: To meet growing demand for energy and to do so in a cleaner, more sustainable way. We believe society can accomplish both, and we strive to meet those challenges while creating value for all our stakeholders.

OUR

VISION

  

To contribute to human progress by responsibly helping meet the world’s oil and gas needs.

OUR

CORE VALUES

  

Safety: We never compromise on safety.

 

Integrity: We conduct our business with respect, honesty, and dignity.

 

People: We recognize people are the foundation that drive our success.

 

Stewardship: We have an unwavering commitment to responsible operations.

 

Ingenuity: We set aggressive goals, question the status quo, and seek top performance through continuous improvement.

 

 

 

LOGO


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Message from Our Non-Executive Chair of the Board

Dear Fellow Shareholders,

In September 2022, I was elected by the Board to serve as non-executive chair of APA Corporation. I am honored to work with the rest of the Board, the management team, and the APA stakeholder community as we help meet the world’s increasing energy needs in a cleaner, more sustainable way. As many of you are aware, I was elected to this role following the retirement of John Lowe, who held the position for the previous seven years. I would like to thank John for his partnership – he has been a wise and consistent voice on our Board for nearly a decade, and we will sincerely miss his contributions.

As your Board, we seek to build sustainable value for shareholders by executing a transparent, focused strategy. We prioritize prudent risk management, good corporate governance, strong realized pay-for-performance alignment in our executive compensation programs, and an intentional approach to environmental, social and governance (ESG) leadership and engagement. We would like to highlight several areas of particular significance for the Board this past year:

Business & Strategy. In 2022, we delivered on a wide range of commitments to maintain a disciplined financial approach and leverage our diversified portfolio. Despite declining oil prices in the second half of the year, APA has continued to enjoy a robust free cash flow profile provided by our unhedged exposure to a globally diversified product price mix. One of our top financial priorities has been returns to our shareholders, and over the past year, we returned over 60%, or roughly $1.6 billion, of free cash flow via stock buybacks and dividends. We also doubled our annual dividend to $1.00 per share starting in the fourth quarter of 2022, and we strengthened our balance sheet by reducing our upstream debt by $1.4 billion. Additionally, we are proud to highlight our achievements across our capital investment plan and portfolio over the past year, which include the following:

 

 

A return to a stable activity set in the U.S. that is expected to deliver sustainable, modest production growth

 

 

Safe delivery of maintenance turnarounds at the Forties Field and Beryl Field in the North Sea

 

 

Progress on our efforts in Egypt, including reaching a 17-rig activity level and delivery of revised well connection expectations in the second half of the year

 

 

Advancement of our exploration and appraisal program in Suriname, with the first oil discovery in Block 53 at the Baja exploration well and, for Block 58, a successful flow test of the Krabdagu discovery well and a second appraisal well and successful flow test at Sapakara South

 

 

Streamlining of portfolio assets, including the sale of a Delaware Basin mineral package and the spinoff of Altus Midstream

Looking ahead, we plan to continue exploration and appraisal activities in Suriname with a goal of advancing towards a development project in Block 58, and our financial priorities have not changed: returning 60% or more of free cash flow to shareholders through stock buybacks and dividends, as well as continued debt reduction.

Engaging with Shareholders. Direct feedback from our shareholders through ongoing engagement is a critical input to our corporate governance, executive compensation, and ESG practices. Our efforts ensure that we remain focused on the issues of greatest importance to our shareholders while we work to provide the world with affordable, reliable, and abundant sources of energy. I was pleased to have the opportunity to meet and speak directly with many of our investors, while our management team engaged with many more. In the Fall of 2022, we reached out to shareholders representing approximately 59.1% of our outstanding shares and 47.5% either engaged with us or told us no meeting was necessary.

In light of our recent 69.4% positive Say-on-Pay outcome, our discussions over the past year included soliciting feedback from investors on the reasoning behind their votes. Some of the specific areas where we requested feedback included the variety of metrics used in our incentive plans, our level of disclosure for performance goals, our process for setting long-term incentive targets, and our peer group. While the Board has been proud of our compensation program’s ability to create strong realized pay-for-performance alignment and a clear connection to our strategic objectives, we look forward to incorporating our investors’ feedback into future iterations of our program design and disclosure. For additional details, please see the Compensation Discussion and Analysis section of the proxy statement.

Board Refreshment. We are committed to ensuring APA has a diverse, highly engaged, and skilled Board to provide valuable strategic guidance to our management team, and our recent additions and promotions reflect this commitment. In February 2022, we welcomed two new Board members – Lt. Gen. Charles Hooper (Ret.) and Dave Stover. General Hooper brings extensive global affairs and cybersecurity experience, and Dave Stover brings crucial international energy and transformation expertise, with each of them complementing the skills and backgrounds of our full Board. Over the past year, they have become trusted and integral members of our Board.

 

  2023 Proxy Statement           i


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The Board also thinks about refreshment from the perspective of its leadership roles. In addition to my own election to the role of non-executive chair in September 2022, Juliet Ellis was appointed chair of the Management Development and Compensation Committee following the retirement of the former committee chair, William Montgomery. Following this transition, all of our three Board committees are now chaired by diverse Board members.

Environmental Stewardship. We concentrate our sustainability efforts on three primary pillars that help focus our resources and direct our efforts toward activities where APA and its subsidiaries can deliver the most positive and relevant impact. These pillars—Air, Water, and Communities + People—are the foundation for our ESG strategy and initiatives. To ensure we remain accountable, the Board, alongside the ESG Management Committee, takes an active role in overseeing our ESG strategy and driving performance by establishing appropriately challenging goals and linking compensation to progress on achievement. After laying a strong foundation for oversight, accountability, and disclosure in recent years, we have made significant progress toward many components of our environmental strategy, including:

 

 

Publishing our 2022 Sustainability Report with an updated Task Force on Climate-related Financial Disclosures (TCFD) analysis using the International Energy Agency’s World Energy Outlook and committing to publish new greenhouse gas intensity targets in 2023

 

 

Eliminating routine flaring in our U.S. onshore operations in 2021, and subsequently achieving our compensation-linked ESG goal to reduce upstream flaring across Egypt operations by 40% in 2022 – both were achieved ahead of schedule

 

 

Setting an aggressive, long-term target in 2022 to eliminate 1 million tons of carbon dioxide equivalent (CO2e) annually from our operations through projects and efficiencies by year-end 2024

 

 

Sourcing 86% of the total water utilized for production operations since 2017 from recycled or non-fresh sources, and achieving our 2021 goal to reduce U.S. total operational water usage to comprise less than 20% fresh water

 

 

Becoming the first in our peer group to link an emissions goal to our long-term incentive compensation program

Our People, Health and Safety, and Community Engagement. Supporting progress within the communities where we operate, as well as within our own workforce, are critical components of our ESG strategy. Over the past year, we have continued to seek new ways to support our local communities, such as by continuing our support of primary school education for girls in Egypt through our Springboard program and helping underserved communities access reliable energy.

Within our workforce, diversity and inclusion (D&I) remains a top priority for APA, and we are focused on creating an environment where everyone feels a sense of belonging and is empowered to thrive and grow. To advance our commitment to diversity and inclusion, we have taken a proactive approach, which has included efforts such as expanding employee resource groups and building an important partnership with the Posse Foundation to support underserved communities. As part of our pledge to D&I, we previously collaborated with a respected D&I consultant and implemented a comprehensive strategy to identify areas of improvement, establish goals, and introduce new initiatives to drive our progress going forward. Related to this, we published our EEO-1 data for 2021 after hearing that many of our investors value this disclosure, and we started incorporating D&I goals into our annual incentive compensation program to reinforce building diversity across our organization as well as our suppliers. In 2022, we successfully met our annual incentive compensation D&I goal of establishing a supplier diversity program and began reporting our Tier 1 spend by category ahead of schedule.

As part of our ongoing commitment to our people, we are proud to highlight two key areas where we have made significant progress and will continue to focus our efforts over the coming year. These include:

 

 

Health and safety. In 2022, we saw significant improvements across several key safety and environmental metrics, with the year-end Total Recordable Incident Rate (TRIR) 34% below target and the Severe Incident and Fatality (SIF) Rate 63% below target. All global leading and lagging targets were achieved.

 

 

Future of work. In 2022, we began to implement a workplace strategy across our global footprint that enhances employee collaboration and development, optimizes productivity, enriches employees’ connection to our culture, and supports wellbeing.

On behalf of the entire Board, I would like to thank you for your continued investment in APA Corporation at this important time in our ESG journey. We are proud of the work that we have accomplished and look forward to building on this momentum in the coming years.

Sincerely,

 

LOGO

  

LOGO

 

H. Lamar McKay

Non-Executive Chair of the Board

 

ii           APA Corporation  


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Notice of Annual Meeting of Shareholders of APA Corporation

 

     
  When   Virtual-Only Meeting   Record Date

  LOGO

 

Tuesday, May 23, 2023
10:00 a.m. Central

 

 

LOGO

 

Register in advance by visiting: www.proxydocs.com/APA

 

LOGO

 

March 24, 2023

Items of Business

The 2023 annual meeting of shareholders of APA Corporation, a Delaware corporation (the Company), will be held as specified above, in a virtual-only format, for the following purposes:

 

   Proposal

 

 

Board Voting
Recommendation

 1–10

 

Election of the ten directors named in the attached proxy statement to serve until the Company’s annual meeting in 2024

  FOR each nominee

11

 

Ratification of appointment of Ernst & Young LLP as the Company’s independent auditor for fiscal year 2023

  FOR

12

 

Advisory vote to approve the compensation of the Company’s named executive officers (NEOs)

  FOR

13

 

Advisory vote on the frequency of the advisory vote to approve NEO compensation

  ONE YEAR

14

 

Approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to provide for the exculpation of officers

  FOR

Shareholders will transact any other business that may properly come before the meeting or any adjournment or postponement thereof.

Voting and Virtual Attendance

Holders of record of the Company’s common stock as of the close of business on the record date set forth above are entitled to notice of, and to vote at, the annual meeting.

The Company’s annual meeting of shareholders will be held in a virtual-only format. Shareholders will not be able to attend the meeting in person. For details on attending the annual meeting virtually, please refer to the section titled How to Register for and Access the Virtual Meeting located near the end of this proxy statement.

Your vote is very important. Whether or not you plan to attend the annual meeting virtually, we encourage you to vote as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions in the Notice of Internet Availability of Proxy Materials you received in the mail, the section titled How to Vote near the end of this proxy statement, or, if you requested to receive printed proxy materials, your enclosed proxy card.

By order of the Board of Directors,

 

LOGO

Rajesh Sharma

Corporate Secretary

APA Corporation

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056

April 11, 2023

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 23, 2023:

This proxy statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, are available free of charge at: www.proxydocs.com/APA

 

  2023 Proxy Statement           iii


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Proxy Statement

This proxy statement contains information about the 2023 annual meeting of shareholders of APA Corporation and, along with any enclosed proxy card, is being made available to you by the Company’s Board of Directors (the Board) starting on or about April 11, 2023.

Contents

About APA Corporation

 

 

2

 

Purpose of the Annual Meeting

 

 

2

 

Corporate Governance

 

 

3

 

Standing Committees and Meetings of the Board

 

 

3

 

Board Risk Oversight

 

 

5

 

Board Leadership Structure

 

 

7

 

Board Nomination Process and Refreshment

 

 

7

 

Director Independence

 

 

9

 

Board Diversity

 

 

9

 

Pledging and Hedging Policies

 

 

10

 

Insider Trading Policy

 

 

10

 

Management Succession Planning and Leadership Development

 

 

11

 

Shareholder Engagement Program and Feedback

 

 

11

 

Environmental and Social Stewardship

 

 

12

 

Communicating with Our Board

 

 

12

 

Election of Directors (Proposal Nos. 1–10)

 

 

13

 

Summary Information about Our Nominees

 

 

13

 

Nominees for Election as Directors

 

 

14

 

Information about Our Executive Officers

 

 

19

 

Executive and Director Compensation

 

 

21

 

Compensation Discussion and Analysis

 

 

21

 

Executive Compensation

 

 

35

 

Director Compensation

 

 

48

 

Ratification of Appointment of Independent Auditor (Proposal No. 11)

 

 

51

 

Fees Paid to the Independent Auditor

 

 

51

 

Pre-Approval of Independent Auditor Services and Fees

 

 

52

 

Report of the Audit Committee

 

 

53

 

Advisory Vote to Approve NEO Compensation (Proposal No. 12)

 

 

54

 

General Information

 

 

54

 

Say-on-Pay

 

 

54

 

Effect of Your Vote

 

 

54

 

Advisory Vote on the Frequency of the Advisory Vote to Approve NEO Compensation (Proposal No. 13)

 

 

55

 

General Information

 

 

55

 

Board Determination and Recommendation

 

 

55

 

Effect of Your Vote

 

 

55

 

Approval of the Charter Amendment (Proposal No. 14)

 

 

56

 

General Information

 

 

56

 

Reasons for the Charter Amendment

 

 

56

 

Effect of the Charter Amendment

 

 

56

 

Other Information

 

 

58

 

Securities Ownership and Principal Holders

 

 

58

 

Equity Compensation Plan Information

 

 

59

 

Who Can Vote

 

 

59

 

How to Register for and Access the Virtual Meeting

 

 

60

 

How to Vote

 

 

60

 

Voting 401(k) Savings Plan Shares

 

 

61

 

Revoking a Proxy

 

 

62

 

Quorum

 

 

62

 

Votes Needed

 

 

62

 

Additional Information

 

 

62

 

Appendix A – Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company

 

 

65

 

 

 

Index of Frequently Requested Information:

 

2022 Annual Incentive Scorecard

 

 

29

 

Board and Committee Evaluations

 

 

4

 

Board Diversity

 

 

9

 

Board Risk Oversight

 

 

5

 

Clawback Policy

 

 

33

 

Climate Change Risk Oversight

 

 

6

 

Compensation Discussion and Analysis

 

 

21

 

Director Compensation Table

 

 

50

 

Insider Trading Policy

 

 

10

 

Peer Group - 2022 Compensation

 

 

27

 

Peer Group - 2022 TSR Performance

 

 

31

 

Pledging and Hedging Policies

 

 

10

 

Stock Ownership Requirements for Directors

 

 

49

 

Stock Ownership Requirements for Officers

 

 

32

 

Summary Compensation Table

 

 

35

 

 

 

References to APA, the Company, our, we, and us mean APA Corporation and its consolidated subsidiaries, unless the context indicates otherwise.

Information on our website and any other website referenced herein is not incorporated by reference into, and does not constitute a part of, this proxy statement.

 

 

 

 

 

 

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ABOUT APA CORPORATION

 

     

GLOBAL PORTFOLIO

 

FOCUSED ON SUSTAINABILITY

 

STRONG CORPORATE GOVERNANCE

 

LOGO

 

 

 

LOGO

  

 

AIR

 

 

LOGO

 

 

Experienced and Diverse Board Members

 

 

LOGO

  

 

WATER

 

 

LOGO

 

 

Comprehensive Oversight and Management of Risks

 

 

LOGO

  

 

COMMUNITIES + PEOPLE

 

 

LOGO

 

 

Extensive Stakeholder Engagement Program

The Company’s subsidiaries have exploration and production (E&P) operations in the United States, Egypt’s Western Desert, and the United Kingdom’s North Sea and exploration operations offshore Suriname and the Dominican Republic.

Since 1954, our team has been unified by our values, our culture, and our commitment to building shareholder value, with a shared sense of purpose that empowers every employee to make decisions and achieve the Company’s goals. Our global team is brought together by a sense of ownership and the knowledge that the best answers win. We aim to be a community partner in our areas of operation, focused on protecting the safety and health of our employees, our communities, and the environment, while continuously looking for more sustainable ways to operate.

Our strategy is to focus on creating sustainable free cash flow by continuing to prioritize long-term returns over growth, strengthening our balance sheet through debt reduction, advancing our large-scale opportunity in Suriname, leveraging our updated production sharing contract terms in Egypt, and continuing our efforts to differentiate the Company through our environmental, social, and governance (ESG) programs and strategy.

In 2021, Apache Corporation transitioned to a holding company structure. As a result, APA Corporation was formed and became the parent company publicly traded on the Nasdaq Stock Market (Nasdaq).

PURPOSE OF THE ANNUAL MEETING

At the Company’s annual meeting, shareholders will vote on the following matters:

 

   

  Proposal

 

 

Board Voting
Recommendation

 

 1–10

 

Election of the ten directors named in this proxy statement

 

 FOR each nominee

11

 

Ratification of appointment of Ernst & Young LLP (EY) as the Company’s independent auditor

 

FOR

12

 

Advisory vote to approve the compensation of the Company’s NEOs

 

FOR

13

 

Advisory vote on the frequency of the advisory vote to approve NEO compensation

 

ONE YEAR

14

 

Approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to provide for the exculpation of officers (the Charter Amendment)

 

FOR

Any other business that properly comes before the meeting may also be transacted. As of the date of this proxy statement, the Company is not aware of any other business to come before the meeting.

There are no rights of appraisal or similar rights of dissenters arising from matters to be acted on at the meeting.

For complete information on who can vote, how to vote, and the votes needed for approval of the above items, please see the Other Information section near the end of this proxy statement.

Your vote is very important. Please vote your shares in advance by the specified deadline, even if you plan to attend the annual meeting virtually.

 

 

LOGO

 

Internet

 

 

 

LOGO

 

Telephone

 

 

 

LOGO

 

Mail

 

 

 

LOGO

 

Annual Meeting

 

Follow the instructions on the proxy card or other voting materials you received.

  Call the number provided on the voting materials and follow the prompts to vote.   Complete and return the proxy card included with the materials sent to you.   Vote during the virtual annual meeting as described in this proxy statement.

 

2           APA Corporation  


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CORPORATE GOVERNANCE

Standing Committees and Meetings of the Board

The standing committees of the Board include the Audit Committee, the Corporate Responsibility, Governance, and Nominating (CRG&N) Committee, and the Management Development and Compensation (MD&C) Committee, each as reflected in the table below. Actions taken by these committees are reported to the Board at the next Board meeting.

During 2022, each of the Company’s continuing directors attended all of the regularly scheduled meetings of the Board held during the period for which the director was a Board member and at least 75% of the regularly scheduled committee meetings for the committees of which he or she was then a member. While the Company does not have a policy regarding Board members’ attendance at our annual meeting of shareholders, all then-current directors attended last year’s annual meeting. The members of the Board and each committee and the number of meetings held by the Board (including both regular and special meetings) and each committee during 2022 are set forth in the following table.

 

         

  Directors During 2022

    

LOGO

Board

    

LOGO

Audit(1)

    

LOGO

CRG&N

    

LOGO

MD&C

Annell R. Bay

    

           

Chair

    

John J. Christmann IV, CEO and President

    

                    

Juliet S. Ellis

    

           

    

Chair(2)

Charles W. Hooper(3)

    

           

    

Chansoo Joung

    

    

Chair

    

      

John E. Lowe(4)

    

                    

H. Lamar McKay, Non-Executive Chair(5)

    

Chair

           

    

William C. Montgomery(6)

    

                  

Amy H. Nelson

    

    

    

      

Daniel W. Rabun

    

    

    

      

Peter A. Ragauss

    

    

             

David L. Stover(7)

    

                  

  Number of Meetings in 2022

    

7

    

8

    

6

    

5

 

(1)

The Board has determined that all members of the Audit Committee qualify as financial experts, as defined in Item 407 of Regulation S-K under the Securities Act of 1933, as amended, and each is considered “financially sophisticated” and independent under Nasdaq rules.

 

(2)

Ms. Ellis was appointed chair of the MD&C Committee effective May 13, 2022, after the retirement of Mr. Montgomery, the former chair of the committee.

 

(3)

Lt. Gen. Hooper joined the Board on February 2, 2022, and was appointed to the CRG&N and MD&C Committees effective February 3, 2022.

 

(4)

Mr. Lowe retired from the Board effective September 1, 2022.

 

(5)

Mr. McKay was appointed Non-Executive Chair of the Board effective September 1, 2022, and was a member of the CRG&N and MD&C Committees until December 13, 2022.

 

(6)

Mr. Montgomery did not stand for re-election at the 2022 annual meeting of shareholders and retired from the Board effective May 12, 2022.

 

(7)

Mr. Stover joined the Board on February 21, 2022, and was appointed to the MD&C Committee effective May 13, 2022.

Committee Responsibilities

Audit Committee

 

Assists the Board in fulfilling its oversight responsibility relating to the integrity of the Company’s consolidated financial statements, accounting and financial reporting processes, and systems of internal controls over accounting and financial reporting

 

Reviews the Company’s compliance with legal and regulatory requirements

 

  2023 Proxy Statement           3


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Reviews the independent auditor’s qualifications, independence, and performance, including having sole authority for appointment, compensation, oversight, evaluation, and termination

 

Reviews the performance of the Company’s internal audit function

 

Issues the report of the Audit Committee required by the rules of the Securities and Exchange Commission (SEC), as included in this proxy statement

 

Reviews with management the guidelines and policies governing the process by which both management and the relevant departments of the Company assess and manage the Company’s exposure to risk

 

Oversees the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures

CRG&N Committee

 

Recommends to the Board the slate of director nominees submitted to the shareholders for election at each annual meeting and proposes qualified candidates to fill vacancies on the Board

 

Considers director nominee recommendations from executive officers of the Company, independent members of the Board, and shareholders of the Company, as well as recommendations from other interested parties

 

Retains an outside search firm to assist it in finding director candidates, when appropriate

 

Develops corporate governance principles for the Company

 

Reviews related-party transactions

 

Oversees the evaluation of the Board

 

Reviews the Company’s strategies regarding sustainability and other ESG-related matters

MD&C Committee

 

Reviews the Company’s management resources and structure, including CEO and management succession planning

 

Administers the Company’s compensation programs and retirement, stock purchase, and similar plans

 

Ensures appropriate practices are in place to support the development and retention of employees

Committee Charters and Governance Documents

You can access electronic copies of the charters of the Audit Committee, the CRG&N Committee, and the MD&C Committee, along with our Governance Principles and Code of Business Conduct and Ethics, which meets the requirements of a code of ethics under applicable SEC regulations and Nasdaq standards, on our website at www.apacorp.com. You may also request printed copies of any of these documents by writing to APA’s Corporate Secretary at 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400.

Board and Committee Evaluations

Our Board recognizes that a thorough evaluation process is an important element of corporate governance and enhances our Board’s effectiveness. Therefore, each year, the independent non-executive chair of the Board oversees the director evaluation process to ensure that the full Board and each committee assess their performance and solicit feedback for areas of improvement. For the full Board, our non-executive chair interviews each Board member individually to solicit feedback on a wide-range of performance-related matters.

In turn, the chair of the CRG&N Committee interviews each Board member to solicit feedback on the non-executive chair’s performance. Each committee also conducts a thorough annual self-evaluation in the committee’s executive session. These evaluations are then shared with the full Board during the Board’s executive session.

 

 

LOGO

 

In the first quarter of 2023, the Board also engaged the National Association of Corporate Directors (NACD), which administered an independent board evaluation through individual interviews with each director and an online survey completed by each director. After discussion with the independent non-executive chair and the chair of the CRG&N Committee, NACD issued a report to the full Board.

 

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Board Risk Oversight

The full Board oversees the Company’s risk management and business strategy, including from both a short-term and long-term perspective, while Company management is responsible for the day-to-day management of risk and implementation of that strategy. To assist it in this oversight role, the Board’s committees are primarily responsible for matters relating to the risks inherent in the committees’ respective areas of oversight, with each committee regularly reporting and making recommendations to the full Board. As discussed in detail below, the Board also retains direct oversight of key strategic risks, such as ESG, climate change, and cybersecurity. The Board believes that this structure and division of responsibility is the most effective way to monitor and control risk.

The Board is also responsible for promoting a culture of prudent risk management for the Company, setting the example for management and all employees to follow. Through regular interaction with and reporting from management, including with the head of the Company’s internal audit, risk, and compliance functions, along with ongoing communication with the independent auditor, the Board and its committees take an active role in risk oversight for the Company. This risk oversight framework utilized by the Company is designed to enable careful and efficient identification and management of our enterprise risks, with the Board regularly reviewing this framework and related activities to ensure their ongoing effectiveness.

Board Risk Oversight Framework

 

 

Board of Directors

 

 Oversees the Company’s risk management and business strategy

 

 Receives regular updates and recommendations from Board committees about their respective risk oversight activities

 

 Invites external experts and advisors to present on current and future risks and trends that could impact the Company, our industry, or the broader business or geopolitical landscape

 

 Reviews additional risks not specifically within the purview of any particular committee and risks of a more strategic nature, including operational risks and risks relating to environment, health, safety, and security

 

 Holds regularly scheduled executive sessions of the independent directors as often as they deem appropriate, but in any event at least twice each year, providing an additional avenue through which the Board monitors the Company’s risk exposure and policies regarding risk management

 

 

     

 

Audit Committee

   

 

Corporate Responsibility, Governance, and Nominating Committee

   

 

Management Development and Compensation Committee

 

 Reviews with management the guidelines and policies governing the process by which management assesses and manages the Company’s exposure to risk

 

 Discusses with management, and, if appropriate, the independent auditor, the Company’s major financial risk exposures

 

 Reviews the steps management has taken to monitor and control such exposures

 

   

 

 Reviews ESG risks, trends, issues, and concerns, both domestic and international, that affect or could affect the Company’s business activities, performance, and reputation

 

 Reviews and approves related-party transactions for potential conflicts of interest

 

 Reviews the policy governing political contributions and lobbying expenditures and approves contributions using Company funds

 

 Develops and recommends to the Board corporate governance principles and a code of conduct and ethics

 

   

 

 Develops and monitors the executive compensation program to ensure it does not encourage excessive risk-taking

 

 Reviews the Company’s human capital programs, policies, and procedures

 

 Reviews executive compensation, incentive compensation, and succession management development plans

 

 Ensures appropriate practices are in place to develop and retain the talent necessary to achieve the Company’s business goals and objectives

 

 

  2023 Proxy Statement           5


Table of Contents

 

Company Management

 

   

 

Internal Audit

 

 

 Provides day-to-day management of risk and implementation of strategy

 

 Tasked with, among other things, ensuring sound policies, procedures, and practices are in place to address corporate-wide management of risks, including financial and operational risks

 

 Updates the Board on emerging risks and opportunities

 

   

 

 Functionally reports directly to the Audit Committee, providing regular reports to the committee and meeting with committee members, with and without management present

 

 Provides independent, objective assurance and consulting activity designed to add value and improve operations and reviews the adequacy and effectiveness of risk management, control, and governance systems

 

For discussion of risk considerations in our compensation programs, please also see Risk Considerations in Compensation Programs included in the Compensation Discussion and Analysis section of this proxy statement.

Cybersecurity Risk Oversight

Cybersecurity risk is an area of significant focus for our entire Board, particularly as more and more of our operations rely on digital technologies. Cyberattacks use increasingly sophisticated methods and could pose serious risks to the Company’s revenue, reputation, data integrity, and ability to operate in a safe and environmentally responsible way. To mitigate this risk, the Company has adopted an information security program, which uses sophisticated technology and processes to help reduce the threats posed by malicious online actors, with our Information Technology Security team monitoring, identifying, preventing, and responding to potential cyberattacks that threaten the Company.

To help ensure the ongoing strength and effectiveness of the Company’s efforts and because of the risks posed to all areas of our operations, cybersecurity is overseen at the Board level. The Board has determined that retaining direct oversight responsibility for this risk allows the broadest possible viewpoints to be brought to bear on this issue. Our Board members are therefore able to review and analyze this risk from both the perspective of the matters managed by the committees of which they are a member and from a comprehensive, Company-wide perspective.

Our management team provides at least annual updates to each of the Audit Committee and the full Board regarding this program, as well as trends in cyberattack activities and other developments impacting our digital security. External cybersecurity experts are also invited to speak to the Board, and management provides regular cybersecurity training and updates to Company personnel. Additionally, given Lt. Gen. Hooper’s previous work experience in positions relevant to information security, the Board benefits from his perspectives and skills when reviewing and managing the Company’s exposure to cybersecurity risk.

The Company has had no indication of a material cybersecurity breach within the past three years that would have had a material impact on our business or results of operations.

ESG and Climate Change Risk Oversight

Our Board and senior management are directly engaged in assessing and managing climate change-related risks and opportunities. These matters, similar to the cybersecurity risk discussed above, are of such a strategic nature that the Board retains direct oversight responsibility, with each committee providing additional oversight unique to their areas of focus. The Audit Committee reviews the Company’s risk management process, which includes management of climate change-related business, legal, and regulatory risks. The CRG&N Committee oversees management of and performance on ESG issues, including the content of the Company’s annual Sustainability Report. The MD&C Committee has also taken steps that link ESG performance to compensation for all employees.

In addition to the work of these committees, the full Board receives regular updates on climate change-related topics, including risk management, greenhouse gas (GHG) emissions management, third-party ESG ratings, and overall ESG performance. The Board also regularly invites outside experts on ESG issues to provide ongoing education and differing perspectives. Additionally, the Company’s management team conducts scenario analyses, incorporating both short-term views—generally with a 5-year horizon—and long-term views—utilizing internal and external analyses, averaged out over multiple decades. These analyses are utilized when making investment and development plans, including assessing potential climate-related risks and opportunities, which the Board reviews.

The Company commits considerable time, energy, and capital to reduce its impact on the environment and to manage the evolving opportunities and risks associated with climate change. The Board and Company management engage every level of the organization and all functional areas of the business through a “wellhead-to-boardroom” approach, which aligns the Company’s collective interests and incentivizes top performance and accountability.

For information on the Board’s role in human capital management, please see the description of the MD&C Committee above and the Management Succession Planning and Leadership Development section below.

 

6           APA Corporation  


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Board Leadership Structure

 

 

Current Board Leadership Structure

 

LOGO

  

H. Lamar McKay

Non-Executive Chair of the Board

 

        

 

LOGO

  

John J. Christmann IV

Chief Executive Officer and President

    
 
Focuses on Board and corporate governance       Focuses on management leadership and corporate strategy     

Separate Roles for Board Chair and CEO

The Board does not have a formal policy regarding whether the position of chair may be filled by the Company’s Chief Executive Officer and President (CEO and President). Instead, the Board has adopted a flexible leadership structure that allows for variations depending on the circumstances and changing needs of the Company over time. The Board believes the current structure enhances corporate governance and allows each of our non-executive chair and our CEO and President to remain focused on their distinct roles, which, for the non-executive chair, primarily involves Board and corporate governance and, for the CEO and President, primarily involves day-to-day management leadership and implementation of our corporate strategy. The Board regularly reviews all aspects of its governance profile, including the Board leadership structure, and will make changes as appropriate.

Role of the Non-Executive Chair

Consistent with good governance practices, since 2015, the Board has annually elected an independent director to serve as non-executive chair. Pursuant to the Company’s Governance Principles, the non-executive chair is an independent director who is elected from time to time, but not less than annually, by the affirmative vote of a majority of the independent directors. The non-executive chair:

 

 

discusses management’s proposed meeting agendas with the other independent directors and reviews the approved meeting agendas with our CEO and President

 

 

leads the discussion with our CEO and President following the independent directors’ executive sessions

 

 

ensures that the Board’s individual, group, and committee self-assessments are completed annually

 

 

leads periodic discussions with other Board members and management concerning the Board’s information needs

 

 

is available for discussions with major shareholders

 

 

fulfills the other roles and responsibilities of the non-executive chair included in the Company’s Governance Principles

Board Nomination Process and Refreshment

We are committed to ensuring APA has a diverse, highly engaged, and skilled Board to provide valuable strategic guidance to our management team. This commitment includes extensive evaluation criteria for election and re-election of Board members, guidelines ensuring our Board members can dedicate sufficient time to the needs of the Board, and a focus on refreshment of the Board to continue to bring in new perspectives, skills, and experiences.

Evaluation Criteria for Board Members

The CRG&N Committee considers the following criteria in recommending new nominees or the re-election of directors to the Company’s Board and its committees:

 

 

Expertise and perspective needed to govern the business and strengthen and support senior management, including, for example, strong financial expertise, knowledge of international operations, knowledge of the petroleum or related industries, or unique insights into ESG-related matters

 

 

Sound business judgment and a sufficiently broad perspective to make meaningful contributions

 

 

Interest and enthusiasm in the Company and a commitment to become involved in its future

 

 

Time and energy to meet Board commitments

 

 

Ability to constructively participate in discussions and quickly understand and evaluate complex and diverse issues

 

  2023 Proxy Statement           7


Table of Contents
 

Dedication to the highest ethical standards

 

 

Dedication to the highest health, safety, and environmental standards

 

 

Supportive of management, but independent, objective, and willing to question and challenge both openly and in private

 

 

Awareness of the dynamics of change and a willingness to anticipate and explore opportunities

All decisions to recommend the nomination of a new nominee for election to the Board or for the re-election of a director are within the sole discretion of the CRG&N Committee. The above criteria and guidelines, together with the section of the Company’s Governance Principles entitled “Qualifications of Board Members,” constitute the policy of the CRG&N Committee regarding the recommendation of new nominees or the re-election of directors to the Board or its committees.

 

LOGO

Overboarding Maximums

As reflected in the evaluation criteria above, our Board recognizes the importance of our directors’ ability to commit significant time and energy to fulfill their responsibilities to the Company. Given the commitment needed for service on a public company’s board, a director’s service on too many other public company boards may cause the director to be “overboarded.”

Therefore, our Governance Principles state that a director who also serves as the CEO of the Company or any other public company should not serve on more than one other board of a public company, in addition to the Company’s Board, and all other directors should not serve on more than three other boards of a public company, in addition to the Company’s Board.

 

     
    

CEO Director

 

Other Directors

  Maximum Other Public Company Boards

  (excluding service on our Board)

 

 

1

 

 

 

3

 

 

All of our directors comply with our overboarding maximums.

The CRG&N Committee oversees compliance with this overboarding principle and takes public company board service into account when evaluating director nominees for election or re-election. As of the date of this proxy statement, none of our directors exceeds our overboarding maximums.

Board Refreshment

The search process for new directors is an extensive and time intensive process involving our CRG&N Committee and the full Board. The CRG&N Committee also has the sole authority to retain any external search firms and advisors, when appropriate, to assist in the search for or evaluation of candidates, including the authority to approve fees and any other terms of retention. The Board’s commitment to spending the time and energy necessary to identify, recruit, and retain talented directors is a critical component of the Board’s responsibilities to our stakeholders.

Over the past four years, we have added four new directors to the Board and four directors have retired from the Board, significantly reducing the average tenure of our members. Our newest directors bring a variety of skills and perspectives to the Board, including through financial, executive, analytical, cybersecurity, ESG, and international experience. These fresh perspectives continue to help the Board fulfil its commitment to its oversight role and prudently managing the Company’s risks and strategies. The Board will continue to evaluate its membership and committee assignments, in furtherance of the Company’s core value to seek top performance through continuous improvement.

 

8           APA Corporation  


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Shareholder Recommendations and Nominations

Shareholders interested in making a recommendation to the CRG&N Committee for consideration of a director nominee may contact the Company’s Corporate Secretary at 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. Shareholder recommendations are then forwarded to the CRG&N Committee for consideration. Additionally, shareholders may review the requirements under the section entitled Future Shareholder Proposals and Director Nominations for the requirements and deadlines to include a director nomination in next year’s proxy statement or for presentation directly at next year’s meeting, in accordance with the Company’s bylaws.

Director Independence

During the first two months of 2023, the Board evaluated all business and charitable relationships between the Company and the Company’s non-employee directors (all directors other than Mr. Christmann) and all other relevant facts and circumstances. As a result of this evaluation, the Board determined, as required by the Company’s Governance Principles, that each non-employee director is an independent director as defined by the standards for director independence established by applicable laws, rules, and listing standards, including, without limitation, the standards for independent directors established by Nasdaq and the SEC.

 

           
       

Audit

         

CRG&N

         

MD&C    

Fully Independent Committees

    

        

        

    

The Company’s Governance Principles require that the independent directors meet in executive session at least twice each year; in 2022, they met four times in executive session. These executive sessions are chaired by our independent, non-executive chair.

Board Diversity

Company policy precludes directors and employees from discriminating against any protected group. As such, all director candidates are evaluated, and the decision of whether or not to nominate a particular candidate is made, based solely on Company- and work-related factors. The Company’s approach to Board diversity complements this policy, as we believe that Board diversity in all its aspects is essential to our business. Our criteria for Board selection, summarized above, operates as our diversity policy.

The Board is committed to recruiting and appointing a diverse and broadly inclusive membership. Five of our ten director nominees self-identify as diverse, based on gender or ethnicity.

Nasdaq’s Board Diversity Requirements

Nasdaq listing rules require companies to have, or explain why they do not have, two diverse directors on the board, including at least one female director and at least one director who identifies as either a racial or ethnic minority or a member of the LGBTQ+ community. The Company’s Board exceeds this Nasdaq diversity requirement.

 

     
  

 

 

Nasdaq Requirement

 

Our Board

    Number of Diverse Directors

 

 

2

 

 

5

 

 

Our Board Exceeds Nasdaq’s Director Diversity Requirement

 

  2023 Proxy Statement           9


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Board Diversity Matrix

Nasdaq-listed companies are required to publicly disclose board-level statistics using a standardized board diversity matrix in the form of the table below. The information in the table is based on voluntary, self-reported information from the Company’s directors. The categories included in the table, other than “Additional Diversity Characteristics,” have the meanings set forth in Nasdaq Rule 5605(f). Diversity characteristics not applicable to our Board have been excluded from the table.

 

 

Board Diversity Matrix

 
  

 

  

(as of April 11, 2023)  

  

(as of April 1, 2022)

 

Total Number of Directors

  

10

  

12

 

Part I: Gender Identity

  

Female

  

Male

  

Female

  

Male

 

Directors

  

3

  

7

  

3

  

9

 

Part II: Demographic Background

    

 

    

 

    

 

    

 

 

African American or Black

  

  

1

  

  

1

 

Asian

  

  

1

  

  

1

 

White

  

3

  

5

  

3

  

7

 

Additional Diversity Characteristics

    

 

    

 

    

 

    

 

 

Military Veteran

  

  

1

  

  

1

Pledging and Hedging Policies

The Company has a pledging policy that prohibits non-employee directors and executive officers from holding APA securities in a margin account or pledging any APA securities as collateral for a loan. The Company also has a hedging policy that prohibits non-employee directors and executive officers from entering into any hedge or other transaction (such as puts, calls, options, or other derivative securities) in APA securities that has the effect of limiting the risk of ownership of APA common stock or stock options. As of the date of this proxy statement, each non-employee director and executive officer complies with the Company’s pledging and hedging policies. The Company does not have pledging or hedging policies applicable to employees who are not executive officers.

 

   
  

 

  

Pledging or Hedging

 

For Non-Employee Directors and Executive Officers

  

 

 No

Insider Trading Policy

The Company has an insider trading policy regarding the purchase, sale, or other dispositions of the Company’s securities by officers, directors, and employees of the Company and its affiliates that is reasonably designed to promote compliance with insider trading laws, rules, and regulations, and any listing standards applicable to the Company. The policy sets forth the basic principles of the types of insider trading transactions prohibited by U.S. securities laws, the civil and criminal penalties that may result from violations, and examples of the types of information that constitute material, nonpublic information. The policy includes requirements for managers to remind employees about insider trading laws when such employees possess material, nonpublic information and addresses the process by which the Company may implement special blackout periods to restrict trading. The Company’s Corporate Secretary is the primary point of contact for questions about the policy and for alerting the Company of any known or suspected prohibited transactions.

Additionally, the Company’s Code of Business Conduct and Ethics, which applies to all directors, officers, and employees of the Company and its affiliates, contains a dedicated discussion of insider trading, with reference to the Company’s insider trading policy. This section of the Code prohibits the use of material, nonpublic information for personal gain or the enrichment of others. While in possession of material, nonpublic information, the Company’s representatives are prohibited from buying or selling APA securities or securities of any other company to which the material, nonpublic information relates. The Company’s representatives are also prohibited from disseminating the material, nonpublic information to anyone who may trade on or misuse the information. The Code emphasizes that insider trading laws carry significant penalties, including the possibility of criminal prosecution and jail time.

 

10           APA Corporation  


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Management Succession Planning and Leadership Development

To drive our success, the Company invests in our greatest asset: our people. This includes ensuring we have talented and high-performing individuals leading the Company at all levels, from leaders in the field to executive officers in our corporate headquarters. The retention and continued development of these leaders is a key priority of the Company. In addition, the Company is focused on leadership succession planning to ensure the identification and preparation of a strong pipeline of future leaders, ensuring that the Company has the right leaders today and tomorrow to execute on our long-term strategies.

The full Board has direct responsibility for overseeing the succession plan for our CEO and President, including the approval and maintenance of a succession plan, based on recommendations of the MD&C Committee, as required by our Governance Principles. Additionally, the MD&C Committee is responsible for reviewing and discussing with management the succession planning for other members of our management team, as required by the committee’s charter. Having a clear and defined succession planning process helps keep our current and future leaders more engaged and dedicated to the success of the Company.

Leaders at all levels of the Company, including senior management, are provided ongoing training and skills development programs. Our programs focus on the following:

 

   

  Skillset

  

Applicable Topics

  Core Skills

  

Communication, Collaboration, and Culture, including D&I training

  Leadership Skills

  

Strategy, Change Management, and Effective Team Leadership

  Technical Skills

  

Vary by Function

A company-wide mentorship program provides opportunities for informal skill development and improvement of core leadership skills.

Shareholder Engagement Program and Feedback

The Company’s industry-leading approach to engagement with stakeholders on a year-round basis, including efforts specific to the ESG-related issues discussed in the following section, continues to be a core focus of our Board and executive management. These engagement and feedback initiatives help ensure we are addressing the issues that our shareholders consider to be critical to the Company’s long-term success.

 

 

Shareholder Engagement Program

 

Review and summarize feedback from

annual meeting and identify potential

areas of concern

 

 

LOGO

 

 

Meet with shareholders and consider

issues raised

 

Complete shareholder meetings, meet

internally to review feedback received,

and consider modification of governance

policies and compensation plans

 

 

Continue to meet with shareholders,

modify meeting content based on early

feedback, and identify any other areas

of concern

The feedback received through these engagement programs has been instrumental in guiding the Board’s and the Company’s strategic decision making for operational, risk, and compensation decisions.

 

  2023 Proxy Statement           11


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Environmental and Social Stewardship

The Board and management understand that the future success of our Company hinges upon our ability to help meet the world’s energy needs in ways that are innovative, safe, environmentally responsible, and profitable. Therefore, we focus our ESG efforts in areas that are core to our business, important to our stakeholders, and where we are capable of making a material impact: air, water, and communities + people. To ensure we remain accountable, the Board, alongside the ESG Management Committee, which is made up of cross-functional management-level employees responsible for evaluating ESG risks and opportunities, takes an active role in overseeing our ESG strategy and driving performance by linking compensation to the Company’s progress against ESG metrics.

 

   

Focus Area

 

Vision

 

LOGO

 

AIR

  Be at the forefront of our industry’s efforts to measure, disclose, and mitigate emissions

 

LOGO

 

WATER

  Preserve freshwater resources and leverage technology to maximize water reuse

 

LOGO

 

COMMUNITIES + PEOPLE

 

Provide fulfilling and rewarding careers for our employees and create shared value in the communities where we operate

In addition to our ongoing shareholder engagement program, the Company has an ESG-focused engagement program with the following components:

 

 

Environmental, Social, and Governance Engagement

 

LOGO

  

 

LOGO

  

 

LOGO

  

 

LOGO

APA Conducts Multiple

Meetings with Stakeholder

Groups

   CEO Generally Hosts a Larger Meeting and Q&A with Active Shareholders    APA Participates with
Shareholders in Governance
Forums
   APA Facilitates
Shareholder Meetings with
Our Directors

Communicating with Our Board

Shareholders and other interested parties may communicate with the independent directors of our Board by mailing their communications to the address below, and the Company’s Corporate Secretary will forward relevant communications to the independent directors.

 

 

Address for Corresponding with Independent Directors

LOGO

 

APA Corporation

Attn: Corporate Secretary

2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

Concerns about accounting, internal accounting controls, or auditing matters should be reported through the procedures specified in the document titled “Procedures for the Submission of Complaints and Concerns Regarding Accounting, Internal Accounting Controls, or Auditing Matters,” and any actual or suspected violation of law or the Company’s Code of Business Conduct and Ethics should be reported through the reporting methods specified in the Code of Business Conduct and Ethics. Both documents are available on the Company’s website at www.apacorp.com.

 

12           APA Corporation  


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ELECTION OF DIRECTORS (PROPOSAL NOS. 1–10)

The terms of our current directors will expire at the annual meeting. Each of our current directors has been recommended by the CRG&N Committee and nominated by the Board for election by the shareholders to a one-year term. If elected, all nominees will serve beginning upon their election until their respective successors have been duly elected and qualified at the annual meeting of shareholders in 2024.

Unless otherwise instructed, all proxies will be voted in favor of these nominees. If one or more of the nominees is unwilling or unable to serve, the proxies will be voted only for the remaining named nominees. The Board knows of no nominee for director who is unwilling or unable to serve if elected. Proxies cannot be voted for more than ten nominees.

 

 

      The Board recommends that you vote “FOR” the election of each of the nominees as directors.

 

Summary Information about Our Nominees

Board Skills Matrix

 

    

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

Director Nominees

 

CEO/Senior Leadership Experience

 

Financial Reporting Experience

 

Industry

Experience

 

 

Global

Experience

 

 

Environmental / Regulatory Experience

 

Cyber-security Experience

 

Other Public Company Board Experience

Annell R. Bay

 

   

 

 

 

 

   

 

 

John J. Christmann IV

 

 

 

 

 

   

 

   

 

Juliet S. Ellis

 

 

 

 

   

 

   

 

 

Charles W. Hooper

 

   

 

   

 

 

   

 

 

   

 

Chansoo Joung

   

 

 

 

 

   

 

   

 

 

H. Lamar McKay

 

 

 

 

 

   

 

 

Amy H. Nelson

   

 

 

 

   

 

 

   

 

 

Daniel W. Rabun

 

 

 

 

 

   

 

 

Peter A. Ragauss

 

 

 

 

   

 

   

 

 

David L. Stover

 

 

 

 

 

   

 

 

Board Nominee Composition Highlights

 

       

Independence

  

Average Tenure

  

Balanced Tenures

  

Diversity

 

LOGO

 

  

 

LOGO

 

  

 

LOGO

 

  

 

LOGO

 

 

  2023 Proxy Statement           13


Table of Contents

Nominees for Election as Directors

 

 

LOGO

 

Age: 67

 

Director Since:

May 2014

 

APA Committees:

  CRG&N, Chair

  MD&C

 

Other Public Company Boards:

  Hunting PLC

  Verisk Analytics, Inc.

  

 

ANNELL R. BAY

 

Reasons for Nomination to Our Board

 

  With her extensive experience in the global oil and gas industry, Ms. Bay brings critical expertise and oversight of the Company’s strategic exploration and operations projects around the world.

 

  Ms. Bay’s relationships with some of the world’s top academic and industry-focused institutions provide APA with rare insight into the latest scientific developments, allowing us to maintain our competitive advantage.

 

  As a member of public company boards in two countries with vastly different governance regulatory regimes, Ms. Bay brings unique governance perspective and understanding of emerging best practices to the Board.

 

  Having served as Chair of our CRG&N Committee and a member of our MD&C Committee, Ms. Bay has been a driving force behind APA’s approach to ESG leadership and engagement.

 

Additional Leadership Experience and Service

 

  Advisory board member, Jackson School of Geosciences, University of Texas at Austin

 

  Advisory board member, Independent Petroleum Association of America Energy Education Center

 

  Trustee, Trinity University

 

Career Highlights

 

Marathon Oil Corporation, 2008-2014

 

  Vice President, Global Exploration

 

  Senior Vice President, Exploration

 

Shell Exploration and Production Company, 2004-2008

 

  Vice President, Americas Exploration

 

Kerr-McGee Oil and Gas Corporation (and Oryx Energy prior to merger), 1988-2004

 

  Vice President, Worldwide Exploration

 

  Vice President, North America Exploration

 

 

LOGO

 

Chief Executive Officer and President

 

Age: 56

 

Director Since:

January 2015

 

APA Committees:

  None

 

Other Public Company Boards:

  None

  

 

JOHN J. CHRISTMANN IV

 

Reasons for Nomination to Our Board

 

  With more than three decades in the oil and gas industry, including more than 25 years at the Company leading both operational and staff functions and most recently serving as CEO and President, Mr. Christmann has the proficiency and depth to manage and operate a large-scale oil and gas exploration and production company.

 

  Mr. Christmann’s extensive experience in the oil and gas industry has provided him with an in-depth understanding of successful execution and operational management in the field, an appreciation and talent for value-added M&A activity, and the expertise to oversee the strategic direction of a large, publicly traded company.

 

  His experience, coupled with his thorough knowledge and understanding of the Company’s assets and unique operations, complement Mr. Christmann’s management strengths and enable him to lead the Company through the complexities of day-to-day operations as well as the macroeconomic impact of commodity prices.

 

Additional Leadership Experience and Service

 

  Board of Visitors, University of Texas MD Anderson Cancer Center

 

Career Highlights

 

APA Corporation, 1997-present

 

  Chief Executive Officer and President, 2015-present

 

  Executive Vice President and Chief Operating Officer, North America

 

  Region Vice President, Permian Region

 

  Vice President, Business Development

 

  Production Manager, Gulf Coast Region

 

 

14           APA Corporation  


Table of Contents

 

LOGO

 

Age: 64

 

Director Since:

May 2019

 

APA Committees:

  CRG&N

  MD&C, Chair

 

Other Public Company Boards:

  Donnelley Financial Solutions, Inc.

  

 

JULIET S. ELLIS

 

Reasons for Nomination to Our Board

 

  Ms. Ellis’s extensive experience over three decades in portfolio management, strategy, and risk oversight has helped guide APA toward fulfilling our commitments to maintain a disciplined financial approach and leverage our diversified portfolio of assets.

 

  Ms. Ellis’s deep expertise within the institutional investor community provides her with a unique ability to represent our shareholders and allows the Board to keep apprised of their emerging areas of interest.

 

  As our MD&C Chair, Ms. Ellis has been instrumental in leading a number of enhancements made to our executive compensation practices in an effort to align with our shareholders’ expectations.

 

Additional Leadership Experience and Service

 

  Board of Directors, Houston Methodist Hospital system

 

  Member, Women Corporate Directors

 

  Chartered Financial Analyst (CFA) charterholder

 

Career Highlights

 

Invesco, 2004-2019

 

  Managing Director, Senior Portfolio Manager

 

  Chief Investment Officer, US Growth Equities Investment Management Unit

 

  Senior Portfolio Manager, Small Cap Growth Fund and Small Cap Equity Fund

 

JPMorgan Chase & Co. (and Fleming Asset Management prior to acquisition), 1987-2004

 

  Senior Portfolio Manager

 

  Managing Director

 

  Equity Analyst

 

 

LOGO

 

Age: 65

 

Director Since:

February 2022

 

APA Committees:

  CRG&N

  MD&C

 

Other Public Company Boards:

  None

  

 

Lt. Gen. CHARLES W. HOOPER (U.S. Army, Retired)

 

Reasons for Nomination to Our Board

 

  Lt. Gen. Hooper’s extensive experience with executive and analytical roles, foreign relations, cybersecurity, and international assignments, including service in Egypt, which is an area of significant operations for the Company, brings valuable perspectives that are critical to our Board’s ability to oversee our international portfolio development strategy.

 

  His service spanning more than four decades in the U.S. Army has translated to many valuable learnings for our Board, particularly in regard to risk management and critical decision making, as well as navigating the ongoing macroeconomic and geopolitical challenges that APA faces around the world.

 

  Lt. Gen. Hooper has vast management experience. In his role as the U.S. Department of Defense expert on security assistance funding and U.S. foreign military sales, he had oversight of 20,000 people globally and over $50 billion in annual weapons sales. This experience brings a valuable perspective on managerial oversight to our Board.

 

Additional Leadership Experience and Service

 

  Member, Council on Foreign Relations

 

  Nonresident Scholar, Atlantic Council; Harvard University Belfer Center

 

  Board of Directors, UL Inc.; Two Six Technologies; Loc Performance; National Bureau of Asian Research

 

Career Highlights

 

The Cohen Group, 2020-present

 

  Senior Counselor

 

U.S. Army, 1979-2020

 

  Director of the Defense Security Cooperation Agency

 

  Chief of the Office of Military Cooperation, U.S. Embassy, Cairo, Egypt

 

  Command and Staff Assignments, 25th Infantry and 82nd Airborne Divisions

 

  U.S. Defense Attaché to the People’s Republic of China

 

  Chief Strategist and Planner, U.S. Africa Command

 

 

  2023 Proxy Statement           15


Table of Contents

 

LOGO

 

Age: 63

 

Director Since:

February 2011

 

APA Committees:

  Audit, Chair

  CRG&N

 

Other Public Company Boards:

  Magellan Midstream Partners, L.P.

  

 

CHANSOO JOUNG

 

Reasons for Nomination to Our Board

 

  Mr. Joung has spent the majority of his career in the finance industry working with energy companies. Through his experiences in private equity and as an investment banker, Mr. Joung has gained a rare level of expertise with energy companies, the energy industry, and energy-related capital markets and M&A activity, which greatly enhances the business and strategy capabilities of the Board. He additionally has developed skills in the identification, assessment, and management of risk.

 

  During his time at Warburg Pincus, Mr. Joung was also responsible for the global coordination of the firm’s renewables activities, including wind, solar, biofuels, and grid storage, which have translated to valuable learnings for the Board as we continue to drive APA’s environmental initiatives forward.

 

  Mr. Joung is deeply passionate about our Company’s recruiting efforts and has specific expertise in diverse recruitment and development, which has been instrumental in the Board’s oversight of the Company’s workforce and D&I initiatives.

 

Additional Leadership Experience and Service

 

  Former Director, Targa Resources Partners/Targa Corporation

 

Career Highlights

 

Warburg Pincus, 2005-2015

 

  Senior Advisor

 

  Partner

 

Goldman Sachs, 1987-2004

 

  Head, Americas Natural Resources Group, Investment Banking Division

 

  Co-Head, Recruiting, Investment Banking Division

 

  Co-Head, Women’s and Diversity Recruitment and Development, Investment Banking Division

 

 

LOGO

 

Non-Executive Chair of the Board since September 1, 2022

 

Age: 64

 

Director Since:

February 2021

 

APA Committees:

  None

 

Other Public Company Boards:

  CRH plc

 

  

 

H. LAMAR MCKAY

 

Reasons for Nomination to Our Board

 

  Mr. McKay spent his entire career at a major international oil and gas company. His extensive experience and global perspective assist the Board in the assessment and management of risks faced by natural gas and oil companies.

 

  Mr. McKay’s deep level of industry expertise has been critical to the Board’s ability to oversee APA’s complex capital investment and portfolio-related initiatives, including safe and on-budget maintenance turnarounds, modernization efforts, advancement of exploration and appraisal programs, and streamlining of portfolio assets.

 

  His experience as Chair of our Board includes time spent working closely with the rest of the Board, the management team, and our stakeholders. In particular, he is heavily involved in APA’s shareholder engagement and ESG efforts.

 

Career Highlights

 

BP p.l.c. (and Amoco prior to acquisition), 1980-2020

 

  Chief Transition Officer

 

  Deputy Chief Executive Officer

 

  Chief Executive, Worldwide Upstream Business

 

  Chair and President, BP America

 

  Executive Vice President

 

  Head of Strategy

 

 

16           APA Corporation  


Table of Contents

 

LOGO

 

Age: 54

 

Director Since:

February 2014

 

APA Committees:

  Audit

  CRG&N

 

Other Public Company Boards:

  NexTier Oilfield Solutions Inc.

  Helix Energy Solutions Group, Inc.

  

 

AMY H. NELSON

 

Reasons for Nomination to Our Board

 

  In her current role, Ms. Nelson advises her clients on strategy development, capital allocation, acquisition evaluation, and infrastructure development. Her clients span a broad range of oilfield service, product, and geographic markets. This experience provides her deep industry and subject matter expertise, which is critical to our Board’s oversight of APA’s operations.

 

  Ms. Nelson’s rich experience serving companies in the oil and gas industry provides the Board with valuable insight into the assessment and management of risks faced by oil and gas companies.

 

  Ms. Nelson developed substantial water-related expertise in the unconventional field development water cycle, including treatment technologies, temporary and permanent transportation infrastructure, containment and disposal, water sources and associated management of access rights to ground, surface, industrial, and municipal water sources, and management of regulatory and compliance issues. Ms. Nelson’s understanding of this topic has greatly contributed to the Board’s ability to oversee APA’s environmental stewardship efforts.

 

Additional Leadership Experience and Service

 

  Former Board of Directors, National Association of Corporate Directors (NACD) TriCities Chapter

 

  Private company board roles during tenures at SCF Partners and Greenridge Advisors

 

Career Highlights

 

Greenridge Advisors, LLC, 2007-present

 

  Founder, President

 

SCF Partners, 2000-2007

 

  Vice President

 

Amoco Production Company, 1992-1998

 

  Various roles in planning, project management, and engineering

 

 

LOGO

 

Age: 68

 

Director Since:

May 2015

 

APA Committees:

  Audit

  CRG&N

 

Other Public Company Boards:

  Golar LNG Ltd.

  ChampionX Corporation

  

 

DANIEL W. RABUN

 

Reasons for Nomination to Our Board

 

  Mr. Rabun’s international experience, global perspective, experience with strategic acquisitions, and financial acumen from having served as a public company’s chair, president, and chief executive officer assist the Board in the assessment and management of risks faced by oil and gas companies.

 

  During his tenure, Ensco drilled some of the most complex wells for super majors, national oil companies, and independent operators in nearly every strategic oil and gas area in the world, from the North Sea to the “golden triangle” of the Gulf of Mexico, Brazil, and West Africa, and from the Middle East and the Mediterranean to Asia and Australia. This experience allows him to provide valuable perspectives on APA’s global operations across many of the same areas.

 

  Mr. Rabun’s experience as a director of Golar LNG Ltd. gives him critical insight into the global liquid natural gas business, which is highly beneficial to the Company in its efforts to market natural gas.

 

  In addition, Mr. Rabun’s experience as chair of the board of ChampionX Corporation provides APA rare insight into new technologies used to drill and produce oil and gas and to monitor and prevent methane emissions, allowing us to maintain our competitive advantage.

 

Additional Leadership Experience and Service

 

  Former Chair, International Association of Drilling Contractors

 

  Certified Public Accountant (CPA)

 

Career Highlights

 

Ensco p.l.c., 2007-2015

 

  Chair

 

  President and Chief Executive Officer

 

Baker & McKenzie LLP, 1986-2005

 

  Partner

 

 

  2023 Proxy Statement           17


Table of Contents

 

LOGO

 

Age: 65

 

Director Since:

December 2014

 

APA Committees:

  Audit

 

Other Public Company Boards:

  The Williams Companies, Inc.

  

 

PETER A. RAGAUSS

 

Reasons for Nomination to Our Board

 

  Mr. Ragauss brings a wealth of accounting, financial, and executive experience to the Board, having held senior positions, including as chief executive officer, chief financial officer, controller, and vice president of finance. His wide and varied experiences in the oil and gas industry, including in the area of finance, have provided him with unique understanding and insight concerning the risks faced by oil and gas companies.

 

  His board service at The Williams Companies, whose core business is natural gas gathering, processing, and transportation, has provided valuable learnings to our Board regarding APA’s strategic initiatives as well as corporate governance best practices.

 

Career Highlights

 

Baker Hughes, 2006-2014

 

  Senior Vice President and Chief Financial Officer

 

BP p.l.c. (and Amoco prior to acquisition), 1998-2006

 

  Controller, Refining and Marketing

 

  Chief Executive Officer, Air BP

 

  Assistant to Group Chief Executive, BP Amoco

 

  Vice President of Finance and Portfolio Management, Amoco Energy International

 

El Paso Energy International, 1996-1998

 

  Vice President, Finance

 

Tenneco Inc., 1993-1996

 

  Various positions

 

Kidder, Peabody & Co, 1987-1993

 

  Various positions

 

 

LOGO

 

Age: 65

 

Director Since:

February 2022

 

APA Committees:

  MD&C

 

Other Public Company Boards:

  None

  

 

DAVID L. STOVER

 

Reasons for Nomination to Our Board

 

  Mr. Stover’s experience as the board chair and chief executive officer at an international oil and gas company and his career working in diverse roles in the industry further enhances the Board’s ability to continue fulfilling its critical oversight role across APA’s complex operations.

 

  Mr. Stover’s experience working with significant exploration success and offshore operations in the Eastern Mediterranean, West Africa, and Gulf of Mexico, together with his extensive onshore unconventional experience, including in the Permian Basin, also brings key insights to our Board for developing and bringing online large-scale discoveries.

 

Career Highlights

 

Noble Energy, Inc., 2002-2020

 

  Board Chair and Chief Executive Officer

 

  President and Chief Operating Officer

 

  Executive positions in business development and operations

 

BP p.l.c., 2000-2002

 

  Vice President and Business Unit Leader, Gulf of Mexico Shelf, BP America

 

Vastar Resources, Inc., 1994-2000

 

  Various onshore and offshore management positions

 

ARCO Oil and Gas Company, 1979-1994

 

  Positions in engineering, operations, and management

 

 

18           APA Corporation  


Table of Contents

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Biographical information, as of the date of this proxy statement, for the executive officers of the Company is set forth below.

 

 

LOGO

 

  

 

JOHN J. CHRISTMANN IV, 56, Chief Executive Officer and President

 

Mr. Christmann’s biographical information is set forth above under the heading Nominees for Election as Directors.

 

 

LOGO

  

 

D. CLAY BRETCHES, 58, Executive Vice President, Operations

 

Mr. Bretches was appointed executive vice president of Operations on January 1, 2020, having been senior vice president, U.S. Midstream Operations since January 2019. He also served from January 2019 until February 2022 as Chief Executive Officer and President and a member of the board of directors of Altus Midstream Company, which was then a controlled subsidiary of the Company. He previously served as the president and CEO of Sendero Midstream since 2014.

 

Prior to that, Mr. Bretches served at Anadarko Petroleum Corporation as vice president, E&P Services and Minerals from 2010 to 2014, and as vice president, Marketing and Minerals from 2005 to 2010. He was instrumental in the formation of Western Gas Partners, a midstream MLP. Earlier in his career, Mr. Bretches led the crude oil marketing and midstream operations for Vastar Resources and worked as an engineer for ARCO.

 

 

LOGO

  

 

TRACEY K. HENDERSON, 56, Executive Vice President, Exploration

 

Ms. Henderson was appointed executive vice president of Exploration in January 2023, having previously been senior vice president of Exploration since April 2021. Prior to joining the Company, Ms. Henderson served as chief exploration officer at Kosmos Energy since February 2019, having previously served as their senior vice president of Exploration since January 2017.

 

Prior to her roles in exploration leadership at Kosmos, she also served in a variety of business and geophysical roles of increasing responsibility. Prior to joining Kosmos, Ms. Henderson served in geophysicist roles at Nexen Petroleum, Hess, and Triton Energy.

 

 

LOGO

  

 

REBECCA A. HOYT, 58, Senior Vice President, Chief Accounting Officer, and Controller

 

Ms. Hoyt was appointed senior vice president, chief accounting officer, and controller in August 2014, having been vice president, chief accounting officer, and controller since November 2010. She previously served as the Company’s vice president and controller since November 2006, assistant controller since 2003, and held positions of increasing responsibility within the accounting area since joining the Company in 1993.

Previously, Ms. Hoyt was an audit manager with Arthur Andersen LLP, an independent public accounting firm, from 1992 to 1993. Ms. Hoyt has been a member of the board of directors of the University of Houston Foundation since January 2021 and serves on its investment committee.

 

 

LOGO

  

 

P. ANTHONY LANNIE, 69, Executive Vice President and General Counsel

 

Mr. Lannie was appointed executive vice president and general counsel in August 2009 and was interim chief financial officer from October 9, 2014, through March 2, 2015. Mr. Lannie previously served as senior vice president and general counsel since May 2004, and vice president and general counsel since March 2003.

 

Prior to joining the Company, he was president of Kinder Morgan Power Company, Houston, Texas, from 2000 through February 2003, and president of Coral Energy Canada in 1999. Mr. Lannie was senior vice president and general counsel of Coral Energy, an affiliate of Shell Oil Company and Tejas Gas Corporation, from 1995 through 1999, and of Tejas Gas Corporation from 1994 until its combination with Coral Energy in 1998.

 

 

  2023 Proxy Statement           19


Table of Contents

 

LOGO

  

 

MARK D. MADDOX, 56, Executive Vice President, Administration

 

Mr. Maddox was appointed executive vice president of Administration in January 2023, having previously been senior vice president of Administration since April 2020. Previously, Mr. Maddox served as senior vice president of Supply Chain and chief information officer since June 2019, and vice president and chief information officer since January 2017. He joined the Company in June 2015 as vice president of Information Technology.

 

Prior to joining the Company, Mr. Maddox worked at Ernst & Young LLP, where he was a principal of Oil & Gas Advisory Services since February 2014, and at Deloitte LLP from 2010 to 2014 as director of Energy and Resources. He also held various roles of increasing responsibility at SAP America from 1998 to 2009, having begun his career at Tenneco Energy in 1989, where he held positions in accounting, operations, and information technology.

 

 

LOGO

  

 

DAVID A. PURSELL, 59, Executive Vice President, Development

 

Mr. Pursell was appointed executive vice president of Development in April 2020, having previously been senior vice president, Planning, Reserves, and Fundamentals since March 2018. Prior to joining the Company, Mr. Pursell served as managing director of Investment Banking for Tudor, Pickering, Holt & Co. (TPH), having previously served as head of Macro Research at TPH after serving as one of the founders of Pickering Energy Partners, Inc. in 2004.

 

Prior to TPH, Mr. Pursell was director of Upstream Research at Simmons & Company International. Earlier in his career, he worked in various production and reservoir engineering assignments at S.A. Holditch and Associates, which is now part of Schlumberger. Mr. Pursell began his career at ARCO Alaska in Anchorage with production and operations engineering assignments in South Alaska and the North Slope.

 

 

LOGO

 

  

 

STEPHEN J. RINEY, 62, Executive Vice President and Chief Financial Officer

 

Mr. Riney was appointed executive vice president on February 18, 2015, and chief financial officer effective March 3, 2015. Prior to joining the Company, he was with Amoco Corporation and BP p.l.c. from 1991 to 2015.

 

He served as chief financial officer for BP Exploration and Production from July 2012 to January 2015 and global head of mergers and acquisitions for BP p.l.c. from January 2007 to June 2012.

 

 

20           APA Corporation  


Table of Contents

EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

The Company’s executive compensation program and practices are underpinned by APA’s purpose – to meet the growing demand for energy in a cleaner and more sustainable way; vision – to contribute to human progress by responsibly helping meet the world’s oil and gas needs; and strategy – to focus on creating sustainable free cash flow by prioritizing long-term returns over growth.

CD&A At-a-Glance

This Compensation Discussion and Analysis (CD&A) explains our executive compensation program for our CEO and President, Chief Financial Officer, and our three other most highly compensated executive officers serving at the end of 2022, referred to as our named executive officers (NEOs). This CD&A also describes the MD&C Committee’s process for making pay decisions, as well as its rationale for specific decisions related to fiscal year 2022.

 

 

  Key Actions in 2022

 

 

 

  Details

 

 

Continued our robust shareholder outreach and engagement program

 

 

   Reached out directly to shareholders representing approximately 59.1% of our outstanding shares, and 47.5% either engaged with us or told us no meeting was necessary

   Had our independent directors, including our non-executive chair and the chairs of the MD&C and CRG&N Committees, available to participate in all meetings

 

Reduced CEO target compensation

 

 

   Reduced the CEO and President’s equity award value by 9%

   Maintained NEO base salaries at the same levels as 2021

 

Continued emphasis on ESG metrics in our incentive compensation plans

 

 

   Added an ESG metric to the 2022 long-term incentive plan focusing on carbon dioxide equivalent (CO2e) reduction

   Added two ESG metrics to the 2023 long-term incentive plan focusing on reducing GHG intensity and accelerating reclamation to increase biodiversity in the U.S.

   Established a Supplier Diversity Initiative within our Supply Chain, the success of which is directly linked to annual incentives

 

Engaged a new independent compensation

consultant

 

 

   Retained a new, independent compensation consulting firm to gain further insight on pay practices and ensure that our program effectively balances competitive market practices, investor expectations, best-practice governance standards and our business strategy

 

Enhanced overall disclosure

 

 

   Increased disclosure on performance targets and pay outcomes

   Streamlined the language to enhance readability

   Aligned the content of our executive compensation disclosures with best-practice narratives

2022 Named Executive Officers

 

 

  Named Executive Officer                  

 

 

 

Title

 

 

John J. Christmann IV

 

 

Chief Executive Officer and President

 

Stephen J. Riney

 

 

Executive Vice President and Chief Financial Officer

 

P. Anthony Lannie

 

 

Executive Vice President and General Counsel

 

David A. Pursell

 

 

Executive Vice President, Development

 

D. Clay Bretches

 

 

Executive Vice President, Operations

 

  2023 Proxy Statement           21


Table of Contents

Executive Summary

Our 2022 Performance Highlights

During 2022, APA continued to build on its foundation for long-term success by continuing to prioritize long-term returns over production growth, strengthening our balance sheet through debt reduction, and focusing on immediate and actionable ESG opportunities most relevant to our industry and business strategy. Through our disciplined approach, we delivered excellent financial performance with strong execution in each of our operational areas.

We generated the second-highest annual Free Cash Flow (FCF)(1) in our history, of which 66% was returned to our shareholders, and our stock price increased over 65%. We outperformed all of our safety targets and continued to demonstrate our industry leadership on ESG issues where we believe we can have the greatest direct impact: air, water, and communities + people. In all, our measured and thoughtful strategies have proven effective in building sustainable value for shareholders.

The following are key business achievements in 2022:

 

LOGO

 

 

   Generated ~$2.7 billion of FCF(1); 2nd highest in APA’s 68-year history and more than double our target

 

   Returned ~$1.6 billion (66% of FCF) to APA shareholders through share buybacks and dividends

 

   Reduced outstanding shares by 10% and doubled annual dividend

 

   Eliminated $1.4 billion, or more than 20%, of outstanding bond debt

 

 
   

LOGO

 

   Increased drilling and completion activity in the U.S. and Egypt to a pace capable of delivering moderate and sustainable production growth

 

   Successfully integrated Delaware Basin tuck-in acquisition

 

   Advanced appraisal programs on Block 58 offshore Suriname at Sapakara & Krabdagu with three successful flow tests; announced first oil discovery on Block 53 at Baja

 

   Identified continued low-risk oil growth in Egypt

 

   Divested underperforming assets in the U.S. and other non-core interests, with sales proceeds of ~$1B

 

   Successfully managed cost levels despite ongoing inflation pressure in the service sector

 

 

LOGO

 

 

   Reduced routine upstream flaring by more than 40% in Egypt ahead of schedule

 

   Finished 2022 with the lowest Total Recordable Incident Rate (TRIR) since 2005

 

   Outperformed on all other safety metrics, including Days Away, Restricted or Transferred (DART), Severe Injury and Fatality Rate (SIF), and Vehicle Incident Rate (VIR)

 

   Established Supplier Diversity Program and met commitment for Tier 1 spend by category reporting

 

   Maintained <1% total flaring intensity in the U.S.

 

   On track to deliver projects that can eliminate at least 1 million tons of CO2e emissions by year-end 2024

 

Our approach to corporate and social responsibility, including our ESG initiatives, programs, goals, and progress, is guided by our core values. Further details regarding our ESG approach, including current environmental initiatives, social responsibility focuses, and other highlights and accomplishments, can be found on the Sustainability portion of our website.

 

(1)

Free Cash Flow for goal metrics and as used herein is calculated by taking cash flows from operations before changes in operating assets and liabilities, adjusted to exclude Sinopec’s noncontrolling interest and cash-based stock compensation expense, and subtracts upstream capital investment, non-oil and gas capital, capitalized interest, and Company dividends.

 

22           APA Corporation  


Table of Contents

Say-on-Pay and Shareholder Engagement

The MD&C Committee has a long history of keeping an open dialogue with the investor community. We regularly meet with our shareholders to discuss business topics, seek feedback on our performance, and address other matters, such as executive compensation. Over the past few years, these discussions have led to key program improvements, such as moving from subjective to quantitatively measured ESG metrics, limiting the use of discretion to adjust payouts, and expanding our Total Shareholder Return (TSR) peer group to include a broader mix of energy companies.

Consistent with our commitment to listen and respond to our shareholders, we increased the focus and intensity of our outreach and engagement efforts as a result of our most recent say-on-pay vote, which yielded approximately 70% support for our executive compensation program. In the Fall of 2022, we reached out directly to shareholders representing approximately 59.1% of shares outstanding to discuss, amongst other topics, our compensation practices. Shareholders owning approximately 47.5% of our shares outstanding either met with us in engagement meetings or notified us that no meeting was necessary this year. Our independent directors, including our non-executive chair and the chairs of the MD&C and CRG&N Committees, were available for all of our shareholder meetings throughout 2022, unless a shareholder preferred to speak with one or the other or with management only.

As part of this process, the MD&C Committee also retained a new independent compensation consulting firm to gain further insight on current pay practices and ensure that our approach going forward effectively balances competitive market practices, shareholder expectations, best-practice governance standards, and our business strategy.

What We Heard and What We Did

Focused discussions about executive compensation with our shareholders always provide valuable and balanced insights about what our investors like about our program and what could be enhanced. During this most recent round of engagement sessions, many of our shareholders reiterated their appreciation for the heavy weighting we place on quantitative goals in both of our incentive plans. They also commended us for being a “best-in-class” example of incorporating ESG goals into our long-term incentive plan, as well as holding ourselves accountable for achieving near-term environmental goals, in preference to meeting targets that are far into the future (i.e., 2040).

We also gained a better understanding of where shareholders expect us to continue strengthening alignment with their interests and be more transparent in our disclosures. In response, we have taken multiple steps to further enhance the structure and features of our executive compensation program, which are summarized below.

 

What We Heard

 

 

 

What We Did

 

Create a stronger alignment of CEO target compensation with the peer group

 

   Reduced CEO long-term compensation by 9% for 2022 and maintained the same target for 2023

Focus on greater Board diversity

 

   Introduced new independent directors with comprehensive expertise and diverse backgrounds to the Board

Continue leading by example by using quantitative ESG metrics in long-term incentive compensation

 

   For 2022, added a CO2e reduction metric — specifically, by the end of 2024, we plan to deliver capital and operational projects that collectively target the elimination of at least 1 million tons of annualized CO2e emissions

   For 2023, added metrics focusing on reducing GHG intensity by 5% and accelerating reclamation to increase biodiversity in the U.S.

Refine annual incentive metrics to provide clarity on key focus areas, with continued commitment to measurable ESG goals

 

   For 2022, revised disclosure and streamlined categories to emphasize our balanced scorecard approach, focused on four key areas: financial (40%), operational (20%), ESG/EH&S-related (20%), and strategic goals (20%)

   For 2023, further streamlined ESG focus by implementing the following goals:

   Utilize at least 50% recycled produced water for completions in our U.S. onshore operations

   Convert more than 2,000 pneumatic devices to reduce methane emissions in our U.S. onshore operations

 

 

  2023 Proxy Statement           23


Table of Contents

Compensation Best Practices and Policies

We believe the following practices and policies promote sound compensation governance and are in the best interests of our shareholders and executives.

 

   

 

What We Do

  

 

What We Don’t Do

  

 

Place a significant emphasis on performance-based, at-risk, long-term compensation

 

  

 

×

 

 

No repricing of underwater stock options

  

 

Maintain rigorous stock ownership requirements for our officers and directors

 

  

 

×

 

 

No excessive perquisites

  

 

Cap our TSR payouts at target if TSR is negative

 

  

 

×

 

 

No executive officer employment contracts

 

  

 

Double trigger change in control provisions

 

  

 

×

 

 

No guaranteed bonuses or uncapped incentives

 

  

 

Maintain a robust clawback policy

 

  

 

×

 

 

No tax gross ups, except in the case of standard expatriate tax equalization benefits available to all similarly situated employees

 

  

 

Use an independent, external compensation consultant and all members of the MD&C Committee are independent

 

  

 

×

 

 

No pledging or hedging of Company securities by directors and executive officers

 

Pay-for-Performance Alignment

Our executive compensation program delivers pay that is aligned with actual performance and is structured such that performance directly impacts the realizable pay of our NEOs. The following chart shows that the realizable value of the CEO and President’s compensation is strongly aligned with shareholder value. Because a significant portion of executive compensation is long-term and equity-based, the amounts shown in the Summary Compensation Table are not the same as realizable pay. Realizable pay is defined as base salary, earned bonus, all other compensation as reported in the Summary Compensation Table, and earned value of long-term awards or their target value in the case of ongoing awards. This means that realizable pay makes estimates about the value of certain equity awards, but that value may change significantly based on performance results before the awards actually pay out. As a result, while realizable pay includes some actually paid amounts (base salary, for example), it is not compensation actually received in each respective year.

 

 

 

 

LOGO

 

 

*Awards are valued at target for future vesting of in-progress programs.

 

24           APA Corporation  


Table of Contents

What Guides Our Program

APA’s Guiding Principles and Executive Compensation Philosophy

The executive compensation program is designed to keep our senior leadership team focused on the seamless execution of the Company’s strategic plan, with the goal of delivering shareholder value over the long term. As such, executive compensation program decisions are grounded in the following principles:

 

   

Alignment with shareholder interests. Executives should be compensated through market-competitive pay elements (base salaries and annual- and long-term incentives) designed to align executive compensation with the creation of long-term value for our shareholders.

 

   

Pay for performance. A substantial portion of executives’ compensation should be linked to pre-determined operational, financial, and other strategic metrics with rigorous targets that align with APA’s long-term goals.

 

   

Commitment to sustainability. Our program should include quantifiable ESG, health, and safety metrics, the achievement of which impact actual incentive award payouts. Considerable focus should be on metrics that demonstrate our commitment to measurable improvements in the areas of environmental sustainability, D&I, and employee safety.

Components of Executive Compensation

The following primary components of compensation support our executive compensation philosophy.

 

       
    

Component

 

Objective

 

Detail

Fixed

 

Base Salary

 

Provide market-competitive base pay, reflective of an executive officer’s role, responsibilities, and individual performance to attract and retain top talent

 

 

  Reviewed annually based on market data, internal equity, job responsibilities, and individual performance

Variable / At-Risk

 

Annual Incentive Compensation

  Motivate and reward our executive officers to achieve key business objectives that support APA’s long-term strategy  

  Achievement is measured against annual goals and objectives as described under the section Annual Incentive Compensation below

 

  Establish aggressive targets for each metric at the beginning of the year at or above our corporate plan for allocating capital (the plan) to support execution of our strategy in any commodity price environment

 

 

Long-Term Incentive Compensation

  Align our executive officers’ awards with the long-term interests of our shareholders and APA’s long-term strategy  

  Awards are comprised of 60% performance shares and 40% restricted stock units

 

  Vest half of the performance shares at the end of a three-year performance period, and the remaining half at the end of the fourth year

 

  Incorporate relative and absolute metrics in the performance share program to provide a balanced assessment of long-term performance, including a negative TSR modifier, a three-year Cash Return on Invested Capital (CROIC) metric, and–new for 2022–a three-year ESG metric

 

 

  2023 Proxy Statement           25


Table of Contents

Compensation Mix

The charts below show the target annual total direct compensation of our CEO and President and the average for our other NEOs for fiscal year 2022. These charts illustrate that a majority of executive compensation is variable, with 89% for our CEO and President and an average of 83% for our other NEOs at risk.

 

LOGO

Totals may not add to 100% due to rounding.

Decision-Making Process

 

 
Board of Directors
 

Executive compensation decision-making is a core responsibility of the Board. The independent members of the Board review, modify as needed, and approve the MD&C Committee’s recommendations for the CEO and President’s total compensation. The entire Board is responsible for this same process in establishing annual compensation for the other NEOs.

   
   
MD&C Committee     Independent Compensation Consultant
   

  Assesses the effectiveness of our compensation programs to ensure compensation does not incentivize excessive risk

 

  Undertakes an extensive, year-round approach to determine the appropriate executive compensation programs and amounts

 

  Engages an independent external advisor, considers analysis and advice from the consultant when making compensation decisions, and annually reviews the effectiveness and independence of the consultant, obtaining written certification that the consultant complies with its own independence rules

 

  Each member meets the independence requirements of the Nasdaq listing standards

 

  May delegate all or a portion of its duties and responsibilities to a subcommittee composed of at least two members

 

  Responsibilities are also described in the Committee Responsibilities section earlier in this proxy statement and more fully set forth in the committee’s charter, which is available on our website

 

   

  Directly engaged by the MD&C Committee

 

  Provides recommendations on CEO and President compensation directly to the MD&C Committee, without consulting management

 

  Periodically reviews the executive compensation programs, in cooperation with management, and advises the MD&C Committee of changes that may be made to better reflect evolving best practices and improve effectiveness

 

  Periodically reviews the compensation philosophy, target peer group, and target competitive positioning for reasonableness and appropriateness

 

  Has direct access to MD&C Committee members without management involvement

 

  Received de minimis compensation for limited advisory services provided with respect to broad-based compensation and for drafting and review of compensation-related disclosures in 2022

 

  Details about the engagement of our new compensation consultant are provided below

 

   
 
Executive Management
 

  Provides recommendations to the MD&C Committee with respect to compensation decisions for APA’s executive officers (other than the CEO and President)

 

  Provides input regarding APA’s business strategy and performance

 

  CEO and President, along with each member of the executive management team, provides the MD&C Committee with a self-assessment based on achievement of the agreed-upon objectives and other leadership accomplishments

 

  CEO and President provides the MD&C Committee with performance evaluations and pay recommendations for other executive officers

 

26           APA Corporation  


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Engagement of New Independent Compensation Consultant

For 2022, the MD&C Committee continued its engagement with NFP Compensation Consulting (the Prior Consultant), as the independent compensation consultant for matters related to executive compensation, including the determination of 2022 base salaries and target incentive award opportunities. The Prior Consultant was retained through May 2022, at which time the MD&C Committee retained the services of Pearl Meyer & Partners, LLC (Pearl Meyer) as its independent compensation consultant for the remainder of the year.

Pearl Meyer was engaged to support the MD&C Committee’s efforts to conduct a comprehensive analysis of the current executive compensation program, in response to shareholder feedback following the Company’s 2022 annual meeting of shareholders. Pearl Meyer was selected as the independent compensation consultant after an extensive review process conducted by the MD&C Committee. The MD&C Committee determined that Pearl Meyer and the Prior Consultant were independent during 2022.

Compensation Peer Group

Peer group data contributes to our external market parity, recruitment, retention, and performance analysis. The MD&C Committee refers to data regarding compensation awarded to similarly situated officers by companies in the compensation peer group to ensure that our NEOs’ base salaries, target annual incentive compensation award opportunities, and equity grants are competitive. The compensation peer group is intended to reflect E&P companies of a similar size, scope of operations, complexity, and international footprint as APA.

The MD&C Committee uses the following criteria when determining the compensation peer group for companies in our industry:

 

   

Size: Companies with similar market capitalization (between 0.4x and 5.1x our market capitalization), revenues (between 0.3x and 3.0x our revenue), and assets (between 0.8x and 5.7x our assets)

 

   

Operations: Companies with similar domestic and/or international operations

 

   

Headquarters: Companies headquartered in Texas or surrounding states

 

   

Talent Competition: Companies with which we compete for executive talent

Based on the above criteria and as a result of consolidation in the industry, the 2022 compensation peer group is comprised of the following E&P companies, as approved by our MD&C Committee:

 

 

2022 Compensation Peer Group

  Continental Resources, Inc.

 

EOG Resources, Inc.

  

Occidental Petroleum Corporation

  Coterra Energy, Inc.

 

Hess Corporation

  

Ovintiv Inc.

  Devon Energy Corporation

 

Marathon Oil Corporation

  

Pioneer Natural Resources Co.

  Diamondback Energy, Inc.

 

Murphy Oil Corporation

    

For 2023, our MD&C Committee has determined it is appropriate to maintain the same compensation peer group, except that Continental Resources, Inc. (Continental) was removed following its take-private transaction in 2022.

2022 Executive Compensation Program in Detail

Base Salary

Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain executive leadership talent. Our base salary program is designed to help us recruit and retain executive talent with experience in oil and gas E&P companies operating in the United States and internationally. In making base salary decisions, the MD&C Committee considers the CEO and President’s recommendations for non-CEO NEO salaries, as well as each NEO’s position and level of responsibility within the Company. The MD&C Committee considers factors such as relevant market data as well as individual performance and contributions.

Our NEOs’ base salaries were held flat in 2022.

 

     

 

  Named Executive Officer

  

 

Base Salary on January 1, 2022 ($)  

 

 

Change in 2022

John J. Christmann IV

  

1,300,000  

 

 

LOGO

No Change

Base Salaries Remained Unchanged in

2022 for All of Our NEOs

 

Stephen J. Riney

  

795,000  

 

P. Anthony Lannie

  

 

695,000  

 

David A. Pursell

  

 

675,000  

 

D. Clay Bretches

  

 

675,000  

 

  2023 Proxy Statement           27


Table of Contents

Annual Incentive Compensation

Our annual incentive compensation plan is designed to motivate and reward our NEOs to create long-term value by achieving key short-term business objectives aligned with our long-term strategy. When determining individual annual incentive payouts, the MD&C Committee considers both corporate achievement of business objectives and each officer’s individual performance. In formulating and assessing the annual incentive compensation plan, we consider whether and to what degree the elements of the plan advance the Company’s long-term strategy.

Annual incentive targets are expressed as a percentage of base salary and based on market data, internal equity, and size and scope of job responsibilities. Actual awards may range from zero to 200% of target, depending on corporate and individual performance.

 

 

Base Salary
($)

 

 

 

Ó

 

 

Target Annual  

Incentive  

(%)  

 

 

 

Ó

 

 

Corporate   Performance  

(%)  

 

 

 

Ó

 

 

Individual   Performance  

(%)  

 

 

 

=

 

 

Annual Incentive   Award  

($)  

 

The table below discloses the annual incentive targets for each NEO for 2022.

 

       

  Named Executive Officer

 

2022 Base Salary

($)

   

2022 Target Annual

Incentive Opportunity

(%)

   

2022 Target Annual  

Incentive Opportunity  

($)  

 

  John J. Christmann IV

 

 

1,300,000

 

 

 

130

 

 

 

1,690,000  

 

  Stephen J. Riney

 

 

795,000

 

 

 

100

 

 

 

795,000  

 

  P. Anthony Lannie

 

 

695,000

 

 

 

80

 

 

 

556,000  

 

  David A. Pursell

 

 

675,000

 

 

 

100

 

 

 

675,000  

 

  D. Clay Bretches

 

 

675,000

 

 

 

100

 

 

 

675,000  

 

Corporate Performance

Corporate performance under the annual incentive compensation plan is measured based on a pre-determined mix of quantitative metrics and strategic goals that are aligned with our purpose, vision, and strategy. These metrics are intended to reflect goals that can be acted upon within the current year and produce results that contribute to the long-term success of the Company. The threshold, target, and maximum achievement for each goal are generally set at the beginning of the year by the MD&C Committee and recommended for approval during the February Board meeting.

2022 Corporate Performance Metrics and Results

 

     

Metric

 

Rationale

  

Weighting  

Quantitative Metrics

  

80

Financial

  Free Cash Flow(1)

 

Budget conservatively and aggressively manage cost structure to ensure free cash flow generation and prioritize debt reduction

  Cash Costs per Barrel of Oil Equivalent (BOE)(2)

 

Maintain our focus on managing production expenses and overhead costs in an inflammatory environment to maximize cash flow

Operational

  Drilling Capital Efficiency(3)

 

Prudently allocate capital to drilling projects to optimize long-term returns

  All-in Finding and
Development (F&D)(4)

 

Focus management on exploration and development activities that yield reserve additions at a reasonable cost

ESG, Health, and Safety

 

Focus our efforts on air, water, and communities & people, to ensure long-term sustainable business, and provide a safe, secure, healthy, and environmentally responsible workplace

Strategic Goals

  

20

Return a minimum of 60% of Free Cash Flow to shareholders

 

Delivery on the externally communicated shareholder return framework

Materially improve long-term outlook of the Company beyond 3-year plan

 

Improve APA’s investment proposition relative to peers via portfolio optimization and balance sheet management

Return Egypt to oil production growth

 

Establish a growth trajectory via increased investment leveraging modernized terms ratified by the government of Egypt at the end of 2021

 

28           APA Corporation  


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(1)

Free Cash Flow for goal metrics is calculated by taking cash flows from operations before changes in operating assets and liabilities, adjusted to exclude Sinopec’s noncontrolling interest and cash-based stock compensation expense, and subtracts upstream capital investment, non-oil and gas capital, capitalized interest, and Company dividends.

(2)

Cash costs per BOE includes lifting (direct) expense, workover expense, and overhead costs. This is calculated as total applicable costs for the year divided by total adjusted BOE production (excluding tax barrels and non-controlling interests) for the year.

 

(3)

Drilling capital efficiency is measured using the profitability index (P/I) metric, defined as the ratio of the discounted cumulative operating cash flow generated by a project relative to the discounted capital investment in the project using a 10% discount rate. It is calculated based on well and facility capital costs, life of well production forecasts, and operating costs and is fully burdened with overhead costs and non-overhead indirect costs.

 

(4)

All-in F&D costs are determined on a $/BOE basis by dividing the sum of drilling, completion, facility, land, seismic, and overhead costs for the year by the proved reserves added from extensions, discoveries, and engineering revisions. Costs include both capital and cash exploration expense. Both costs and reserves are determined on a GAAP basis (upstream only).

Corporate performance targets are set based on our approved annual corporate plan, which represents our expectations for the year, and are measured against a scorecard at the end of the fiscal year. Because we conduct business in an industry that is driven by volatile commodity prices, our plan is reviewed regularly by management and the Board, so that we can adapt our operations to changing conditions as necessary. In particular, the MD&C Committee set the corporate performance targets outlined below in early 2022, considering the relevant business conditions at the time, a significant increase in capital expenditures for the year, high inflationary pressures, increased cash costs across the sector, and ongoing supply disruptions, which continued to drive higher dollar per BOE costs.

The 2022 scorecard, including metric weightings, performance targets, and actual results, is outlined below.

 

 

The MD&C Committee’s Final Scorecard

2022 Corporate Performance Metrics

 Metric

 

Weight (%)

 

Performance Targets

 

Results

   

Payout (%)

 Financial/Operational

      

Threshold

 

Target

 

Maximum

           

  Free Cash Flow (in millions)

 

20

 

$600

 

$1,200

 

$1,800

 

 

$2,669

 

 

40.0

  Cash Costs per BOE ($/BOE)

 

20

 

$16.00

 

$14.00

 

$12.00

 

 

$14.38

 

 

18.1

  Drilling Capital Efficiency (P/I)

 

10

 

1.70

 

2.00

 

2.30

 

 

1.80

 

 

6.7

  All-in F&D ($/BOE)

 

10

 

$21.00

 

$19.00

 

$17.00

 

 

$18.57

 

 

12.2

ESG, Health, and Safety

 

20

 

   Reduced upstream flaring in Egypt by 59%, exceeding our target of 40%; emission reductions were verified by a third-party

   Established a Supplier Diversity Initiative and externally reported diverse spend by year-end

   Achieved TRIR of 0.23, exceeding our target of 0.35; achieved a Severe Incident Rate of 0.011, exceeding our target of 0.030; and exceeded all process safety goals

 

 

Exceeded

 

 

40.0

Strategic Goals

 

20

 

   Returned ~66% of free cash flow to shareholders, exceeding our target of 60%

   Materially improved long-term outlook of the Company (outside of the three-year plan) by improving our balance sheet (see Our 2022 Performance Highlights in the Executive Summary of this CD&A)

   Oil volumes in Egypt strengthened throughout the year, delivering overall oil growth in 2022

 

 

Exceeded

 

 

30.0

  Final Achievement

 

100

       

146.9

Individual Performance

Using the corporate objectives as a foundation, the MD&C Committee, with input from the CEO and President for all other NEOs, assesses the annual incentive compensation target for each executive against market conditions. Where needed, the MD&C Committee further tailors an executive’s annual incentive compensation to their responsibilities and performance, the executive’s impact on annual results, and internal alignment. Our CEO and President evaluates all other officers based on these same criteria. Our independent compensation consultant is involved in the determination of targets and recommended awards for all officers.

 

  2023 Proxy Statement           29


Table of Contents

In evaluating our NEOs’ contributions during 2022, the Committee considered each NEO’s specific contribution to the Company’s performance and key strategic initiatives and provided the individual performance modifier to reflect their respective contributions to those achievements.

2022 Annual Incentive Award Payouts

The CEO and President’s annual incentive award payout was determined by the MD&C Committee and recommended to the Board for approval. For each of the other NEOs, the MD&C Committee approved the CEO and President’s recommendations with respect to the annual incentive award payouts. The actual awards paid to the NEOs for 2022 were as follows:

 

  Named Executive Officer

 

2022 Target

(%)

   

2022 Target

($)

   

Corporate
Performance
Results

(%)

   

Individual
Performance
Results*

(%)

   

2022 Actual

($)

   

Actual as

Percent of
Target

(%)

 

  John J. Christmann IV

 

 

130

 

 

 

1,690,000

 

 

 

146.9

 

 

 

97.35

 

 

 

2,416,700

 

 

 

143.0

 

  Stephen J. Riney

 

 

100

 

 

 

795,000

 

 

 

146.9

 

 

 

100.00

 

 

 

1,167,855

 

 

 

146.9

 

  P. Anthony Lannie

 

 

80

 

 

 

556,000

 

 

 

146.9

 

 

 

100.00

 

 

 

816,764

 

 

 

146.9

 

  David A. Pursell

 

 

100

 

 

 

675,000

 

 

 

146.9

 

 

 

92.00

 

 

 

912,249

 

 

 

135.1

 

  D. Clay Bretches

 

 

100

 

 

 

675,000

 

 

 

146.9

 

 

 

92.00

 

 

 

912,249

 

 

 

135.1

 

 

*

Percentages may be rounded.

Long-Term Incentive Compensation

Our long-term incentive compensation plan is intended to align the long-term interests of our NEOs with the long-term interests of our shareholders. In 2022, long-term incentives were delivered using a mix of performance-based awards (performance shares) and time-based awards (restricted stock units) as follows:

 

         

  Award Type

  

Weighting

      

Design At-a-Glance

    

  Performance   Shares

  

60%

   

Performance shares align executive pay with achievement of operational and financial metrics that are the most impactful to shareholders. Performance is measured against both relative and absolute metrics to provide a comprehensive and balanced evaluation of our long-term business performance. NEOs can earn between 0% and 200% of their target award opportunity.

 

If achievement warrants and the executive remains employed by the Company, performance shares vest 50% at the end of the three-year performance period, with the remaining 50% vesting the year after that. Performance shares are settled in cash, based on the closing share price on the vesting date.

 
 
       Measurement and Vesting Periods for Performance Shares  
       Three-Year Performance Measurement Period    Vesting Period (as warranted)  
      

 

LOGO

  

 

LOGO

  

 

LOGO

  

 

LOGO

  

 

LOGO

 
      

Beginning of Year 1

Grants Awarded

   Year 2    Year 3   

End of Year 3

50% Vested

  

End of Year 4

50% Vested

 
             These awards are eligible for dividend equivalents that accumulate during the performance period if dividends are declared and paid by the Company during such period, subject to the resulting performance multiple. If a payout is warranted, dividends are paid in cash at the end of the performance period based on the same achievement and vesting schedule as the underlying awards. Dividends are forfeited if the underlying awards are forfeited.    

APA Restricted Stock Units (RSUs)

  

40%

      RSUs vest ratably over three years. The NEOs receive common stock for a portion of the RSU awards that vest. The remaining portion of the RSUs are cash-based units under the 2016 Omnibus Compensation Plan and are paid in cash once the RSUs vest.    

 

30           APA Corporation  


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2022 Long-Term Incentive Awards

In 2022, the NEOs received long-term incentive awards as follows:

 

       

  Named Executive Officer

 

Performance Shares

($)

   

Restricted Stock Units(1)

($)

   

Total Target Award Value

($)

 

  John J. Christmann IV

 

 

5,070,000

 

 

 

3,380,000

 

 

 

8,450,000

 

  Stephen J. Riney

 

 

2,385,000

 

 

 

1,590,000

 

 

 

3,975,000

 

  P. Anthony Lannie

 

 

1,501,200

 

 

 

1,000,800

 

 

 

2,502,000

 

  David A. Pursell

 

 

1,620,000

 

 

 

1,080,000

 

 

 

2,700,000

 

  D. Clay Bretches

 

 

1,620,000

 

 

 

1,080,000

 

 

 

2,700,000

 

 

(1)

RSUs are delivered in a combination of cash and shares at the time of vesting.

A Closer Look at the 2022 Performance Share Program

The 2022 performance share program was structured as follows:

 

 

2022 Performance Shares

 

  Metric

  

Weighting

    

Detail

  Relative TSR

  

 

40%

 

  

  Measured relative to the TSR Performance Peer Group set forth below over a three-year period

 

  Balanced payout scale

 

  Capped at 1x target if absolute TSR is negative

  CROIC

  

 

40%

 

  

  Designed to incentivize the sustained generation of returns to shareholders over the long-term, regardless of commodity price

 

  Measured over a three-year period against targets determined based upon the average price of oil over the three-year performance period

 

  Threshold payout is 0.5x and maximum payout is 2x

New for 2022: Reduction in CO2e Emissions

  

 

20%

 

  

  Assessed over a three-year period against performance targets determined for a list of identified projects, using the CO2e calculation method standards applicable to each country of operations

Relative Total Shareholder Return

Under the 2022 performance share program, our TSR performance is measured relative to 24 peer companies and the S&P 500 Index (which is weighted as two peers) over a three-year period:

 

 

2022 TSR Performance Peer Group

Antero Resources Corp.

 

Devon Energy Corporation

 

Magnolia Oil & Gas Corporation

 

Pioneer Natural Resources Co.

Chevron Corporation

 

Diamondback Energy, Inc.

 

Marathon Oil Corporation

 

Range Resources Corporation

Civitas Resources, Inc.

 

EOG Resources, Inc.

 

Matador Resources Company

 

Southwestern Energy Company

CNX Resources Corporation

 

EQT Corporation

 

Murphy Oil Corporation

 

S&P 500 Index

(weighted as 2 peers)

ConocoPhillips Company

 

Exxon Mobil Corporation

 

Occidental Petroleum Corporation

Continental Resources, Inc.(1)

 

Hess Corporation

 

Ovintiv Inc.

Coterra Energy Inc.

 

Kosmos Energy Ltd.

 

PDC Energy, Inc.

 

(1)

The MD&C Committee subsequently removed Continental from our active TSR programs following its take-private transaction in 2022. The payout scale shown below reflects this removal.

The S&P 500 Index is included in the peer group, because the MD&C Committee believes that the Company should be measured against the broader market as well as its direct peers.

 

  2023 Proxy Statement           31


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Payouts and potential results under the relative TSR component of our performance share program closely align with our ability to create long-term shareholder value.

 

                                         

  Rank

 

1–4

   

5

   

6

   

7

   

8

   

9

   

10

   

11

   

12

   

13

   

14

   

15

   

16

   

17

   

18

   

19

   

20

   

21

   

22

   

23–26

 

  Payout (%)

 

 

200

 

 

 

185

 

 

 

170

 

 

 

160

 

 

 

150

 

 

 

140

 

 

 

130

 

 

 

120

 

 

 

110

 

 

 

100

 

 

 

90

 

 

 

80

 

 

 

70

 

 

 

60

 

 

 

50

 

 

 

40

 

 

 

30

 

 

 

20

 

 

 

15

 

 

 

 

Cash Return on Invested Capital

CROIC is calculated with the numerator as cash flow from operations before changes in working capital, excluding Egypt non-controlling interests, with financing costs added back, and the denominator as average debt plus average APA shareholders’ equity. Performance over the three-year period is measured as a percentage above or below target. The CROIC target is set based on a matrix of a three-year average West Texas Intermediate (WTI) price. The target is subject to adjustment based on the actual three-year average WTI price. The threshold payout of 50% is generally achieved at 10% below target, and the maximum payout of 200% is generally achieved at 10% above target.

Reduction in CO2e Emissions

The reduction in CO2e emissions is assessed over a three-year period against performance targets determined for a list of identified projects, using the CO2e calculation standards applicable to each country of operations. The target is to reduce 1,000,000 tons of CO2e annually from projects by 2024. The emissions eliminated related to the projects will be verified externally.

2020 Performance Share Program Payout

The 2020 performance share program resulted in a 155% payout based on the results below:

 

               

  Metric

 

Threshold

 

Target

 

Max

 

Result

   

Achievement

of Target

   

Plan

Allocation

   

Achievement  

 

Relative TSR(1)

 

Based on Payout Scale Below

 

 

9 out of 18

 

 

 

110%

 

 

 

50%

 

 

 

55%  

 

CROIC

 

20.0%
50% payout

 

22.0%
100% payout

 

24.0%
200% payout

 

 

31%

 

 

 

200%

 

 

 

50%

 

 

 

100%  

 

Overall Achievement:

 

 

 

155%  

 

(1)

To calculate the relative TSR results for all programs prior to 2022, we use the average per share closing price for the month of December immediately preceding the beginning and end of the performance period. The Company’s TSR performance for the 2020 performance share program was 9 out of 18, which resulted in a payout of 110% based on the payout scale set forth below. Additional details about the 2020 performance share program were previously provided in the Company’s 2021 proxy statement.

 

                             

Rank

 

1-3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

 

15

 

16-18

 

Payout (%)

 

  200  

 

  185  

 

  170  

 

  155  

 

  140  

 

  125  

 

  110   

 

  90  

 

  75  

 

  60  

 

  45  

 

  30  

 

  15  

 

The relative TSR payout level for the 2020 performance share program shows that long-term compensation is tied to long-term performance.

Other Compensation Practices, Policies, and Guidelines

Executive Officer Stock Ownership Requirements

Under APA’s stock ownership guidelines, executive officers are required to own shares of APA common stock equal in value to a specified multiple of their annual base salary, set forth below:

 

         

CEO and President

  

Chief Financial Officer

  

Executive Vice
Presidents

  

Senior Vice
Presidents

  

Vice Presidents

 

10x

  

 

4x

  

 

3x

  

 

2.5x

  

 

2x

All of our officers currently meet or exceed their applicable stock ownership requirements.

Additionally, each officer is required to hold a minimum of 15%, on an after-tax basis, of all shares acquired upon the vesting of RSUs and the realization of performance-based awards, and under the Company’s hedging policy, executive officers are prohibited from hedging Company stock. See Pledging and Hedging Policies above.

 

32           APA Corporation  


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Clawback Policy

Should the Company’s reported financial or operating results be subject to a material negative restatement as the result of fraud, intentional misconduct, or gross negligence of an executive officer, the Company has the right to recover from such executive officer an amount corresponding to any incentive award or portion thereof (including any cash bonus or equity-based award) that the Company determines would not have been granted, vested, or paid had the Company’s results as originally reported been equal to the Company’s results as subsequently restated. The Company will apply a three-year lookback period from the date of any such material negative restatement. Subject to applicable law, the Company has the right to recover such amount by requiring the executive officer to re-pay such amount to the Company by direct payment to the Company or such other means or combination of means as the Company determines to be appropriate.

If the Company determines to seek a recovery pursuant to this policy, it will make a written demand for repayment from the executive officer and, if such person does not, within a reasonable period of time following such demand, tender repayment in response to such demand, and the Company determines that he or she is unlikely to do so, the Company may seek a court order against the executive officer for such repayment.

Option Awards

In response to Item 402(x)(1) of Regulation S-K, the Company does not currently grant new awards of stock options, stock appreciation rights, or similar option-like instruments. Accordingly, the Company has no specific policy or practice on the timing of awards of such options in relation to the disclosure of material nonpublic information by the Company. In the event the Company determines to grant new awards of such options, the Board will evaluate the appropriate steps to take in relation to the foregoing.

Benefits

Our NEOs receive the standard benefits received by all employees, including group health (medical, dental, pharmacy, and vision), group life, accidental death and dismemberment, business travel accident, disability plans, defined contribution retirement plans (a Money Purchase Retirement Plan and a 401(k) Savings Plan), paid parental, elder care, and bereavement leave, company and flex holidays, and vacation.

As part of their total compensation, our NEOs are eligible for additional benefits that are designed to maintain market competitiveness. These include a comprehensive annual physical examination, an individual cash-value-based variable universal life insurance policy of two times base salary, an enhanced individual long-term disability policy for 75% of eligible earnings, and continued employer and employee tax deferred contributions to a non-qualified retirement/savings plan once limits are reached in qualified retirement plans.

Our operations are spread around the globe, including locations that present a variety of physical and geo-political risks. For both business efficiency and security reasons, we require our CEO and President to use the Company’s aircraft for all air travel, unless good business judgment would require otherwise. More details on the above benefits are discussed under the All Other Compensation column in the Summary Compensation Table.

Risk Considerations in Compensation Programs

The MD&C Committee does not believe that the Company’s compensation programs encourage inappropriate risk taking. The MD&C Committee, with assistance from the independent compensation consultant, arrived at this conclusion for the following reasons:

 

   

Our employees receive both fixed and variable compensation. The fixed portion provides a steady income regardless of the Company’s stock performance. This allows executives to focus on the Company’s business without an excessive focus on the Company’s stock price performance.

 

   

The goals and objectives for the annual incentive compensation plan are set to avoid overweighting any single factor that, if not achieved, would result in the loss of a large percentage of compensation.

 

   

Our equity awards for executives generally vest over three-year periods, which discourages short-term risk taking. Our substantial stock holding requirements extend these time frames further.

 

   

Our stock ownership requirements encourage a long-term perspective by our executives.

 

   

Our equity compensation plan provides that, unless otherwise specifically provided in an award agreement for specified events, such as retirement, our executives’ unvested long-term equity compensation is forfeited upon voluntary termination.

 

   

Our incentive programs have been in place for many years, and we have seen no evidence that they encourage excessive risk taking.

 

   

Essentially all of our employees participate in our equity-based compensation programs, regardless of business unit, which encourages consistent behavior across the Company.

 

  2023 Proxy Statement           33


Table of Contents

Tax Legislation Related to Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a limit, with certain exceptions, on the amount that a publicly held corporation may deduct in any tax year commencing on or after January 1, 1994, for the compensation paid to certain highly compensated employees. Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the Act), certain “performance-based compensation” was not counted toward this limit. The Act eliminated the “performance-based compensation” exemption as of November 2, 2017. The MD&C Committee intends generally to qualify compensation paid to its executive officers as deductible, but it reserves the right to pay compensation that is not deductible.

Internal Revenue Code Section 409A requires “nonqualified deferred compensation plans” to meet requirements to avoid acceleration of the recipient’s federal income taxation of the deferred compensation. The Internal Revenue Service issued final regulations in April 2007 regarding the application of Section 409A, which were generally effective January 1, 2009. Prior to effectiveness, companies were expected to comply in “good faith” with the statute, taking note of the interim guidance issued by the Internal Revenue Service. We amended several of our benefit plans for them to be exempt from Section 409A, while we continue to provide benefits through several plans that remain subject to Section 409A. The terms of these plans were amended before January 1, 2009, as necessary, and are intended to meet the requirements of the final regulations.

Compensation Committee Report

The MD&C Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth above and, based upon such review and discussion, recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Members of the MD&C Committee

 

LOGO   LOGO   LOGO    LOGO
Juliet S. Ellis, Chair   Annell R. Bay   Charles W. Hooper    David L. Stover

 

34           APA Corporation  


Table of Contents

Executive Compensation

Summary Compensation Table

The table below summarizes the compensation for the individuals listed below for all services rendered to the Company and its subsidiaries during fiscal years 2022, 2021, and 2020. The persons included in this table are the Company’s principal executive officer, principal financial officer, and the three other most highly compensated executive officers who served as executive officers of the Company during fiscal year 2022 (collectively, the NEOs).

 

                   

  Name and Principal
  Position

  (a)

 

Year

(b)

   

Salary

($)

(c)

   

Bonus

($)

(d)

   

Stock
Awards(1)

($)

(e)

   

Option
Awards

($)

(f)

   

Non-Equity
Incentive Plan
Compensation(2)

($)

(g)

   

Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(3)

($)

(h)

   

All Other
Compensation(4)

($)

(i)

   

Total

($)

(j)

 

John J. Christmann IV

    CEO and President

 

 

2022

 

 

 

1,300,000

 

 

 

 

 

 

9,479,781

 

 

 

 

 

 

2,416,700

 

 

 

 

 

 

605,638

 

 

 

13,802,119

 

 

 

2021

 

 

 

1,300,000

 

 

 

 

 

 

10,596,139

 

 

 

 

 

 

2,531,620

 

 

 

 

 

 

612,948

 

 

 

15,040,707

 

 

 

2020

 

 

 

1,300,000

 

 

 

 

 

 

10,172,011

 

 

 

 

 

 

2,315,300

 

 

 

 

 

 

533,914

 

 

 

14,321,225

 

                   

Stephen J. Riney

    EVP and Chief

    Financial Officer

 

 

2022

 

 

 

795,000

 

 

 

 

 

 

4,459,396

 

 

 

 

 

 

1,167,855

 

 

 

 

 

 

307,699

 

 

 

6,729,950

 

 

 

2021

 

 

 

795,000

 

 

 

 

 

 

4,531,423

 

 

 

 

 

 

1,190,910

 

 

 

 

 

 

298,058

 

 

 

6,815,391

 

 

 

2020

 

 

 

795,000

 

 

 

 

 

 

4,350,079

 

 

 

 

 

 

1,089,150

 

 

 

 

 

 

253,123

 

 

 

6,487,352

 

P. Anthony Lannie

    EVP and General

    Counsel

 

 

2022

 

 

 

695,000

 

 

 

 

 

 

2,806,876

 

 

 

 

 

 

816,764

 

 

 

 

 

 

234,577

 

 

 

4,553,217

 

 

 

2021

 

 

 

695,000

 

 

 

 

 

 

2,852,223

 

 

 

 

 

 

832,888

 

 

 

 

 

 

223,087

 

 

 

4,603,198

 

 

 

2020

 

 

 

695,000

 

 

 

 

 

 

2,738,082

 

 

 

 

 

 

761,720

 

 

 

 

 

 

188,131

 

 

 

4,382,933

 

David A. Pursell

    EVP, Development

 

 

2022

 

 

 

675,000

 

 

 

 

 

 

3,028,975

 

 

 

 

 

 

912,249

 

 

 

 

 

 

246,959

 

 

 

4,863,183

 

 

 

2021

 

 

 

675,000

 

 

 

 

 

 

3,077,933

 

 

 

 

 

 

910,035

 

 

 

 

 

 

239,657

 

 

 

4,902,625

 

 

 

2020

 

 

 

675,000

 

 

 

 

 

 

2,954,781

 

 

 

 

 

 

832,275

 

 

 

 

 

 

197,012

 

 

 

4,659,068

 

D. Clay Bretches

    EVP, Operations

 

 

2022

 

 

 

675,000

 

 

 

 

 

 

3,028,975

 

 

 

 

 

 

912,249

 

 

 

 

 

 

270,304

 

 

 

4,886,528

 

 

 

2021

 

 

 

675,000

 

 

 

 

 

 

3,014,911

 

 

 

 

 

 

1,011,150

 

 

 

 

 

 

251,737

 

 

 

4,952,798

 

 

 

2020

 

 

 

675,000

 

 

 

 

 

 

2,869,854

 

 

 

 

 

 

924,750

 

 

 

 

 

 

199,622

 

 

 

4,669,226

 

 

  (1)

Value of RSU awards made during the fiscal year, based upon the aggregate grant date fair value determined in accordance with applicable FASB ASC Topic 718. The discussion of the assumptions used in calculating the aggregate grant date fair value of the RSU awards can be found in the footnotes to the Grants of Plan Based Awards Table below and in Note 14 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The value of the RSU awards is expensed ratably over the term of the award. For 2022, the values of the RSU awards at the grant date, if the highest level of performance conditions were to be achieved, would be as follows:

 

   

  Name

 

 

RSU Award at Highest
Level of Performance ($)

 
 

  Mr. Christmann

 

 

13,519,931

 

  Mr. Riney

 

 

6,359,943

 

  Mr. Lannie

 

 

4,003,143

 

  Mr. Pursell

 

 

4,319,897

 

  Mr. Bretches

 

 

4,319,897

 

 

  (2)

Amounts reflected under column (g) are paid pursuant to the Company’s incentive compensation plan as described under Annual Incentive Compensation in the Compensation Discussion and Analysis section.

 

  (3)

Earnings from the Non-Qualified Deferred Compensation Table are not included as they are not above-market or preferential earnings.

 

  2023 Proxy Statement           35


Table of Contents
  (4)

The following table provides additional information for all other compensation paid during the 2022 fiscal year:

 

             

  Name

 

 


Company
Contributions to
Retirement Plans(a)
($)

 
 

 

 

 


Company
Contributions to Non-
Qualified Plans(a)
($)

 


 

 

 


Life
Insurance
Premiums(b)
($)

 
 

 

 

 


Use of
Company
Property(c)
($)

 
 

 

 

 



Enhanced Long-
Term Disability
Coverage and
Annual Physicals(d)
($)


 
 

 

 

 


Workplace
Giving
Program(e)
($)

 
 

 

  Mr. Christmann

 

 

40,500

 

 

 

495,927

 

 

 

13,602

 

 

 

24,308

 

 

 

31,301

 

 

 

 

  Mr. Riney

 

 

40,500

 

 

 

237,527

 

 

 

12,638

 

 

 

 

 

 

17,034

 

 

 

 

  Mr. Lannie

 

 

40,500

 

 

 

173,404

 

 

 

459

 

 

 

 

 

 

15,214

 

 

 

5,000

 

  Mr. Pursell

 

 

40,500

 

 

 

181,405

 

 

 

10,537

 

 

 

 

 

 

14,517

 

 

 

 

  Mr. Bretches

 

 

40,500

 

 

 

195,561

 

 

 

9,212

 

 

 

 

 

 

15,031

 

 

 

10,000

 

 

  (a)

Officers participate in two qualified retirement plans: the Apache Corporation 401(k) Savings Plan provides a match up to the first 8% of base pay and incentive bonus, and the Apache Corporation Money Purchase Retirement Plan provides an annual 6% Company contribution. Additionally, officers can elect to participate in the Apache Corporation Non-Qualified Retirement/Savings Plan to defer beyond the limits in the Apache Corporation 401(k) Savings Plan and continue Company contributions, which exceed the limits in the qualified plans. The APA Deferred Delivery Plan allows officers the ability to defer income in the form of deferred units from the vesting of RSUs under the Company’s 2007 Omnibus Equity Compensation Plan, 2011 Omnibus Equity Compensation Plan, and 2016 Omnibus Compensation Plan. The contributions into both non-qualified plans are reported in the Non-Qualified Deferred Compensation Table. The Company does not have a defined benefit plan for U.S. employees.

 

  (b)

APA provides U.S. employees with two times their base salary under group term life insurance. Executives receive the first $50,000 of coverage under the same group term life insurance plan, and the remaining amount to bring them up to two times salary is provided in the form of universal life insurance policies.

 

  (c)

These amounts are for use of corporate aircraft. During this fiscal year, the Board required Mr. Christmann to use the Company’s aircraft for all air travel for security reasons and to facilitate efficient business travel, unless good business judgment required otherwise. Even though the Company considers these costs a necessary business expense rather than a perquisite, in line with SEC guidance, the table includes the amounts attributable to each NEO’s personal aircraft usage. Executives are not reimbursed for the taxes on the income attributable to the personal use of corporate aircraft. The methodology for the valuation of non-integral use of corporate aircraft for disclosure in the Summary Compensation Table, in compliance with SEC guidance, calculates the incremental cost to the Company for personal use of the aircraft based on the cost of fuel and oil per hour of flight; trip-related inspections, repairs, and maintenance; crew travel expenses; on-board catering; trip-related flight planning services; landing, parking, and hangar fees; supplies; passenger ground transportation; and other variable costs. Additionally, the value of trips attributable to philanthropic interests was included, even though they are seen as contributing to the goodwill of the Company. In addition, Standard Industry Fare Level tables, published by the Internal Revenue Service, are used to determine the amount of compensation income that is imputed to the executive for tax purposes for personal use of corporate aircraft.

 

  (d)

In addition to the benefits for which all employees are eligible, the Company also covers the cost of a comprehensive annual physical and the full cost of enhanced long-term disability coverage for executive officers.

 

  (e)

These amounts reflect payments made to qualified non-profit organizations under the Company’s Workplace Giving Program t