GULFPORT ENERGY CORPORATION
713 Market Drive
Oklahoma City, Oklahoma 73114

April 10, 2023

Notice is given that the 2023 Annual Meeting of Stockholders (including any adjournments or postponements, the “Annual Meeting”) of Gulfport Energy will be held on May 24, 2023 at 9:00 a.m., Central Time at Gulfport Headquarters located at 713 Market Drive, Oklahoma City, OK 73114 to vote on the proposals listed in the following table.

GULFPORT ENERGY CORPORATION

713 Market Drive
Oklahoma City, Oklahoma 73114

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PROXY STATEMENT
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The summary below highlights information contained elsewhere in this proxy statement. It does not contain all the information that you should consider in connection with the matters before the Annual Meeting. Please read the entire proxy statement carefully before voting your shares.

Gulfport is an independent natural gas-weighted exploration and production company with assets primarily located in the Appalachia and Anadarko basins. Our principal properties are located in eastern Ohio, where we target development in what is commonly referred to as the Utica formation, and central Oklahoma where we target development in the SCOOP Woodford and Springer formations. Gulfport’s Predecessor was incorporated in the State of Delaware in July 1997. Our corporate headquarters are in Oklahoma City, Oklahoma and shares of Gulfport’s Common Stock trade on the New York Stock Exchange (NYSE) under the ticker symbol “GPOR”.

Gulfport aims to create sustainable value through the economic development of our significant resource plays in the Utica and SCOOP operating areas. Our strategy is to develop our assets in a manner that generates sustainable cash flow, improves margins and operating efficiencies, while improving our ESG and safety performance. To accomplish these goals, we allocate capital to projects we believe offer the highest rate of return and deploy leading drilling and completion techniques and technologies in our development efforts. We believe our plan to generate free cash flow on an annual basis will allow us to further strengthen our balance sheet, return capital to shareholders and increase our resource depth through incremental leasehold opportunities that provide optionality to our future development plans.

Our Board is comprised of six directors, including the Company’s Chief Executive Officer, John Reinhart, and five non-employee directors, Timothy Cutt, David Wolf, Guillermo (Bill) Martinez, Jason Martinez and David Reganato. They are diverse, industry-leading experts with an average of approximately 30 years of industry leadership experience across multiple disciplines. Each of our directors will stand for election annually and must be elected by a majority of shares voted.

The following table provides summary information about each director nominee who is standing for election at the Annual Meeting. For more information about the background and qualifications of each nominee, please see “Election of Directors and Director Biographies” on page 6 of this proxy statement. We ask you to vote “FOR” each of our director nominees.

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(1)   The Chairman of the Board recommended Ms. Malicki’s nomination for this position.

Gulfport’s Work Safe Program focuses on a combination of twelve rules derived from Company policies (critical tasks) and cultural conditions that have been linked to serious safety incidents in our industry. Critical Task Rules require specific operating procedures to mitigate hazardous work site conditions to complete work safely. Cultural Condition Rules are defined as work site conditions or human behaviors that have been linked to the root cause of most incidents. Employees and contractors are expected to apply and follow the requirements that coincide with the twelve rules. Our goal is to not only improve our safety performance but to proactively prevent incidents before they happen.

Stop Work is one of the Work Safe Program’s critical tasks. Our Chairman and former Chief Executive Officer, Timothy Cutt, signed and communicated a Stop Work Authority and Obligation letter to the Company’s employees and our contractors. This letter outlines Gulfport’s commitment to health, safety and the environment and provides the expectation and support to all Gulfport employees and contract partners to stop work when conditions warrant. Every person on a Gulfport work site has the authority, and obligation to stop any work that is believed to cause an unsafe condition, or places personnel or the environment at risk.

Health, Safety & Environment Highlights for 2022:

•        Reduced number of total OSHA recordable injuries by 33% from 2021;

•        Reduced reportable spills by 63% year-over-year;

•        Continued improving our Contractor Management processes by performing safety audits for new contractors, refreshing safety audits for existing contractors and developing a new contractor orientation video;

•        Advanced our WORK SAFE Program using visual aids in the field and ensuring contractor training requirements have been met;

•        Created and delivered WORK GREEN Program training on the three focus areas – air, land, and water to reinforce our environmental procedures and policies; and

•        Performed a gap assessment on our methane emissions management processes to initiate a gas certification project in Ohio.

Diversity.    Diversity and inclusion are paramount to our organization. We obtained 100% compliance across our Company in diversity and inclusion training. Diversity is also important at our Board level, where over 40% of our directors to identify as gender or ethnically diverse. We are also committed to supporting veterans and do so through our recruiting and hiring efforts as well as supporting several causes that assist veterans and active-duty military.

Community Engagement.    Gulfport consistently strives to positively impact and improve the communities where we live and operate. We uphold our corporate responsibility and put our core tenets into action by forming partnerships that are impactful in our operating areas. We have created a Community Impact Strategy that focuses our volunteering and giving efforts supporting education, health and human services, environmental stewardship, and veterans.

In 2022, we completed a multi-year pledge to the Dolly Parton Imagination Library supporting multiple counties in our Ohio operating area by providing literacy support for young children. We also continued our partnership with the River Protectors in Oklahoma by volunteering to remove trash on the North Canadian River. The River Protectors is an organization that works to remove trash as it arrives on riverbanks and focuses on driving a cultural shift to eliminate the problem.

We believe effective corporate governance requires regular constructive discussions with our stockholders. We have a proactive engagement process that encourages feedback from our stockholders. This feedback helps shape our corporate governance practices, and has specifically resulted in:

Stockholder Engagement and Annual Say-On-Pay Advisory Vote

At the Annual Meeting, our stockholders will again have an opportunity to cast an advisory Say-On-Pay vote on the compensation paid to our named executive officers as described in this proxy statement. The details of the executive compensation program and its pay for performance alignment are discussed in the “Compensation Discussion & Analysis (CD&A)” on page 23 of this proxy statement.

Gulfport Energy has engaged in discussions with our stockholders at investor conferences and through direct calls and meetings with the Company’s management team that represented approximately 75% of the shares outstanding. Through these conversations our stockholders emphasized their expectation that our compensation programs should be designed to focus our executive team on driving results that ensure the financial health of the organization while also driving long-term stockholder value. Specifically, after carefully considering input from stockholders, the Company took the following actions in 2022:

•        Utilized performance-based and time-based equity awards in the form of performance-based restricted stock units tied to relative total shareholder return (“TSR”) and absolute return, vesting over a three-year performance period in 2022; 60% of all equity awards to NEOs were performance-based;

•        Adjusted performance incentive opportunities and long-term equity award targets to closely align our executives’ financial interests with those of our stockholders and to continue to link a large portion of executives’ compensation to the performance of our stock and our operational performance;

•        Modified metrics in the annual incentive plan to include financial metrics directly tied to the financial health of the Company, including production per day, capital expenses, lease operating expenses, free cash flow generation, and specific and quantifiable health, safety, environmental and social metrics; and

•        Provided robust disclosure of our performance metrics and targets for both performance-based cash and equity awards.

The Company is asking its stockholders to vote to elect seven directors to serve on the Board of Directors until the 2024 Annual Meeting of Stockholders (the “2024 Annual Meeting”) or until their respective successors have been duly elected and qualified.

Our Board of Directors currently consists of six members who are elected annually. Five of these six directors are non-employee directors, and four of the six directors are independent under the NYSE listing standards.

The directors standing for election this year are listed below. If any nominee should decline election or should become unable to serve as a director of our Company for any reason before election at the Annual Meeting, votes will be cast by the persons appointed as proxies for a substitute nominee, if any, designated by the Board of Directors.

There are no family relationships among any of the nominees, directors or any of the executive officers.

Vote Required and Board Voting Recommendation

Directors will be elected at the Annual Meeting by a majority of the votes cast. Abstentions and broker non-votes will have no effect on the voting results for Proposal 1.

C      Committee Chairperson.

+      Satisfies NYSE independence and other applicable independence rules for membership on such Committees.

Yes. The charters for each Committee can be found on our website at www.gulfportenergy.com under the “Investors — Governance” captions. You may also obtain copies of these charters, as well as our Code of Business Conduct and Ethics, which is described below, by writing to our Chief Legal and Administrative Officer and Corporate Secretary, Patrick Craine, at Gulfport Energy Corporation, 713 Market Drive, Oklahoma City, Oklahoma 73114.

Our Board of Directors has determined that four of our six current Board members (David Wolf, Guillermo (Bill) Martinez, Jason Martinez and David Reganato) meet the independence requirements in the NYSE listing standards and are free of any relationship that, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out their responsibilities as directors of the Company. Mr. Reinhart, our Chief Executive Officer and Director, is not considered by the Board of Directors to be an independent director because of his current employment with the Company. Mr. Cutt, our Chairman of the Board, is not considered by the Board of Directors to be an independent director because of his previous employment as Chief Executive Officer of the Company. Our Board is currently over 33% diverse, and it will be over 40% diverse with the addition of one new female director nominee.

Board and Committee Evaluations

Director Performance Evaluations

The Board of Directors met 14 times in 2022. In addition to these meetings, the Board of Directors adopted resolutions by unanimous written consent. Each director attended over 85% of the aggregate meetings of the Board of Directors and the meetings of the Committees on which he served.

Our non-management directors routinely meet in an executive session following regularly scheduled meetings of the Board of Directors.

Individuals may communicate with our Board of Directors or individual directors by writing to our Chief Legal and Administrative Officer and Corporate Secretary, Patrick Craine, at Gulfport Energy Corporation, 713 Market Drive, Oklahoma City, Oklahoma 73114. Our Chief Legal and Administrative Officer and Corporate Secretary will review all correspondence and forward our Board of Directors correspondence that, in the opinion of our Chief Legal and Administrative Officer and Corporate Secretary, relates to the function of our Board of Directors or a Board Committee or otherwise requires their attention. Directors may review a log of all correspondence received by us and request copies. Concerns relating to accounting, internal control over financial reporting or auditing matters will be immediately brought to the attention of the chairman of the Audit Committee and handled in accordance with our Audit Committee’s procedures.

Recognizing that director attendance at our Annual Meeting can provide stockholders an opportunity to communicate with directors about issues affecting the Company, we actively encourage our directors to attend the Annual Meeting of Stockholders. All Directors attended our 2022 Annual Meeting of Shareholders.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics designed to help directors and employees resolve ethical issues. Our Code of Business Conduct and Ethics applies to all directors and employees. Our Code of Business Conduct and Ethics covers various topics including, but not limited to, conflicts of interest, fair dealing, discrimination and harassment, confidentiality, compliance procedures and employee complaint procedures. Our Code of Business Conduct and Ethics, together with any amendments or waivers, is posted on our website at www.gulfportenergy.com under the “Investors – Governance” captions.

Political Contribution Policy

Engagement in the political, legislative and regulatory process is important to the success of the Company. The Company has delegated compliance and oversight over this function to the Nominating, Environmental, Social and Governance Committee and has adopted a political contributions and activity policy that sets forth the ways by which the Company and its employees may participate in the political, legislative and regulatory process. All political contributions and activities are subject to compliance with applicable laws.

Director Qualifications

As provided by the Nominating, Environmental, Social and Governance Committee’s charter, the Committee identifies, investigates and recommends candidates to our Board of Directors with the goal of creating a balance of knowledge, experience and diversity. The Committee identifies candidates using third-party search firms, as well as through the extensive networks of our directors and management team in the oil and natural gas industry.

It is our policy that potential directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the interests of our stockholders. In addition to reviewing a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of our Board of Directors, the skills necessary to provide effective oversight in critical areas and the evolving needs of our business. It is the policy of our Board of Directors that, at all times, at least a majority of its members meets the standards of independence promulgated by the NYSE and the SEC and that its members reflect a range of talents, skills and expertise, particularly in the areas of accounting and finance, management, leadership and oil and gas-related industries sufficient to provide sound and prudent guidance with respect to our operations and the interests of our stockholders.

Board Diversity Policy

Our Nominating, Environmental, Social and Governance Committee is dedicated to diversity and adopted a Board Diversity Policy in November 2019. The policy requires that the Nominating, Environmental, Social and Governance Committee consider diversity in its evaluation of candidates for Board membership. Our Nominating, Environmental, Social and Governance Committee, in accordance with its charter, seeks to include diverse candidates in all director searches, taking into account diversity of gender, race, ethnicity, background, age, thought and tenure on our Board (in connection with the consideration of the renomination of an existing director), including by affirmatively instructing any search firm retained to assist the Nominating, Environmental, Social and Governance Committee in identifying director candidates to include diverse candidates from traditional and non-traditional candidate groups. In accordance with its charter, our Nominating, Environmental, Social and Governance Committee periodically reviews and makes recommendations regarding the composition of the Board and the size of the Board.

We also require that the members of our Board of Directors be able to dedicate the time and resources sufficient to ensure the diligent performance of their duties on our behalf, including attending meetings of the Board of Directors and applicable Committee meetings. In accordance with its charter, our Nominating, Environmental, Social and Governance Committee periodically reviews the criteria for the selection of directors to serve on our Board and recommends any proposed changes to our Board of Directors for approval.

Nomination Process

Our Board of Directors will consider stockholder nominations for director candidates upon written submission to our Chief Legal and Administrative Officer and Corporate Secretary along with, among other things, the nominee’s qualifications and certain biographical information regarding the nominee, the nominee’s written consent to serve as a director if elected and being named in the proxy or information statement and information regarding the status of the stockholder submitting the recommendation, all in the manner required by the Second Amended and Restated Bylaws of the Company (the “Bylaws”) and the applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Following verification of the stockholder status of persons proposing candidates, recommendations will be aggregated and considered by our Board of Directors at a regularly scheduled or special Board meeting. If any materials are provided by a stockholder in connection with the nomination of a director candidate, materials will be forwarded to our Board of Directors. See “Submission of Future Stockholder Proposals” below for additional detail regarding submitting director nominees.

The following table sets forth the name, age, positions and business experience of each of our executive officers (other than John Reinhart, who also serves as a member of our Board and who is listed under “Election of Directors and Director Biographies”):

2022 was an important turning point for Gulfport Energy. Once the restructuring process was successfully completed, a new Board of Directors was in place and key senior management team members were appointed, the Company was positioned to transition to a contemporary, best-in-class natural gas provider. Throughout the year, external factors such as high inflation and ongoing sourcing and logistical issues presented new challenges. The Company was able to effectively manage those issues while delivering solid operational results, which our shareholders expect.

From an executive compensation perspective, we were able to set realistic, challenging targets for our short and long-term incentive plans. We were pleased to see the financial and operational results exceeded our expectations. We were able to deliver on our strategy of providing compensation opportunities that were tied to Company performance. Our philosophy is to remain competitive within the oil and gas industry for similarly situated operations.

Please review the Compensation Discussion and Analysis, where we explain how we tie pay and performance to reward our executives. We are confident our shareholders will once again agree with the compensation decisions we made regarding our executive team as they did overwhelmingly based on the 99.7% of votes we received on our 2022 Say-On-Pay vote.

Thank you for your confidence and investment in Gulfport Energy.

Respectfully submitted by the Compensation Committee,

Jason Martinez, Chair

Guillermo (Bill) Martinez

David Reganato

David Wolf

Dated: April 10, 2023

This Compensation Discussion and Analysis, or CD&A, explains the Compensation Committee’s compensation philosophy, summarizes our executive compensation programs and describes compensation decisions for Gulfport’s Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, and the next three highest paid executive officers for 2022. These executive officers, known as our NEOs, are as follows:

During 2022, we had the following notable achievements:

Financial

•        Increased the borrowing base under the revolving credit facility from $850 million to $1.0 billion;

•        Reduced total debt by $19 million;

•        Generated significant adjusted free cash flow and utilized it to repurchase 2.9 million shares of common stock for $250.8 million during 2022;

•        Expanded common stock repurchase program; and

•        Reported year-end estimated net proved reserves of 4.0 Tcfe and total discounted future net cash flows of $8.3 billion.

Health, Safety & Environmental

•        Reduced our total recordable incident rate and number of agency reportable spills year-over-year;

•        Continued to improve our Contractor Management processes by performing safety audits for new contractors, refreshing safety audits for existing contractors and developing a new contractor orientation video;

•        Advanced our WORK SAFE Program using visual aids in the field and ensuring contractor training requirements have been met;

•        Created and delivered WORK GREEN Program training on the three focus areas – air, land, and water – to reinforce our environmental procedures, and policies; and

•        Performed a gap assessment on our methane emissions management processes to initiate a gas certification project in Ohio.

Corporate Social Responsibility

•        Completed a multi-year pledge to support Dolly Parton’s Imagination Library in Ohio to provide books to more than 3,750 children in Belmont, Jefferson and Monroe Counties; and

•        Completed an environmental volunteer effort in Oklahoma, removing trash from the North Canadian River to continue the focus on our WORK GREEN program.

In consideration of our long-term strategy and stockholder feedback following a robust program of engagement (see “Stockholder Engagement and Annual Say-on-Pay Advisory Vote” below), the Company took the following actions in 2022:

•        Provided an equity grant to the Chief Executive Officer and Chief Financial Officer who joined the Company in 2021 to provide a competitive package that is commensurate with the competitive market. No grants were made to our other NEOs in 2022 as the grants made during 2021 were intended to cover a multi-year period.

•        Continued to use absolute and relative TSR and time-based vesting in equity plan grants to maximize the link between performance-based pay of our executives and shareholder value over time.

•        Established annual performance bonus opportunities and long-term equity award targets to closely align our NEOs’ financial interests with those of our stockholders and to continue to link a larger portion of NEOs’ compensation to the performance of our stock and operational performance.

•        Selected metrics in our annual incentive plan to include financial metrics directly tied to the financial health of the Company and specific and quantifiable health, safety and environmental metrics.

•        Continued to provide robust disclosure of our performance metrics and targets for both performance-based cash and equity awards.

•        Utilized formal stock ownership guidelines to ensure our Board of Directors and executive officers own a stake in the Company that is sufficient to align their interests with their fellow stockholders.

The Compensation Committee of our Board of Directors oversees our compensation programs for executive officers and all employees. During 2022, the Compensation Committee was comprised of Jason Martinez (Chair), Guillermo (Bill) Martinez, David Reganato, and David Wolf. All members of the Compensation Committee are independent directors.

The Role of Our Compensation Committee

The Compensation Committee generally reviews and typically makes its decisions regarding the annual compensation of our NEOs at its regular meetings in the first half of each year. These decisions include:

•        Certifying annual performance-based cash incentive awards;

•        Establishing target incentive opportunities and applicable performance objectives for the current year’s annual cash incentive awards;

•        Approving adjustments to base salary, annual cash incentive levels and long-term equity-based incentive levels; and

•        Granting long-term equity-based incentive awards and determining the types of awards for the current year.

The Compensation Committee may also adjust compensation as necessary at other times during the year, such as in the case of promotions, other changes in employment status and significant corporate events, as well as to reflect changing market conditions or for other competitive purposes.

In making its decisions, the Compensation Committee assesses each NEO’s impact during the year and overall value to Gulfport, specifically considering the NEO’s contribution to the growth of Gulfport’s value, operational and financial performance, performance in the NEO’s primary area of responsibility, impact on strategic initiatives, recommendations of our independent compensation consultant, the NEO’s role and trajectory in succession planning and development, recommendations from our CEO with respect to our other NEOs and other intangible qualities that contribute to corporate and individual success.

The Role of our CEO

The Compensation Committee evaluates our CEO based on the Company’s performance metrics, leadership roles as a member of the Board and our lead representative to the investment community and other criteria. The CEO’s total compensation package is determined by the Compensation Committee, based upon its evaluation and input from our independent compensation consultant. Our CEO’s compensation ultimately reflects Gulfport’s performance, personal performance, competitive industry practices and the terms of our employment arrangement with the CEO.

Our CEO evaluates each of the other NEOs and makes compensation recommendations to the Compensation Committee. In developing recommendations, the CEO considers the recommendations of the Compensation Committee’s independent compensation consultant, as well as each NEO’s performance against the Company performance metrics and contribution to Gulfport’s performance. The independent compensation consultant reviews and provides comments to the Compensation Committee based on our CEO’s recommendation with respect to our NEOs, other than our CEO. Our CEO does not participate in deliberations or decisions concerning his own compensation.

The Role of the Compensation Consultants

For 2022, the Compensation Committee retained the service of WTW to perform executive compensation advisory services, reporting directly to the Compensation Committee Chair. The Compensation Committee determined that the expertise that WTW had in the executive compensation consulting space with other similar Exploration and Production (“E&P”) companies, in addition to deep insights into compensation practices of other similar companies, was critical for Gulfport Energy. WTW provided contemporary best practices in base pay administration, short-term incentive plan design and long-term incentive plan design. This information, which included reviews of peers, a broader E&P group and general industry practices, was used by the Compensation Committee to determine base salary, short-term incentives and long-term incentives for our executives.

WTW also provided support with regulatory and other considerations that affect compensation programs generally, as requested by the Compensation Committee, as well as assistance in preparation of the CD&A.

WTW reported exclusively to the Compensation Committee, with respect to the services described above. During 2022, WTW provided other non-executive compensation consulting services to us, but the total fees for such services did not exceed $120,000. The Compensation Committee reviewed the independence of WTW and determined that there were no conflicts of interest because of the Compensation Committee’s engagement of WTW.

The Compensation Committee evaluates the independence of its compensation consultant(s) on an ongoing basis.

As previously disclosed in our 2021 Proxy, the Company made certain grants to key executives and new employees that are customary when emerging from bankruptcy, referred to as emergence grants. These grants included larger than normal course of business grants and as a result, no additional grants were made to most of the NEO group in 2022. The exceptions were grants made to Timothy Cutt, our Chief Executive Officer, and Bill Buese, our Chief Financial Officer, who joined the Company upon emergence from bankruptcy. Their total compensation was evaluated during the 2022 compensation review cycle, and it was determined that adjustments were necessary to remain competitive with the market and consistent with our pay philosophy.

Base Salary

The Compensation Committee engaged WTW to review the overall competitiveness of our executive compensation program for 2022, with continued focus on ensuring the alignment of management compensation with performance and the achievement of Gulfport’s long-term strategic goals. The Compensation Committee reviews NEO base salaries on an annual basis, with a goal of providing market competitive, fixed cash compensation. The Compensation Committee assesses comparable salary information provided by its independent compensation consultant as a factor when determining the base pay for NEOs.

Other factors the Compensation Committee considers in determining base pay for each of the NEOs include, but are not limited to: the NEO’s responsibilities, experience, leadership, potential future contribution and demonstrated individual performance. The relative weighting of these factors varies by NEO depending on their position and responsibilities. In April 2022, the base salaries of the executive team were reviewed and targeted changes were made to certain executives after reviewing the current labor market for executive talent, performance and other job-related factors for each executive. A summary of the changes is reflected in the table below.

Annual Incentive Awards

The Compensation Committee established a performance-based annual cash incentive program for 2022 that tied our NEOs’ compensation directly to pre-established performance metrics. Targeted annual incentive award levels were based on market information supplied by the independent compensation consultant. Individual awards may be decreased at the discretion of the Compensation Committee based on overall corporate performance for the year and other considerations.

2022 Annual Short-Term Incentive “STI” Bonus Metrics and Annual STI Payments

The Compensation Committee determined that the appropriate Key Performance Indicators (“KPIs”) for the 2022 STI plan should focus primarily on generating free cash flow and executing certain strategic objectives that were important to the continued success of the organization and were responsive to shareholder feedback. After reviewing the operating and financial targets for 2022 with the

Board of Directors, the Gulfport Energy executive management team and the independent compensation advisor, the Compensation Committee approved performance targets accordingly. The KPIs included thresholds, targets and maximums that were based on predetermined financial and key performance metrics.

The financial metrics chosen were generally common measures in the oil and gas industry and were viewed as measures of success by our shareholders. The Compensation Committee also believed it was critical to focus on other strategic initiatives that while not directly measured in financial terms, are key indicators of successful companies in the oil and gas industry. Total Recordable Incident Rate (“TRIR”) and spills are common measurements and targets that reflect either industry benchmark information (TRIR) or improvement over prior results (spills). The Compensation Committee also adopted a set of strategic initiatives that focused on environmental and corporate and social governance activities. Specifically, the organization would be measured on making substantial improvement in the areas of greenhouse gas emission management, diversity and inclusion and other key corporate responsibility areas such as succession planning.

In April of 2022, after performance targets for the annual STI had been set in March of 2022, the Board of Directors made a strategic decision to increase the Company’s 2022 capital program to take advantage of the current leasehold landscape and account for certain inflationary pressures that the Board concluded to be outside of management control. Realizing that these additional expenditures were not included in the initial target setting process, the Board of Directors decided not to include those amounts in the 2022 incentive payment results. Additionally, in March of 2022, the Company experienced a casing failure that impacted multiple wells and the associated capital, completion timing and expected first sales dates. The Company believes these failures were caused by defective manufacturing by an external vendor, and the Board concluded the incident to be outside of management control. The casing remediation and associated impacts to full year 2022 capital and production were excluded from the 2022 incentive payment results.

At the completion of the performance period ending December 31, 2022, the Compensation Committee reviewed financial and operating results and the attainment of key performance indicators and approved 2022 STI payout results based on those achievements. This achievement resulted in an overall payout of 119% of target awards. Below is a summary of KPIs and results for the 2022 plan year.

2022 STI Metrics

(1)   Adjusted Free Cash Flow is a non-GAAP measure defined as net cash provided by operating activities from the Company’s Consolidated Statement of Cash Flows less the sum of changes in operating assets and liabilities included in the operating activities section of the Consolidated Statement of Cash Flows less non-recurring general and administrative and other expenses from the Consolidated Statement of Operations less incurred capital expenditures and capitalized expenses. Adjusted Free Cash Flow was calculated assuming realized commodity pricing received throughout the year was consistent with the forward curve pricing used to set the approved Adjusted Free Cash Flow Metric in March of 2022.

(2)   The impact of the changes to the Company’s 2022 capital program on the 2022 incentive payment results as described above consisted of capital expenditures of $67 million, which reduced the Capex metric and increased the Adjusted Free Cash Flow metric 2022 actual results by that amount. Additionally, the casing remediation and associated impacts consisted of a production impact of 14 MMcfe/day and capital expenditures of $21 million. These adjustments increased the production metric 2022 actual results by 14 MMcfe/day, reduced the Capex metric 2022 actual results by $21 million, reduced the LOE per Mcfe metric 2022 actual results by less than $0.01 per Mcfe, and increased the Adjusted Free Cash Flow metric 2022 actual results by $36 million. Without these adjustments, the payout percentage for each of the impacted metrics would have resulted in the following: production – 22%, Capex – 0%, LOE/MCFE – 11%, and Adjusted Free Cash Flow – 0%. These payout percentages would have resulted in a total achievement percentage of 76%.

2022 Target Annual STI Opportunities and Actual Annual STI Payments

The Compensation Committee established the target annual cash STI opportunity for each of the NEOs, taking into consideration the terms of any applicable employment agreement, and approved the following cash payments based on the Company’s 2022 results performance as described above.

2022 INCENTIVE COMPENSATION PLAN

Long-Term Incentive Awards

Each year we grant our NEOs long-term incentive awards, that have historically consisted of equity-based awards. The Compensation Committee determines the amount of these awards, as well as the mix of equity vehicles. The objectives of our long-term incentive plan are to: (i) create significant alignment between the interests of our NEOs and our stockholders; (ii) attract and retain the services of critical talent; and (iii) focus our executives on our sustained growth and financial success.

The Compensation Committee considers the grant date fair value of the long-term incentive package, the package’s potential dilutive effect on our outstanding shares of common stock and the number of shares available for grant under the 2021 Incentive Plan (as defined below) in determining the aggregate number of shares to be awarded as individual long-term incentive awards for our NEOs. The Compensation Committee evaluates stockholder dilution based on equity compensation plans compared to the total amount of the Company’s outstanding common stock. In determining the appropriate long-term incentive awards to grant NEOs other than the CEO, the Compensation Committee considers the recommendations of the CEO. The Compensation Committee reviewed market values with respect to the annual long-term incentive awards granted to similarly situated executives at the Compensation Peer Group. In 2022, the Compensation Committee determined that the CEO and CFO would receive equity grants consisting of 60% performance-based restricted stock units and 40% time-based restricted stock units. No grants were made to our other NEOs in 2022 as the grants made during 2021 were intended to cover a multi-year period.

The time-based restricted stock units granted to our CEO and CFO vest in equal annual installments over a three-year period.

The performance based restricted stock units vest after a three-year performance period, based on the Company’s achievement of relative TSR as compared to a peer group of companies and absolute TSR, in each case, as described in the chart below.

2022 Equity Awards