UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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EOG Resources, Inc.

(Name of Registrant as Specified In Its Charter)

 

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EOG RESOURCES, INC.

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

MAY 3, 2011

 

 

TO OUR STOCKHOLDERS:

 

NOTICE IS HEREBY GIVEN that the 2011 annual meeting of stockholders (“Annual Meeting”) of EOG Resources, Inc. (“EOG”) will be held in the Dezavala meeting room of the Doubletree Hotel at 400 Dallas Street, Houston, Texas, at 3:00 p.m., Houston time, on Tuesday, May 3, 2011, for the following purposes:

 

1. To elect seven directors to hold office until the 2012 annual meeting of stockholders and until their respective successors are duly elected and qualified;

 

2. To ratify the appointment by the Audit Committee of the Board of Directors of Deloitte & Touche LLP, independent public accountants, as our auditors for the year ending December 31, 2011;

 

3. To hold a non-binding advisory vote on executive compensation;

 

4. To hold a non-binding advisory vote on the frequency of holding advisory votes on executive compensation;

 

5. To consider two stockholder proposals, if properly presented; and

 

6. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

 

Holders of record of our Common Stock at the close of business on March 9, 2011 will be entitled to notice of, and to vote at, the Annual Meeting and any adjournments thereof.

 

Stockholders who do not expect to attend the Annual Meeting are encouraged to vote via the Internet, by phone or by returning a signed proxy card.

 

By Order of the Board of Directors,

 

MICHAEL P. DONALDSON

Corporate Secretary

 

Houston, Texas

March 29, 2011

 

TABLE OF CONTENTS

 

 

EOG RESOURCES, INC.

 

 

PROXY STATEMENT

 

 

The enclosed form of proxy is solicited by the Board of Directors (“Board”) of EOG Resources, Inc. (“EOG,” “we,” “us” or “our”) to be used at our 2011 annual meeting of stockholders (“Annual Meeting”) to be held in the Dezavala meeting room of the Doubletree Hotel at 400 Dallas Street, Houston, Texas, at 3:00 p.m., Houston time, on Tuesday, May 3, 2011. This proxy statement and the enclosed form of proxy is being first sent or given to our stockholders on or about March 29, 2011.

 

Any stockholder giving a proxy may revoke it at any time provided written notice of the revocation is received by our Corporate Secretary before the proxy is voted; otherwise, if received prior to or at the Annual Meeting, properly executed proxies will be voted at the Annual Meeting in accordance with the instructions specified on the proxy or, if no such instructions are given, in accordance with the recommendations of the Board described herein. Stockholders attending the Annual Meeting may revoke their proxies and vote in person. If you would like to attend the Annual Meeting and vote in person, you may contact EOG at (713) 651-6260 (Attention: Corporate Secretary) for directions to the Annual Meeting.

 

Attendance at the Annual Meeting is limited to holders of record of our Common Stock at the close of business on March 9, 2011 (“Record Date”) and EOG’s guests. Admission will be on a first-come, first-served basis. You will be asked to present valid government-issued picture identification, such as a driver’s license or passport, in order to be admitted into the Annual Meeting. If your shares are held in the name of a bank, broker or other nominee and you plan to attend the Annual Meeting, you must present proof of your ownership of our Common Stock, such as a bank or brokerage account statement indicating that you owned shares of our Common Stock at the close of business on the Record Date, in order to be admitted. For safety and security reasons, no cameras, recording equipment or other electronic devices will be permitted in the Annual Meeting. A written agenda and rules of procedure for the Annual Meeting will be distributed to those persons in attendance at the Annual Meeting.

 

Our 2010 annual report is being mailed with this proxy statement to all stockholders entitled to vote at the Annual Meeting. However, the annual report does not constitute a part of, and shall not be deemed incorporated by reference into, this proxy statement or the enclosed form of proxy.

 

In addition to solicitation by use of the mails, certain of our officers and employees may solicit the return of proxies personally or by telephone, electronic mail or facsimile. We have also retained a third-party proxy solicitation firm, Morrow & Co., LLC, to solicit proxies on behalf of the Board, and expect to pay such firm approximately $7,500 for their services, plus any reasonable out-of-pocket expenses incurred. The cost of any solicitation of proxies will be borne by us. Arrangements may also be made with brokerage firms and other custodians, nominees and fiduciaries for the forwarding of material to, and solicitation of proxies from, the beneficial owners of our Common Stock held of record at the close of business on the Record Date by such persons. We will reimburse such brokerage firms, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by them in connection with any such activities.

 

In some cases, one copy of this proxy statement and the accompanying notice of annual meeting of stockholders and 2010 annual report is being delivered to multiple stockholders sharing an address, at the request of such stockholders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement or the accompanying notice of annual meeting of stockholders or 2010 annual report to such a

stockholder at a shared address to which a single copy of the document was delivered. Stockholders sharing an address may also submit requests for delivery of a single copy of this proxy statement or the accompanying notice of annual meeting of stockholders or 2010 annual report, but in such event will still receive separate forms of proxy for each account. To request separate or single delivery of these materials now or in the future, a stockholder may submit a written request to our Corporate Secretary at our principal executive offices at 1111 Bagby, Sky Lobby 2, Houston, Texas 77002, or a stockholder may make a request by calling our Corporate Secretary at (713) 651-6260.

 

Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspector of election at the Annual Meeting.

 

A complete list of stockholders entitled to vote at the Annual Meeting will be available to view during the Annual Meeting. You may also access this list at our principal executive offices, for any purpose germane to the Annual Meeting, during ordinary business hours, for a period of ten days prior to the Annual Meeting.

 

The mailing address of our principal executive offices is 1111 Bagby, Sky Lobby 2, Houston, Texas 77002.

 

Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders To Be Held on May 3, 2011

 

Pursuant to United States Securities and Exchange Commission (“SEC”) rules related to the Internet availability of proxy materials, our proxy statement, the accompanying notice of annual meeting of stockholders and form of proxy and our 2010 annual report are available via the Internet at www.eogresources.com/investors/annreport.html and at www.proxyvote.com.

 

Holders of record of our Common Stock at the close of business on the Record Date will be entitled to one vote per share on all matters properly presented at the Annual Meeting. At the close of business on the Record Date, there were 268,189,984 shares of our Common Stock outstanding. Other than our Common Stock, we have no other voting securities currently outstanding.

 

Our stockholders do not have dissenters’ rights or similar rights of appraisal with respect to the proposals described herein and, moreover, do not have cumulative voting rights with respect to the election of directors.

 

The following table and accompanying footnotes set forth certain information regarding the beneficial ownership of our Common Stock by each person (including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) whom we know beneficially owned more than five percent (5%) of our Common Stock as of December 31, 2010, based on filings with the SEC as of February 28, 2011.

 

 

 

The following table and accompanying footnotes set forth certain information regarding the ownership of our Common Stock by (1) each director and director nominee of EOG, (2) each “named executive officer” of EOG named in the “Summary Compensation Table” below and (3) all current directors and executive officers of EOG as a group, in each case as of February 28, 2011.

 

 

 

 

 

 

Director Independence

 

The Board has affirmatively determined that six of our seven current directors, namely Messrs. Alcorn, Crisp, Day, Steward, Textor and Wisner, have no direct or indirect material relationship with EOG and thus meet the criteria for independence of Article III, Section 12 of our bylaws, which are available on our website at www.eogresources.com/about/corpgov.html, as well as the independence requirements of the NYSE and the SEC.

 

In assessing director independence, the Board considered, among other matters, the nature and extent of any business relationships, including transactions conducted, between EOG and each director and between EOG and any organization for which one of our directors is a director or executive officer or with which one of our directors is otherwise affiliated. Specifically, the Board considered (1) various transactions in connection with the exploration and production of crude oil and natural gas, such as revenue distributions, joint interest billings, payments for midstream (i.e., transportation-related) services and payments for crude oil and natural gas, between EOG and certain entities engaged in certain aspects of the oil and gas business for which one of our directors is a director or otherwise affiliated, and (2) payments of dues and contributions to certain not-for-profit entities (such as trade associations) with which one of our directors is affiliated.

Except with respect to Mr. Papa, the Board determined that all such relationships and transactions that it considered were not material relationships or transactions with EOG and did not impair the independence of our directors. The Board determined that Mr. Papa is not independent because he is our Chief Executive Officer (“CEO”).

 

Meetings

 

The Board held eight meetings during the year ended December 31, 2010 (including one joint meeting of the Board and the Audit Committee of the Board).

 

Each director attended at least 75% of the total number of meetings of the Board and Board committees on which the director served. Our directors are expected to attend our annual meeting of stockholders. All of the directors attended our 2010 annual meeting of stockholders.

 

Executive Sessions of Non-Employee Directors

 

Our non-employee directors (each of whom is independent) held five executive sessions during the year ended December 31, 2010. Each of our non-employee directors attended each of the executive sessions. Mr. Crisp was appointed by the non-employee directors as the presiding director for these sessions, and Mr. Day has been appointed by the non-employee directors as the presiding director for executive sessions in 2011.

 

Board Leadership Structure

 

The Board does not have a policy on whether or not the roles of Chairman of the Board and CEO should be separate or combined and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. The directors serving on our Board possess considerable professional and industry experience, significant experience as directors of both public and private companies and a unique knowledge of the challenges and opportunities that EOG faces. As such, the Board believes that it is in the best position to evaluate the needs of EOG and to determine how best to organize EOG’s leadership structure to meet those needs. The Board believes that the most effective leadership structure for EOG at the present time is for Mr. Papa to serve as both Chairman of the Board and CEO.

 

This model has succeeded because it makes clear that the Chairman of the Board and CEO is responsible for managing our business, under the oversight and review of our Board. This structure also enables our CEO to act as a bridge between management and the Board, helping both to act with a common purpose.

 

Mr. Papa has been our Chairman of the Board and CEO since 1999 and has been with EOG and its predecessor companies for over 29 years. Over the past 10 years, our stock price performance has significantly exceeded the performance of the Standard & Poor’s 500 Index as well as the stock price performance of each of our peer group companies, thus demonstrating, we believe, the effectiveness of EOG’s leadership structure.

 

The Board believes that there is already substantial independent oversight of EOG’s management and a strong counterbalancing governance structure in place, as demonstrated by the following:

 

 

 

Board’s Role in Risk Oversight

 

Our Board retains primary responsibility for risk oversight. To assist the Board in carrying out its oversight responsibilities, members of our senior management report to the Board and its committees on areas of risk to our company, and our Board committees consider specific areas of risk inherent in their respective areas of oversight and report to the full Board regarding their activities. For example, our Audit Committee periodically discusses with management our major financial risk exposures and the steps management has taken to monitor and control such exposures. Our Compensation Committee incorporates risk considerations, including the risk of loss of key personnel, as it evaluates the performance of our CEO and other executive officers and determines our executive compensation. Our Nominating and Governance Committee focuses on issues relating to Board composition and corporate governance matters. In addition, to ensure that our Board has a broad view of our overall risk management process, the Board periodically reviews our long-term strategic plans and the principal issues and risks that we may face, as well as the processes through which we manage risk. At this time, we believe that combining the roles of Chairman of the Board and CEO enhances the Board’s administration of its risk oversight function because, through his role as Chairman of the Board, and based on his experiences with the daily management of our business as our CEO, Mr. Papa (EOG’s Chairman of the Board and CEO) provides the Board with valuable insight into our risk profile and the options to mitigate and address those risks.

 

Each committee of the Board identified below has a charter that is available on our website at www.eogresources.com/about/corpgov.html. Copies of the committee charters are also available upon written request to our Corporate Secretary.

 

Nominating and Governance Committee

 

The Nominating and Governance Committee, which is composed exclusively of independent directors, is responsible for identifying prospective qualified candidates to fill vacancies on the Board, recommending director nominees (including chairpersons) for each of our committees, developing and recommending appropriate corporate governance guidelines and overseeing the self-evaluation of the Board. In considering individual director nominees and Board committee appointments, our Nominating and Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and Board committees and to identify individuals who can effectively assist EOG in achieving our short-term and long-term goals, protecting our stockholders’ interests and creating and enhancing value for our stockholders. In so doing, the Nominating and Governance Committee considers all of such person’s diversity attributes (e.g., professional experiences, skills, background, race and gender) as a whole and does not necessarily attribute any greater weight to one attribute. Moreover, diversity in professional experience, skills and background, and diversity in race and gender, are just a few of the attributes that the Nominating and Governance Committee takes into account. In evaluating prospective candidates, the Nominating and Governance Committee also considers whether the individual has personal and professional integrity, good business judgment, relevant experience and skills, and whether such individual is willing and able to commit the time necessary for Board and Board committee service.

While there are no specific minimum requirements that the Nominating and Governance Committee believes must be met by a prospective director nominee (other than the general requirements of our Corporate Governance Guidelines discussed below with respect to director age, director independence and director service on the boards of directors of other public companies), the Nominating and Governance Committee does believe that director nominees should possess personal and professional integrity, have good business judgment, have relevant experience and skills, and be willing and able to commit the necessary time for Board and committee service. Furthermore, the Nominating and Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending individuals that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound business judgment using their diversity of experience in various areas. We believe our current directors possess diverse professional experiences, skills and backgrounds, in addition to (among other characteristics) high standards of personal and professional ethics, proven records of success in their respective fields and valuable knowledge of our business and of the oil and gas industry.

 

Our current Board of seven directors is consistent with our Corporate Governance Guidelines, and our Board has no current plans to add any individuals to the Board. However, if, in the future, we have a vacancy on the Board or the Board determines that it is appropriate to add a directorship, the Nominating and Governance Committee will, pursuant to its charter, take into account diversity in professional experience, skills and background, diversity in race and gender and the other attributes described above, in evaluating candidates for such directorship.

 

Our Corporate Governance Guidelines, which are available at www.eogresources.com/about/corpgov.html, mandate that:

 

 

The Nominating and Governance Committee uses a variety of methods for identifying and evaluating nominees for director. As an alternative to term limits for directors, the Nominating and Governance Committee annually reviews each director’s continuation on the Board. The Nominating and Governance Committee also regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In addition, the Nominating and Governance Committee will consider various potential candidates for director. Candidates may come to the attention of the Nominating and Governance Committee through current Board members, professional search firms, stockholders or other persons. These candidates may be evaluated at regular or special meetings of the Nominating and Governance Committee and may be considered at any point during the year.

 

In addition, the Nominating and Governance Committee will consider nominees recommended by stockholders in accordance with the procedures outlined under “Stockholder Proposals and Director Nominations — Nominations for 2012 Annual Meeting of Stockholders and for Any Special Meetings of Stockholders” below. The Nominating and Governance Committee will evaluate such nominees according to the same criteria, and in the same manner, as any other director nominee.

 

The Nominating and Governance Committee held four meetings during the year ended December 31, 2010. The Nominating and Governance Committee is currently composed of Messrs. Wisner (Chairman), Alcorn, Crisp, Day, Steward and Textor.

 

Audit Committee

 

The Audit Committee, which is composed exclusively of independent directors, has been established by the Board to oversee our accounting and financial reporting processes and the audits of our financial statements.

 

The Board has selected the members of the Audit Committee based on the Board’s determination that the members are financially literate (as required by NYSE rules) and qualified to monitor the performance of

management and the independent auditors and to monitor our disclosures so that our disclosures fairly present our business, financial condition and results of operations.

 

The Board has also determined that Mr. Textor, an independent director since 2001 and the Chairman of our Audit Committee since 2001, is an audit committee financial expert because he has the following attributes: (i) an understanding of generally accepted accounting principles in the United States of America (“GAAP”) and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements; (iv) an understanding of internal control over financial reporting; and (v) an understanding of audit committee functions. Mr. Textor has acquired these attributes by means of having held various positions that provided relevant experience, as described in his biographical information under “Item 1. Election of Directors” below, and by having served as Chairman of our Audit Committee since 2001.

 

The Audit Committee has the sole authority, at its discretion and at our expense, to retain, compensate, evaluate and terminate our independent auditors and to review, as it deems appropriate, the scope of our annual audits, our accounting policies and reporting practices, our system of internal controls, our compliance with policies regarding business conduct and other matters. In addition, the Audit Committee has the authority, at its discretion and at our expense, to retain special legal, accounting or other advisors to advise the Audit Committee.

 

The Audit Committee held six meetings during the year ended December 31, 2010 (including one joint meeting of the Audit Committee and the Board) and is currently composed of Messrs. Textor (Chairman), Alcorn, Crisp, Day, Steward and Wisner.

 

Compensation Committee

 

The Compensation Committee, which is composed exclusively of independent directors, is responsible for the administration of our stock compensation plans and approval and evaluation of the compensation arrangements for our executive officers and directors. The Compensation Committee is also responsible for reviewing the disclosures in our Compensation Discussion and Analysis and providing an annual Compensation Committee Report, both of which are included in this proxy statement. Please refer to “Executive Compensation — Compensation Discussion and Analysis — Compensation Committee Process” and “Director Compensation and Stock Ownership Guidelines” below for a discussion of the Compensation Committee’s procedures and processes for making executive officer and non-employee director compensation determinations.

 

The Compensation Committee held four meetings during the year ended December 31, 2010 and is currently composed of Messrs. Alcorn (Chairman), Crisp, Day, Steward, Textor and Wisner.

 

Messrs. Alcorn, Crisp, Day, Steward, Textor and Wisner serve as members of the Compensation Committee and none of them is a current or former officer or employee of EOG. During the year ended December 31, 2010, none of our executive officers served as a director or member of the compensation committee (or other committee of the board performing equivalent functions) of another entity where an executive officer of such entity served as a director of EOG or on our Board’s Compensation Committee.

 

Pursuant to the process adopted by the Board, our stockholders and other interested parties may communicate with members of the Board by submitting such communications in writing to our Corporate Secretary, who, upon receipt of any communication other than one that is clearly marked “Confidential,” will note the date the communication was received in a log established for that purpose, open the communication, make a copy of it for our files and promptly forward the communication to the director(s) to whom it is addressed. Upon receipt of any communication that is clearly marked “Confidential,” our Corporate Secretary will not open the communication, but will note the date the communication was received in a log established for that purpose and promptly forward

the communication to the director(s) to whom it is addressed. Further information regarding this process can be found on our website at www.eogresources.com/about/corpgov.html.

 

Our stockholders and other interested parties can also communicate directly with the presiding director for the executive sessions of the non-employee directors, or the non-employee directors as a group, using the same procedure outlined above for general communications with the Board, except any such communication should be addressed to the presiding director or to the non-employee directors as a group, as appropriate. James C. Day has been chosen as the presiding director for 2011.

 

Pursuant to NYSE and SEC rules, we have adopted a Code of Business Conduct and Ethics (“Code of Conduct”) that applies to all of our directors, officers and employees, and a Code of Ethics for Senior Financial Officers (“Code of Ethics”) that, along with our Code of Conduct, applies to our principal executive officer, principal financial officer, principal accounting officer and controllers.

 

You can access our Code of Conduct and Code of Ethics on our website at www.eogresources.com/about/corpgov.html, and any stockholder who so requests may obtain a copy of our Code of Conduct or Code of Ethics by submitting a written request to our Corporate Secretary. We intend to disclose any amendments to our Code of Conduct or Code of Ethics and any waivers with respect to our Code of Conduct or Code of Ethics granted to our principal executive officer, our principal financial officer, principal accounting officer, any of our controllers or any of our other employees performing similar functions on our website at www.eogresources.com within four business days after the amendment or waiver. In such case, the disclosure regarding the amendment or waiver will remain available on our website for at least 12 months after the initial disclosure. There have been no waivers granted with respect to our Code of Conduct or our Code of Ethics to any such officers or employees.

 

Moreover, we have adopted, pursuant to NYSE rules, Corporate Governance Guidelines, which may be accessed on our website at www.eogresources.com/about/corpgov.html. Any stockholder may obtain a copy of our Corporate Governance Guidelines by submitting a written request to our Corporate Secretary.

 

In connection with the fiscal year 2010 audited financial statements of EOG Resources, Inc. (“EOG”), the Audit Committee of the Board of Directors of EOG (1) reviewed and discussed the audited financial statements with EOG’s management; (2) discussed with EOG’s independent auditors the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) AU Section 380, “Communication with Audit Committees,” and Securities and Exchange Commission Regulation S-X, Rule 2-07; (3) received the written disclosures and the letter from the independent auditors required by the applicable requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence; (4) discussed with the independent auditors the independent auditors’ independence; and (5) considered whether the provision of non-audit services by EOG’s principal auditors is compatible with maintaining auditor independence.

 

Based upon these reviews and discussions, the Audit Committee has recommended to the Board of Directors, and the Board of Directors has approved, that the audited financial statements for fiscal year 2010 be included in EOG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the Securities and Exchange Commission.

 

AUDIT COMMITTEE

 

Donald F. Textor, Chairman

George A. Alcorn

Charles R. Crisp

James C. Day

H. Leighton Steward

Frank G. Wisner

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended. Based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the proxy statement relating to the 2011 Annual Meeting of Stockholders.

 

COMPENSATION COMMITTEE

 

George A. Alcorn, Chairman

Charles R. Crisp

James C. Day

H. Leighton Steward

Donald F. Textor

Frank G. Wisner

 

Compensation Committee

 

Compensation for our executive officers is administered by the Compensation Committee of the Board (“Committee”). The Committee is an independent committee of the Board currently composed of our six non-employee directors. All of these individuals meet the independence requirements of the NYSE, the SEC and our bylaws, qualify as “Non-Employee Directors” under Rule 16b-3 under the Exchange Act and qualify as “outside directors” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code”). The Committee is responsible for reviewing and establishing the compensation, including annual base salary, bonus and long-term incentive compensation, of our CEO and all of our other executive officers and the annual bonus pool and annual long-term incentive compensation pools for all of our employees.

 

The Committee has the sole authority, at its discretion and at our expense, to retain compensation consultants and any legal, accounting or other advisors it deems appropriate. It has been the Committee’s practice not to use a compensation consultant and none was used in reviewing, determining or recommending the amount or form of our executive and non-employee director compensation for 2010, except that our Human Resources Department used Equilar, Inc. (“Equilar”) for the purpose of compiling peer group executive and director compensation data obtained from publicly available information. As discussed in further detail below, the Committee reviews and discusses this data prior to making compensation decisions to ensure that EOG’s compensation program remains competitive in the oil and gas industry. The Committee has approved the retention of Equilar for 2011.

 

In this Compensation Discussion and Analysis section, “Named Officers” means the individuals who served as our principal executive officer or principal financial officer during 2010, as well as the other individuals included in the “Summary Compensation Table” below.

 

Compensation Committee Process

 

Each component of EOG’s compensation program is reviewed by the Committee on an annual basis. Based on its analysis of the peer group compensation data, the Committee determines the compensation of our CEO during an executive session of the Committee, at which our CEO is not present. Our CEO, who also reviews the peer group compensation data, makes recommendations to the Committee regarding the compensation of the other Named Officers, which the Committee may, at its discretion, discuss in executive session. The final determination as to the compensation of the other Named Officers, however, is made solely by the Committee. During each year, the Committee periodically reviews our compensation program and determines whether it continues to promote the compensation goals of EOG, which goals include remaining competitive in our industry so that we are able to retain and provide appropriate incentives to our executive officers, including our CEO and the other Named Officers. The Committee did not make any material changes to the components of our compensation program for 2010 and does not anticipate the need for any such changes for 2011. See “Components of Our Compensation Program” below.

 

The Committee typically holds at least one meeting each quarter. At its first quarter meeting, the Committee reviews and discusses our performance report regarding certain pre-determined financial and operational goals with respect to the prior year, evaluates achievement of pre-determined individual performance goals set for our CEO and the other Named Officers, certifies the achievement of the performance goal under the EOG Resources, Inc. Amended and Restated Executive Officer Annual Bonus Plan described below (as approved by our stockholders at our 2010 annual meeting of stockholders, the “Executive Bonus Plan”), establishes the aggregate annual bonus pool for all employees and sets the financial and operational goals to be considered for that year. The aggregate annual bonus pool consists of cash and restricted stock/restricted stock units, out of which all employee bonuses for the prior year are paid. The bonuses awarded to EOG’s executive officers, including our CEO and the other Named Officers, are paid from this pool as well.

 

At its second quarter meeting, the Committee approves a list of peer group companies selected for executive officer and non-employee director compensation purposes and reviews the peer group director compensation data and recommends any changes to our non-employee director compensation program. At its third quarter meeting, the

Committee reviews the peer group executive compensation data and considers annual base salary increases and annual stock option/SAR and/or restricted stock/restricted stock unit grants for all executive officers, including our CEO and the other Named Officers, and the annual stock option/SAR and restricted stock/restricted stock unit grant pools for all of our other employees. At its fourth quarter meeting, the Committee typically addresses administrative matters unrelated to executive compensation and reviews our stock ownership guidelines for our executive officers and our non-employee directors.

 

In addition, throughout the year, as necessary, the Committee reviews and approves amendments to our stock plans and benefit plans; reviews and approves employment, change of control and severance agreements and amendments thereto; reviews and revises stock grant vesting and termination provisions; reviews and revises the amount available for grant under our CEO’s discretionary pool of stock options/SARs and discretionary pool of restricted stock/restricted stock units; and takes any other action it deems necessary or appropriate.

 

Objectives of Our Compensation Program

 

Our executive compensation program is designed to attract and retain a highly qualified and motivated management team and appropriately reward individual executive officers for their contributions to the achievement of EOG’s key short-term and long-term goals. The Committee is guided by the following key principles in determining the compensation of our CEO and other Named Officers:

 

 

A more detailed discussion of each of these key principles is provided below.

 

Competition Among Peers

 

In order to attract, motivate and retain talented executive officers, we must ensure that our compensation program remains competitive with the types and ranges of compensation paid by our peer companies and other companies that we regard as having similar lines of business. On an annual basis, the Committee reviews and discusses compensation data setting forth the annual base salary, non-equity incentive payments, long-term incentive awards, perquisites and other compensation and benefits for our CEO and our other Named Officers as compared to publicly available compensation data for similarly situated executive officers at our peer companies.

 

The Committee recognizes a peer group primarily composed of companies included in the Standard & Poor’s 500 Oil & Gas Exploration & Production Index (“S&P Peer Group”) that have lines of business similar to those of EOG. The Committee may also recognize certain companies not included in the S&P Peer Group but that the Committee deems to be our “peers” due to their similar lines of business and market capitalization. EOG’s peer group changes from time to time as a result of fluctuation in company size, changes in the business lines of our peers, acquisitions of peer companies by third parties, developments in the oil and gas industry and other factors. For 2010, the Committee considered the following list of peer group companies:

 

 

 

 

 

When we refer to “peers,” “peer group” or “peer companies” or similar phrases in this proxy statement, we are referring to this list of companies, as it may be updated by the Committee from time to time.

 

The Committee supports a practice of paying annual base salaries that approximate the average of our peer group, taking into consideration our market capitalization relative to our peer companies, and annual non-equity incentive payments and long-term incentive awards which may deliver above-average compensation if our financial and operational results and/or stockholder returns exceed those of our peer companies.

 

In establishing the compensation of our CEO and other Named Officers, the Committee reviews and considers the allocation of total compensation (among annual base salary, bonus and equity compensation components, including the total theoretical compensation value considering actual realized stock option/SAR gains and the value realized on restricted stock/restricted stock unit vestings) of our peer companies. The Committee then makes a subjective determination as to the appropriate allocation of total compensation among the various components in order to remain competitive in our industry with respect to the recruiting and retention of executive officers. Generally, our total compensation package is more heavily weighted toward long-term compensation than our peer companies since the Committee places significant value on the retention of our executive officers over time.

 

Accountability for Our Performance and Accountability for Individual Performance

 

As further described below, substantially all of EOG’s employees, including our CEO and our other Named Officers, are eligible to receive annual bonuses, payable in cash or, for bonuses equal to or greater than $7,500 ($5,000, for annual bonuses for 2009 and 2008), a combination of cash and restricted stock/restricted stock units. To achieve the goal of tying compensation to accountability for our performance, the Committee considers EOG’s achievement of certain pre-determined financial and operational goals as well as each executive officer’s achievement of pre-determined individual performance goals in awarding annual bonuses.

 

This analysis is conducted on two levels. First, EOG’s performance is measured on a purely objective basis. Under our Executive Bonus Plan, the performance goal for a calendar year necessary for the payment of bonuses under the plan is the achievement of positive adjusted non-GAAP net income available to common stockholders, as reported in our year-end earnings release (“Adjusted Non-GAAP Net Income”). If the Adjusted Non-GAAP Net Income goal is not met for any given year, no bonuses will be paid to our executive officers under our Executive Bonus Plan for such year.

 

Second, if the Adjusted Non-GAAP Net Income goal is met, the Committee will then consider EOG’s achievement of certain pre-determined financial and operational goals. These additional performance goals are evaluated in a subjective manner. The Committee and our CEO develop these goals in connection with the formation of a company-wide annual operating plan at the beginning of each year.

 

The specific performance goals, in addition to the Adjusted Non-GAAP Net Income goal, established for 2010 were:

 

 

 

The Committee considers the achievement of these performance goals in its determination of the aggregate annual bonus pool, and it has the discretion to weigh the achievement or lack of achievement of the goals as the Committee deems appropriate. In addition, the Committee may deem overachievement in some areas to outweigh underachievement in others. There is, however, no specific numerical weighting assigned to each performance goal. As noted above, the only performance goal that is outside of the Committee’s subjective discretion is that Adjusted Non-GAAP Net Income must be positive in the immediately preceding year in order for bonuses to be paid to our executive officers for such year. In determining whether EOG has adequately met its performance goals for the year, the Committee has also considered, and may continue in the future to also consider, (1) factors such as commodity prices and other factors outside of EOG’s control (such as the availability and cost of necessary personnel, equipment, materials and services), and the effect of such factors on the achievement of the performance goals, and (2) other notable accomplishments by EOG.

 

At the Committee’s meeting in the first quarter of 2011, the achievement of our 2010 goals was evaluated. The Committee certified that the performance goal described above, necessary for payment of bonuses under our Executive Bonus Plan, was met for 2010. The Committee acknowledged that we did not meet our numerical targets, due primarily to a continued weak natural gas price environment throughout 2010. In addition, the Committee noted that we had lowered our production volume growth target late in 2010 when it became apparent that bringing our crude oil and natural gas liquids production on-line would be slower than anticipated, in part due to limited availability of necessary equipment and related services and materials as well as a lack of necessary transportation services and infrastructure. The Committee believed that these circumstances also contributed to the short-term under-performance of our stock price relative to our peer companies. However, the Committee determined that several strategic and operational goals were met or exceeded during 2010, including:

 

 

 

¹ For purposes of computing this ratio, “net debt” is equal to our aggregate long-term debt (including any current portion of long-term debt) less our cash and cash equivalents, and “total capitalization” is equal to our total stockholders’ equity plus net debt.

² The calculation of our after-tax rate of return with respect to our capital expenditure program for a particular year is based on the estimated proved reserves (“net” to EOG’s interest) for all wells drilled or acquired during such year, the estimated present value of the future net cash flows from such reserves (for which we utilize certain assumptions regarding future commodity prices and operating costs) and our direct and indirect net costs incurred in drilling or acquiring (as the case may be) such wells. As such, our after-tax rate of return with respect to our capital expenditures for a particular year cannot be calculated from our audited financial statements for such year.

³ Million cubic feet equivalent of natural gas, crude oil and condensate and natural gas liquids. Natural gas equivalents are determined using a ratio of 6.0 thousand cubic feet of natural gas to 1.0 barrel of crude oil, condensate or natural gas liquids.

 

 

Most significantly, the Committee determined that we made significant progress in 2010 in transitioning from being primarily a natural gas company to primarily a liquids (crude oil and natural gas liquids) company, as evidenced by the fact that our revenues generated from crude oil, condensate and natural gas liquids in 2010 exceeded those from natural gas for the first time in our history. The determinations of the Committee were applied to all compensation components subject to the 2010 goals. In addition, at the Committee’s meeting in the first quarter of 2011, our performance goals for 2011 were set.

 

The Committee further considers individual contributions to our achievement of the goals identified above in allocating the bonus pool among individual executive officers, as the Committee believes it is important to recognize and reward significant personal contributions that benefit EOG. As a result, the annual base salary and bonus award to a particular executive officer may fluctuate relative to the other executive officers from year to year. In addition, the Committee considers contributions by EOG employees involved in significant oil and gas discoveries. Accordingly, in recognition of those management employees responsible for identifying and/or executing significant new oil and gas exploration and development projects, the Committee has from time to time awarded restricted stock/restricted stock units to our management employees, including certain of our Named Officers. No such awards, however, were made in 2010.

 

The Committee annually evaluates the individual performance and contributions of the executive officers in their particular roles within EOG. At the beginning of each year, each executive officer meets with our CEO to discuss and identify individual performance goals for the upcoming year. Our CEO will present his evaluation of the level of achievement of these goals to the Committee the following year. In addition, our CEO gives each executive officer performance feedback throughout the year and conducts a formal performance review at the end of each year. The Committee considers our CEO’s evaluation of the other executive officers in making compensation decisions regarding the other executive officers, particularly in awarding annual bonuses. Throughout the year, the Committee may also consider any significant individual contributions of the executive officers as described further below.

 

The 2010 individual goals for the Named Officers were consistent with, and included certain of, the overall company performance goals discussed above. Such goals also included goals that were specific to each Named Officer’s functional area within the company — such as, for Mr. Leiker, with Mr. Garrison’s assistance (prior to his appointment as the Executive Vice President and General Manager of our new San Antonio, Texas office), being the primary driver in EOG’s search for new North American horizontal crude oil resource plays; for Mr. Thomas, maintaining EOG’s position as an industry leader in horizontal drilling and completion technology; for Mr. Driggers, determining the optimum methods (and timing) for funding our capital expenditure budget for 2010 and future years; and for Mr. Plaeger, continuing to focus on proactive legal, audit and government relations support and litigation prevention. The 2011 individual goals for the Named Officers (other than Mr. Garrison, who is no longer an executive officer of EOG) have been established.

 

At the Committee’s meeting in the first quarter of 2011, Mr. Papa, our CEO, noted the specific contributions of Messrs. Thomas, Leiker, Plaeger and Driggers to the achievement of EOG’s overall company performance goals for 2010. Mr. Papa also discussed his assessment of the achievement of each executive officer’s individual performance goals. The Committee and Mr. Papa determined that Messrs. Thomas, Leiker, Plaeger and Driggers had met or exceeded their individual performance goals for 2010. Since Mr. Garrison was no longer an executive officer at the time of the Committee’s first quarter 2011 meeting, the Committee did not consider and assess Mr. Garrison’s contributions to the achievement of EOG’s overall company performance goals for 2010, nor Mr. Garrison’s achievement of his individual performance goals for 2010.

 

The Committee considers EOG’s overall company performance goals for a given year to be the individual performance goals of our CEO for such year. In considering Mr. Papa’s achievement of his individual performance

goals for 2010, the Committee determined that Mr. Papa’s individual contribution to our meeting or exceeding several of our strategic and operational goals in 2010 was substantial. Moreover, the Committee determined that Mr. Papa’s leadership was integral to the significant progress we made in 2010 in transitioning from being primarily a natural gas company to primarily a liquids (crude oil and natural gas liquids) company. Accordingly, the Committee determined that Mr. Papa substantially achieved his individual performance goals for 2010.

 

At Mr. Papa’s request, the Committee has not increased Mr. Papa’s annual base salary since 2004 in order to prevent his annual base salary from becoming further disproportionate in comparison to the rest of our employees. To reward Mr. Papa for his individual contributions to EOG’s performance, in lieu of annual base salary increases and to further provide incentives to Mr. Papa and to retain Mr. Papa, the Committee may provide for greater bonus awards and equity-based compensation grants to Mr. Papa.

 

Alignment with Stockholder Interests

 

The Committee also believes that it is in the best interests of our stockholders for all of our executive officers to maintain a certain level of ownership in EOG. Therefore, the Committee has established stock ownership guidelines ranging from one times base salary for Vice Presidents to up to five times base salary for our CEO. Each Named Officer currently satisfies the guidelines. While none of the Named Officers have entered into any transactions to hedge the economic risks of EOG stock ownership, EOG’s policies do not explicitly prohibit such hedging transactions. However, all transactions involving EOG stock must comply with EOG’s Code of Conduct, EOG’s Insider Trading Policy and applicable law, including the public reporting provisions of Section 16 of the Exchange Act. Under our Code of Conduct, officers and employees are prohibited from trading in EOG stock based on material, non-public information about EOG.

 

Additionally, our Insider Trading Policy provides that any director or executive officer covered by Section 16 of the Exchange Act shall not hold EOG common stock in a margin account or pledge (with certain limited exceptions) such common stock as collateral for a loan. The limited exception to this prohibition is in instances where a director or executive officer wishes to pledge his shares of EOG common stock as collateral for a personal loan (other than a margin loan to purchase additional EOG common stock) and clearly demonstrates the financial ability to repay the loan without resort to the pledged securities. Any such exception must be submitted to the CEO or General Counsel for approval. In the limited circumstance where an exception is granted, EOG’s stock ownership guidelines specifically provide that any stock held as pledged securities are not counted in determining compliance with such ownership guidelines. However, none of the executive officers have pledged EOG common stock as collateral for a loan pursuant to this exception under our Insider Trading Policy.

 

Compensation Program Design

 

The Committee believes that appropriately balanced compensation components contribute to our success and that the best compensation philosophy is to put a substantial portion of the total compensation package at risk by tying it to both our financial and operational results and the performance of our Common Stock. The mix of stock options/SARs and restricted stock/restricted stock units in each executive officer’s compensation package is evaluated annually and will vary from time to time, as the Committee deems necessary to achieve a balance between incentive compensation, through stock options/SARs, and retention-directed compensation, through restricted stock/restricted stock units.

 

Restricted stock/restricted stock unit grants generally vest five years after the grant date, requiring the individual receiving the grant to remain with EOG for five years in order to receive any value from this component of his compensation. If the Committee determines that an executive officer does not have an unvested value in restricted stock/restricted stock units sufficient to provide an incentive to remain at EOG, and if the Committee has determined that the individual should receive additional equity-based compensation, then the Committee will typically grant more compensation in restricted stock/restricted stock units than in stock options/SARs.

 

Additionally, the Committee uses post-termination compensation and benefits as a significant component of the compensation packages for our Named Officers to reward each executive officer for his service to EOG on a long-term basis, to be competitive among peer companies from a recruiting and retention standpoint and to shift the focus of each executive officer to the day-to-day operations of EOG rather than job security concerns.

Consistent with the objectives described above, the compensation package of our CEO and the other Named Officers consists of the following components:

 

 

A more detailed discussion of each component of our compensation program is provided below. The Committee does not use any formulas to determine the amount of each component to be paid or delivered. Rather, each component of our compensation program is reviewed individually relative to the objectives of that component. In addition, the Committee reviews the aggregate of annual base salary and non-equity incentives and compares such amounts to that of our peer companies.

 

The Committee also annually compares each Named Officer’s total realized compensation, including stock option/SAR gains and the value realized on restricted stock/restricted stock unit vestings relative to three-year stockholder returns, to that of similarly situated executive officers at our peer companies to confirm that the size of the annual stock option/SAR and restricted stock/restricted stock unit grants is appropriate. Moreover, depending upon availability of up-to-date publications, the Committee also considers published market analyses and rankings in connection with its analysis of our CEO’s compensation package to aid in determining if his compensation package is delivering rewards commensurate with our stock performance. In 2010, the only published market analysis considered by the Committee in addition to the peer group compensation data compiled by Equilar was Forbes’ Special Report on CEO Compensation.

 

We currently do not have any policies in place regarding the adjustment or recovery of compensation payments or awards in the event that we are required to restate our financial statements. We believe that our accounting practices are conservative and, moreover, we have not been required to restate our financial statements at any time since becoming an independent company in 1999. Thus, the Committee has not deemed any adjustment or recovery policies to be necessary.

 

Further, we currently do not have any policies in place regarding the adjustment of compensation payments or awards due to amounts potentially realizable from such awards. The Committee follows the philosophy that stock options/SARs, for example, are granted with an incentive purpose, as compared to the retention purpose of restricted stock/restricted stock units. The Committee will, however, consider the amount and value of unvested restricted stock/restricted stock units, as further detailed below, in deciding whether to award restricted stock/restricted stock units instead of stock options/SARs as the equity portion of a Named Officer’s compensation package.

 

The Committee emphasizes the retention incentives provided by restricted stock/restricted stock unit awards when evaluating our compensation program, and our compensation program is weighted in favor of long-term compensation over currently paid compensation for this reason.

 

In general, the compensation program used with respect to our Named Officers corresponds to that used with respect to other employees of EOG. Substantially all of EOG’s employees are eligible for annual bonuses and annual equity grants as well as most of the benefits available to the Named Officers described under “Components of Our Compensation Program — Other Compensation and Benefits” below. Our CEO’s compensation package, however, is more substantial than that of most employees, including the other Named Officers. The Committee determined that this difference was acceptable based on its comparison of the compensation packages awarded to the chief executive officers of EOG’s peer companies. At his request, the Committee has not increased Mr. Papa’s annual base salary since 2004. Instead, the Committee has adjusted Mr. Papa’s compensation by allocating a significant portion of his compensation to restricted stock units that vest over time, which provide additional retention incentives. As a result, Mr. Papa has received more restricted stock units than the other Named Officers.

Components of Our Compensation Program

 

The following discussion describes the components of our compensation program and explains why we choose to pay each component and how we determine the amount to be paid or delivered. Except as described above with respect to grants of stock options/SARs and restricted stock/restricted stock units, decisions regarding an increase or other adjustment of a particular component will not affect decisions regarding the other components. The Committee views each component of our compensation program as independent, since each component was selected for a specific purpose.

 

Base Salary

 

 

 

The following table presents the adjustments to the annual base salary of each of our Named Officers granted by the Committee (except, as discussed in footnote (d) below, with respect to Mr. Garrison) at its third quarter 2010 meeting. The 2010 adjustments to the annual base salaries of Messrs. Leiker, Thomas, Plaeger, Garrison and Driggers were more (on both a dollars basis and percentage basis) than the adjustments granted in 2009 in order for such annual base salaries to remain competitive with the annual base salaries of similarly situated executive officers of our peer companies, to help ensure the retention of our executive officers and to reward the individual performance and contributions of our executive officers.

 

2010 Salary Adjustments

 

 

 

 

 

Bonus — Cash (Non-Equity Incentive)

 

 

 

2010 Performance Bonus Awards

 

 

 

 

 

Bonus — Restricted Stock/Restricted Stock Units (Equity Incentive)

 

 

 

 

 

Restricted stock units are similar in nature to restricted stock, except that in the case of a restricted stock unit, no shares of our Common Stock are actually transferred to a holder of a restricted stock unit until the expiration of the applicable vesting period. Accordingly, a holder of a restricted stock unit will not have the rights of a stockholder of EOG (e.g., voting rights) until shares of our Common Stock are transferred to the holder. All dividends declared on our Common Stock are credited to the holder of an unvested restricted stock unit for the future benefit of such holder. Upon the expiration of the applicable vesting period, all accumulated dividends attributable to the vested restricted stock unit are paid to the holder. Any dividends attributable to an unvested restricted stock unit are forfeited in the same manner and at the same time as the restricted stock unit to which they are attributable is forfeited.

 

 

Stock Options/SARs

 

 

 

 

 

 

Restricted Stock/Restricted Stock Units

 

 

 

 

 

 

 

 

Post-Termination Compensation and Benefits

 

The components of our post-termination compensation and benefits, and the events that trigger those benefits, are discussed under “Potential Payments Upon Termination of Employment or Change of Control” below. Each Named Officer, other than Mr. Garrison, has a change of control agreement that provides benefits, in addition to the EOG Resources, Inc. Change of Control Severance Plan (as amended, “Change of Control Severance Plan”) that applies to all employees, because the Committee believes that the risk of job loss in connection with a change of control is higher for executive officers and the time necessary to secure appropriate new employment may be longer. In the event of a change of control of EOG, Mr. Garrison would be subject to the terms and conditions of our Change of Control Severance Plan.

 

The Committee believes that these change of control benefits are a retention device in a competitive market and believes that our Named Officers should be compensated if they (1) are involuntarily terminated (other than for cause) after a change of control of EOG, (2) voluntarily terminate their employment with EOG under circumstances that constitute “good reason” (as defined in the applicable agreement or plan) or (3) other than with respect to Mr. Garrison, terminate their employment with EOG for any reason during the 30-day period beginning six months after a change of control of EOG, which the Committee believes is sufficient time to determine if there is potential for a long-term employment relationship with the acquiring company.

 

Other Compensation and Benefits

 

 

 

 

 

Tax and Accounting Considerations

 

In setting the components of our compensation program, the Committee considers the impact of the following tax and accounting provisions:

 

 

 

Salary and Bonus in Proportion to Total Compensation

 

The Committee reviews the aggregate of the annual base salary and annual bonus for each of our Named Officers and compares such totals to the corresponding amounts paid to similarly situated executive officers of our peer companies (taking into consideration their market capitalization compared to EOG’s market capitalization). Under our compensation program, the value of the combined annual base salary and annual bonus for each of our Named Officers is approximately 27% to 44% of their total respective compensation, which is generally less than the corresponding percentages of annual base salary and annual bonus compensation paid to similarly situated executive officers of a majority of our peer companies. The Committee has determined that this weighted proportion is in the best interests of EOG and our stockholders because it is consistent with the Committee’s belief that our compensation program should be tied in part to our stock price performance so as to align our Named Officers’ interests with those of our stockholders.

 

The following table summarizes certain information regarding compensation paid or accrued during 2010, 2009 and 2008 to the Named Officers.

 

 

 

 

 

 

The following table summarizes certain information regarding grants made to each of the Named Officers during 2010 under any plan.

 

 

 

The vesting schedule of all stock options/SARs and restricted stock/restricted stock units awarded to the Named Officers is described under footnotes (c) and (d) to the “Grants of Plan-Based Awards Table for 2010” above. In accordance with the terms of our 2008 Stock Plan and 1992 Stock Plan, no dividends or other distributions will be delivered on unvested shares of restricted stock/restricted stock units, but the value of any dividends or distributions declared on our Common Stock will be credited by us to the account of the Named Officer (with no interest) with respect to those unvested shares or units. When a portion of the restricted stock/restricted stock units vests, we will deliver the accumulated dividends or distributions attributable to such portion to the respective Named Officer in cash. The value of dividends and distributions are forfeited under the same circumstances that the restricted stock/restricted stock units are forfeited, as described under “Compensation Discussion and Analysis — Components of Our Compensation Program — Bonus — Restricted Stock/Restricted Stock Units (Equity Incentive)” above. At no time during 2010 were any outstanding awards re-priced or otherwise modified. Moreover, there are no performance-based or market-based conditions applicable to any of the awards described above, except to the extent that restricted stock/restricted stock units are granted as equity incentive compensation under the Executive Bonus Plan.

 

The following table summarizes certain information regarding unexercised stock options/SARs and unvested shares of restricted stock/restricted stock units outstanding as of December 31, 2010 (based on the closing price of our Common Stock on the NYSE of $91.41 per share on such date) for each of the Named Officers.

 

 

 

 

 

The following table summarizes certain information regarding exercises of stock options/SARs and vesting of restricted stock/restricted stock units during 2010 for each of the Named Officers.