HOUSTON, Jan. 27, 2021 /PRNewswire/ -- Marathon Oil
Corporation (NYSE: MRO) today announced an update regarding its
environmental, social, and governance (ESG) performance, including
significant changes to its executive compensation framework as well
as new quantitative greenhouse gas (GHG) emissions reduction
initiatives. The Company believes continuously improving all
elements of its ESG performance is essential to successfully
executing its long-term strategy of maximizing shareholder value,
including the delivery of strong financial returns and sustainable
free cash flow while maintaining a solid balance sheet and
returning capital to shareholders.
Highlights
- CEO and Board total compensation reduced 25%1 with
Board compensation mix shifted more toward equity and CEO mix
further aligned with broader industry norms
- Short-term incentive (STI) scorecard simplified to focus on
Marathon's core financial and ESG framework
-
- Prioritizes safety, environmental performance, capital
efficiency, capital discipline/free cash flow generation, and
financial/balance sheet strength
- Production metrics eliminated from annual cash bonus
scorecard
- Long-term incentive (LTI) framework redesigned to mitigate
overreliance on relative total shareholder return (TSR) against
direct E&P peers
-
- S&P 500 and S&P Energy indices introduced as peer
comparators to promote improved performance vs. broader market
- Free cash flow generation incorporated into LTI framework
- Expect 2020 GHG emissions intensity reduction of approximately
20%2 vs. 2019; improved total Company gas capture to
98.5% for fourth quarter 2020
- Raising the bar on environmental performance with announcement
of quantitative GHG reduction initiatives
-
- Added 2021 GHG emissions intensity target to STI scorecard,
representing approximate 30% reduction to GHG emissions intensity
vs. 2019
- Announced medium-term goal to reduce GHG emissions intensity by
at least 50% by 2025 vs. 2019
- Achieved second consecutive year of record safety performance
in 2020, as measured by total recordable incident rate (TRIR) for
both employees and contractors
"To realize improved outcomes for all stakeholders, we believe
energy companies must deliver competitive financial results
relative to the S&P 500 while simultaneously driving meaningful
improvement to all elements of ESG performance," said President,
CEO and Chairman Lee Tillman.
"Marathon Oil has taken a leadership role in driving the changes
our industry needs, prioritizing free cash flow, debt reduction,
and return of capital to shareholders. We believe strong corporate
governance is foundational to delivering ultimate shareholder
value, and have modified our executive compensation framework to
further align management interests with stakeholders and to
incentivize the behaviors we believe are most important. We
are also announcing an ambitious goal to meaningfully reduce our
GHG emissions intensity by 2025, building on the momentum we
established in 2020. We believe oil and gas will be an essential
contributor to the transition to a lower carbon future and it is
imperative that the Company and our industry address the dual
challenge of meeting the world's growing energy demand while also
responding to the risk of climate change."
Governance and Executive Compensation
Marathon Oil is
fully committed to best-in-class corporate governance as its
foundation for executing its long-term strategy. The Company has
modified its executive compensation framework to enhance executive
alignment with shareholders, incentivize achievement of its core
strategic objectives, and encourage the behaviors the Company
believes are most likely to maximize long-term shareholder
value.
More specifically, the Company is reducing annual Board
compensation by 25% with the mix shifted more toward equity. The
Company is also reducing CEO total direct compensation by 25%,
including a 35% reduction to long-term incentive (LTI) awards.
These changes are intended to better align CEO compensation quantum
and mix with the broader industry and current business environment.
Other senior officers will also participate in total compensation
reductions and the Company's revised compensation program.
Marathon Oil's short-term incentive (STI) annual cash bonus
scorecard has been restructured to better reflect the Company's
financial and ESG framework. The scorecard has been simplified to
prioritize performance in 5 areas deemed critical for long-term
shareholder value creation: 1) safety (total recordable
incident rate); 2) environmental (GHG emissions intensity);
3) capital efficiency (corporate free cash flow breakeven);
4) capital discipline/free cash flow (reinvestment rate),
and 5) financial/balance sheet strength (cash flow per debt
adjusted share). All production and growth metrics have been
eliminated from the Company's annual bonus scorecard.
Additionally, the Company has revised its LTI compensation
framework, now focused on three vehicles, all of which are
denominated in shares: restricted stock units (RSUs), relative
total shareholder returns performance stock units (TSR PSUs), and
free cash flow performance stock units (FCF PSUs). The revised
framework is intended to mitigate an overreliance on relative TSR
against direct E&P peers by introducing the S&P 500 and
S&P Energy indices as peer comparators within the relative TSR
calculation to promote improved performance vs. the broader
market. Additionally, the introduction of FCF PSUs further
diversifies the LTI performance metrics and underscores the
Company's priority to generate sustainable free cash flow.
As announced previously, in January, the Company appointed
Brent Smolik, formerly of Noble
Energy Corporation, to its Board of Directors. Over half of the
Company's directors have now been appointed to their positions
since 2018, with average director tenure less than five years, well
below the S&P 500 average for 2020. Eight of nine directors are
independent and all committees are made up of entirely NYSE
independent directors. In addition to strong refreshment and
independence, the Board of Directors includes a diversity of
perspectives. Two of nine directors, including the chairs of the
Audit and Finance and Health, Environmental, Safety, and Corporate
Responsibility (HESCR) Committees, are female. Two of nine
directors self-identify as an ethnicity other than
Caucasian/White.
Environmental
Reducing greenhouse gas (GHG) emissions
intensity is central to Marathon Oil's strategic goals of
minimizing its environmental impact, addressing the risks of
climate change, and delivering strong long-term financial
performance.
During 2020, the Company made significant progress in improving
its environmental performance, achieving an estimated 20% reduction
to its GHG emissions intensity relative to 2019 and improving total
Company gas capture to approximately 98.5% for fourth quarter
2020.
For 2021, the Company has established a quantitative GHG
intensity target, representing a reduction of more than 30%
relative to 2019, which has been added to the Company's executive
compensation STI scorecard. Further, Marathon Oil has disclosed a
new medium-term goal highlighting the Company's commitment to
significant ongoing improvement to its environmental performance.
By 2025, the Company's goal is to reduce its GHG intensity by more
than 50% relative to 2019. The Company has already identified
concrete steps to assist in achieving this improvement, including
but not limited to continued replacement of pneumatic controllers
with lower emitting technology, connecting additional sites to
utility power, and investing in soil carbon sequestration to offset
emissions.
Safety
Marathon Oil views safety as a core value and a
key component of its ESG performance, as keeping its workforce
safe, both employees and contractors, is and always will be a top
priority. Importantly, 2020 represented the Company's second
consecutive year of record safety performance, as measured by TRIR.
As noted above, peer leading safety performance will remain a
component of the Company's executive compensation scorecard.
Methodology and definitions for GHG emissions and safety
performance are based on information from the Company's
2019 MRO Sustainability Report that
can be found on the Company's website. The Company reports direct
(Scope 1) and indirect (Scope 2) GHG emissions, with emissions
intensity measured by metric tonnes carbon dioxide equivalent
(CO2e) emissions per thousand barrels of oil equivalent
of hydrocarbons produced from Marathon Oil-operated facilities.
Footnotes:
1: Exclusive of temporary reductions announced in
2020
2: Preliminary estimate subject to final
calculation
Forward-looking Statements
This release
contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of
historical fact, including without limitation statements regarding
the Company's future capital budgets and allocations, GHG emissions
reduction initiatives, targets or goals, future performance,
business strategy and other plans and objectives for future
operations, are forward-looking statements. Words such as
"anticipate," "believe," "could," "estimate," "expect," "forecast,"
"future," "goal," "guidance," "intend," "may," "outlook," "plan,"
"positioned," "project," "seek," "should," "target," "will,"
"would," or similar words may be used to identify forward-looking
statements; however, the absence of these words does not mean that
the statements are not forward-looking. While the Company believes
its assumptions concerning future events are reasonable, a number
of factors could cause actual results to differ materially from
those projected, including, but not limited to: conditions in the
oil and gas industry, including supply/demand levels for crude oil
and condensate, NGLs and natural gas and the resulting impact on
price; changes in expected reserve or production levels; changes in
political or economic conditions in the U.S. and Equatorial
Guinea, including changes in foreign currency exchange rates,
interest rates, inflation rates; actions taken by the members of
the Organization of the Petroleum Exporting Countries (OPEC)
and Russia affecting the production and pricing of crude
oil; and other global and domestic political, economic or
diplomatic developments; capital available for exploration and
development; risks related to the Company's hedging activities;
voluntary or involuntary curtailments, delays or cancellations of
certain drilling activities; well production timing; liability
resulting from litigation; drilling and operating risks; lack of,
or disruption in, access to storage capacity, pipelines or other
transportation methods; availability of drilling rigs, materials
and labor, including the costs associated therewith; difficulty in
obtaining necessary approvals and permits; non-performance by third
parties of contractual obligations; unforeseen hazards such as
weather conditions, a health pandemic (including COVID-19), acts of
war or terrorist acts and the government or military response
thereto; cyber-attacks; changes in safety, health, environmental,
tax and other regulations, requirements or initiatives, including
initiatives addressing the impact of global climate change, air
emissions, or water management; other geological, operating and
economic considerations; and the risk factors, forward-looking
statements and challenges and uncertainties described in the
Company's 2019 Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other public filings and press releases, available
at https://ir.marathonoil.com/. Except as required by
law, the Company undertakes no obligation to revise or update any
forward-looking statements as a result of new information, future
events or otherwise.
Media Relations Contact:
Stephanie Gentry: 832-206-3746
Investor Relations Contacts:
Guy Baber: 713-296-1892
John Reid: 713-296-4380
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SOURCE Marathon Oil Corporation