GULFPORT ENERGY CORPORATION
3001 Quail Springs Parkway
Oklahoma City, Oklahoma 73134

PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION – JUNE 9, 2020

GULFPORT ENERGY CORPORATION

3001 Quail Springs Parkway
Oklahoma City, Oklahoma 73134

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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 of the information that you should consider in connection with the matters before the 2020 Annual Meeting of Stockholders (including any postponements or adjournments, the “Annual Meeting”). Please read the entire proxy statement carefully before voting your shares.

This proxy statement is being furnished to you in connection with the solicitation of proxies by the Board of Directors (the “Board” or the “Board of Directors”) of Gulfport Energy Corporation, a Delaware corporation (“Gulfport,” the “Company,” “we,” “our” or “us”) for use at the Annual Meeting. The notice and proxy statement are first being made available to stockholders on or about [X], 2020.

PROPOSALS REQUIRING YOUR VOTE. Our Board of Directors is soliciting your vote on the following matters:

Gulfport Energy Corporation operates in two of the premier gas-weighted plays in the United States – the Utica Shale play of Eastern Ohio and the South Central Oklahoma Oil Province (SCOOP) play in Oklahoma. Our corporate strategy is focused on the economic development of our asset base in an effort to generate sustainable free cash flow. Our substantial inventory of hydrocarbon resources, including unproved acreage positions in each of our key basins, provides a strong foundation to create future value. Concentrated blocks of unproved acreage provide us the opportunity to apply best-in-class techniques including optimum well spacing, leading completion practices and lateral length optimization to maximize overall capital efficiency. We have improved our capital and operating efficiency metrics over the last several years and today have a low-cost structure in both our Utica and SCOOP operating areas. We believe our low-cost structure provides a significant competitive advantage in the current commodity price environment, and it is our strategy to continue to seek capital and operating efficiencies to grow this advantage.

We continue focusing on reducing our leverage profile, increasing cash flow from operations, improving margins through financial discipline and operating efficiencies while at the same time maintaining strong health, safety and environmental performance. To accomplish these goals, we allocate capital to projects offering the highest rate of return, deploy leading drilling and completion techniques and technologies, and explore merger, acquisition and divestiture opportunities that strengthen our cost structure, deepen our inventory and improve our asset portfolio.

We believe that our dedication to financial discipline, the flexibility and efficiency of our capital program and our continued focus on safety and environmental stewardship provides opportunities for sustainable value creation.

Board Composition

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 [19] of this proxy statement. We ask you to vote “FOR” each of our director nominees.

(1)   Relevant experience in the industry; degree in the area

Employees and contractors are expected to live by, 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 Chief Executive Officer, David Wood, and Chief Operating Officer, Donnie Moore, 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, not only the authority, but also the 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 2019

•        Reduced reportable spills by 38% year-over-year

•        Reduced Total Recordable Incident Rate (combined employee and contractor) by 36% year-over-year

•        Reduced Lost Time Incident Rate (combined employee and contractor) by 82% year-over-year

•        Reduced our Preventable Motor Vehicle Accident rate by 85% year-over-year by implementing numerous initiatives, including a safe driver training and recognition program

Community Engagement.    Gulfport consistently strives to positively impact and improve the communities where we live and operate. We form partnerships focused on education and work with local authorities to ensure the safety and well-being of the populations where we operate. Gulfport has also formed a strong partnership with the Foundation for Appalachian Ohio and the Communities Foundation of Oklahoma and created the Gulfport Energy Fund in both Ohio and Oklahoma. Through these funds, Gulfport makes direct monetary contributions to local organizations to improve education, youth development, health, human services and environmental stewardship.

2019 demonstrated Gulfport’s unwavering commitment to capital discipline. Our ability to generate free cash flow, despite an extremely challenging price environment, was accomplished through the dedication of our team who worked to increase operational efficiencies, improve our cost structure and implement a strong hedging program. The table below highlights our 2019 strategic, operational and financial achievements.

Continue to Strengthen Compensation Governance Practices

Added Relative Total Stockholder Return (RTSR) performance-based LTI awards in 2019 for the first time.    After taking into consideration the input received from our stockholders and the recommendation of Pearl Meyer & Partners, LLC, the Compensation Committee’s independent compensation consultant (“Pearl Meyer”), the Compensation Committee determined that for 2019: (i) 50% of the equity awards granted to our named executive officers (NEOs) would consist of performance-based restricted stock units, vesting after a three-year performance period, based on the Company’s achievement of weighted average RTSR, with target performance set at the 55th percentile of the peer group, and a payout cap of 100% if the Company’s absolute Total Stockholder Return (TSR) is negative during the performance period in addition to a service condition requiring the executive’s continuous service through the last day of the performance period; and (ii) 50% of the equity awards granted to our NEOs will consist of time vesting restricted stock units, vesting over a three-year period.

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. The details of the executive compensation program and its pay for performance alignment are discussed in the “Compensation Discussion & Analysis (CD&A)” on page [37] of this proxy statement. This alignment is evident in the substantially lower realized pay received by our CEO relative to target levels as we did not achieve all of our target goals, as discussed in the CD&A.

Since the 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”), Gulfport 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 67% 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.

The Company is asking its stockholders to vote to elect eight directors to serve on the Board of Directors until the 2021 Annual Meeting of Stockholders (the “2021 Annual Meeting”) or until their respective successors have been duly elected and qualified.

Our Board of Directors currently consists of eight members who are elected annually. Seven of these eight directors are independent under the Nasdaq Stock Market (the “Nasdaq”) listing standards. Messrs. Houston and Westerman are not standing for re-election at the Annual Meeting.

The directors standing for election this year are listed below. All nominees named below have consented to being named in this proxy statement and to serve as directors of the Company if elected. It is expected that all nominees proposed by the Board will be able to serve on the Board if elected. If any nominee, however, 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 director nominees, directors or 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.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE FOLLOWING
NOMINEES FOR DIRECTOR.

C     Committee Chairperson.

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

Yes. The charters for each of our Committees can be found on our website at www.gulfportenergy.com under the “Investors — Corporate 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 General Counsel and Corporate Secretary, Patrick K. Craine, at Gulfport Energy Corporation, 3001 Quail Springs Parkway, Oklahoma City, Oklahoma 73134.

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:

Our Board of Directors has determined that seven of our eight current Board members (Deborah G. Adams, Alvin Bledsoe, Valerie Jochen, David L. Houston, Doug Johnson, Ben T. Morris and Paul D. Westerman), and our two director nominees (Mr. Somerhalder and Ms. Holroyd) meet the independence requirements in the Nasdaq 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. In determining Ms. Adams’ independence, the Board considered Ms. Adams’ service on the Board of Directors and the Audit and Compensation Committees of MRC Global Inc., a company listed on the New York Stock Exchange (the “NYSE”) from which we purchased products and services representing less than 1% of either Company’s revenues in 2019. In determining Mr. Westerman’s independence, the Board considered Mr. Westerman’s service on the Board of Directors of J-W Energy Company and J-W Power Company, which perform certain compression and related oilfield services to the Company representing less than 1% of either Company’s revenues in 2019.

Board and Committee Evaluations

Director Performance Evaluations

The Board of Directors met 14 times in 2019. In addition to these meetings, the Board of Directors adopted resolutions by unanimous written consent. Each director attended at least 93% of the aggregate meetings of the Board of Directors and the meetings of the Committees on which he or she served.

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

Individuals may communicate with our Board of Directors or individual directors by writing to our General Counsel and Corporate Secretary, Patrick K. Craine, at Gulfport Energy Corporation, 3001 Quail Springs Parkway, Oklahoma City, Oklahoma 73134. Our General Counsel and Corporate Secretary will review all correspondence and forward our Board of Directors correspondence that, in the opinion of our General Counsel 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 our stockholders an opportunity to communicate with directors about issues affecting the Company, we actively encourage our directors to attend the Annual Meeting. All eight of our directors then serving attended the 2019 Annual Meeting in person or telephonically.

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 – Corporate Governance” captions.

Bylaw Amendment for Stockholder Vote Standard

On May 29, 2020, the Board of Directors amended our Second Amended and Restated Bylaws (as amended, the “Bylaws”) to permit our stockholders to amend the Bylaws by the affirmative vote of at least a majority of all outstanding shares of capital stock of the Company entitled to vote in the election of directors. As part of its commitment to best-in-class corporate governance, the Board of Directors regularly evaluates opportunities to improve the Company’s governance features. The Board of Directors determined, in light of evolving corporate governance practices, that it would be in the best interest of our stockholders to replace the supermajority vote standard required for stockholders to amend the Bylaws with a majority vote standard. The Board of Directors believes that adopting this majority standard will balance the opportunity for stockholders to participate meaningfully in the corporate governance of the Company with the desire to protect the interests of all stockholders from action that may only be in the interest of a small portion of stockholders.

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 Sustainability 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.

Aircraft Use Policy

In February 2019, we adopted an aircraft use policy for aircraft chartered or owned by the Company. We restrict personal use of Company-owned or chartered aircraft by our executive officers and other employees, as well as by members of our Board of Directors. Our aircraft use policy requires that any personal use of Company-owned or chartered aircraft by any NEO be reported as a perquisite, based on the aggregate incremental value of such personal use. There was no personal use of Company-owned or chartered aircraft in 2019.

Director Qualifications

As provided by the Nominating and Corporate Governance Committee’s charter, our Nominating and Corporate Governance Committee identifies, investigates and recommends to our Board of Directors candidates with the goal of creating a balance of knowledge, experience and diversity. The Committee identifies candidates through the use of 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 Nasdaq and the SEC and that all 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 to provide sound and prudent guidance with respect to our operations and the interests of our stockholders.

Board Diversity Policy

Our Nominating and Corporate Governance Committee is dedicated to diversity and adopted a Board Diversity Policy in November 2019. The policy requires that the Nominating and Corporate Governance Committee consider diversity in its evaluation of candidates for Board membership. Our Nominating and Corporate 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 and Corporate Governance Committee in identifying director candidates to seek to include diverse candidates from traditional and nontraditional candidate groups. In accordance with its charter, our Nominating and Corporate 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 and Corporate 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 General Counsel 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 serving as a director if elected and being named in the proxy or information statement and certain information regarding the status of the stockholder submitting the recommendation, all in the manner required by 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, the materials will be forwarded to our Board of Directors. See “Submission of Future Stockholder Proposals” on page [91] of this proxy statement for additional detail regarding submitting director nominees.

Our Board of Directors may also review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a stockholder. In evaluating nominations, our Board of Directors will seek to achieve a balance of knowledge, experience and diversity on the Board. Our Board of Directors uses the same criteria for evaluating candidates nominated by stockholders as it does for those proposed by current Board members, professional search firms and other persons. After completing its evaluation, our Board of Directors approves the final slate of director nominees.

Role of Chairman and Chief Executive Officer

The positions of Chairman of the Board and Chief Executive Officer are held by two different individuals, and the Chairman of the Board is a non-executive position elected from among the directors by the Board. Separating the positions of Chairman of the Board and Chief Executive Officer allows our Chief Executive Officer to focus on business development strategies as well as our day-to-day business and operations, while allowing our Chairman of the Board to lead the Board in its fundamental role of providing advice to and oversight of management. The Chairman of the Board provides leadership to our Board of Directors and works with the Board of Directors to define its structure and activities in the fulfillment of its responsibilities.

The duties of the non-executive Chairman of the Board include:

•        Presiding at meetings of our Board of Directors and stockholders;

•        Setting board agendas with the input from other members of the Board and our management;

•        Facilitating communication among and information flow to directors;

•        Calling special meetings of our Board of Directors and stockholders; and

•        Advising and counseling our Chief Executive Officer and other officers.

Our Board of Directors does not have a lead director.

Directors

We believe that our directors bring a broad range of leadership experience to the boardroom and regularly contribute to the thoughtful discussion involved in effectively overseeing the business and affairs of the Company. We believe that the atmosphere of our Board is collegial, that all Board members are well engaged in their responsibilities and that all Board members express their views and consider the opinions expressed by other directors. Seven out of eight director nominees are independent under the Nasdaq listing standards and SEC rules. We believe that all our independent directors have demonstrated leadership in business enterprises and are familiar with Board processes. Our independent directors are involved in the leadership structure of our Board by serving on our Audit, Nominating and Corporate Governance, Sustainability and Compensation Committees, comprised entirely of independent directors and each having an independent chairperson.

Committee Chairs

Specifically, our Audit Committee Chair oversees the accounting and financial reporting processes and compliance with legal and regulatory requirements. Our Compensation Committee Chair oversees our compensation policies and practices and their impact on risk and risk management. The Chair of our Sustainability Committee oversees our practices relating to health, safety and environmental protections, as well as social and governance matters. Our Nominating and Corporate Governance Committee Chair monitors matters related to Board and Committee composition, Board performance and best practices in corporate governance. As such, each Committee Chair provides independent leadership for purposes of many important functions delegated by our Board of Directors to each Committee.

While our management team is responsible for the day-to-day management of risks, the Board of Directors has primary responsibility for risk oversight. Boards typically exercise this oversight during regular Board meetings, but our Board of Directors also maintains constant and open dialogue with management and reviews and monitors key processes. As a result, they are better able to respond to emerging risks and to influence our strategy to address those risks.

While our Board of Directors is ultimately responsible for risk oversight at the Company, our four Committees assist the Board in fulfilling its oversight responsibilities in the areas of risk below:

The following table sets forth the name, age, positions and business experience of each of our executive officers (other than David M. Wood, who also serves as a member of our Board and who is listed under “Election of Directors and Director Biographies” on page [19] of this proxy statement):

As members of Gulfport’s Compensation Committee, our goal is to create an executive compensation program that promotes long-term value creation for our stockholders, strikes the right balance of pay for performance, attracts and retains an exceptionally talented executive team and steers Gulfport’s leadership to meet ambitious goals without taking undue risk. This framework was of particular importance in fiscal year 2019, which was very much a transformative year for the Company, in light of changes made to both our senior management team and our Board. The Committee recognizes that as Gulfport continues to evolve, our executive compensation programs have been, and will continue to be, essential to our ongoing success through this period of meaningful change.

Our refreshed Compensation Committee brought new ideas and viewpoints. In 2019, we approved a number of changes to the composition of our leadership teams and Committees. As part of this refreshment, Mr. Morris assumed the role of Committee Chair, and Mr. Bledsoe joined the Committee as a new member in 2020. Over the past 12 months, we performed an in-depth review of the Company’s executive compensation plans which included an assessment of peer groups, total compensation philosophy, equity usage and appropriate incentive metrics and governance practices while reflecting on the feedback of our stockholders received during the course of our ongoing engagement efforts.

We implemented a number of changes and decisions to support the Company’s transformation. In fiscal year 2019, we:

•        Aligned CEO pay with industry benchmark peer group data for base pay, short-term and long-term incentives after reviewing median pay data for other similar positions provided by the independent consultant to the Board;

•        Introduced performance-based equity awards in the form of performance-based restricted stock units tied to RTSR, vesting over a three-year performance period, comprising 50% of all equity awards granted in 2019;

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

•        Adopted 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; and

•        Introduced free cash flow and production per debt-adjusted share metrics into the annual incentive plan and replaced the qualitative strategic initiative metric with quantifiable health, safety and environmental targets.

We conducted a substantial stockholder outreach effort that included the Committee Chair and management. This effort involved meeting and having a robust dialog with stockholders representing over 67% of the Company’s outstanding common stock. We were glad to hear support for bringing in a talented group of executives as our refreshed management team, and for implementing specific changes to the program that would help further promote transparency and alignment. We remain committed to maintaining healthy and productive ongoing conversations with our stockholders as we guide Gulfport through our shared future and will continue to consider the different viewpoints of our stockholders as we discuss future enhancements to our compensation programs.

We believe that the changes in the development of our program follow the input we have heard and are the right steps to align our management team with our financial and strategic goals. We have the highest confidence in the skills and leadership of our new CEO and his entire Gulfport senior management team, and we look forward to continued execution of our business strategy.

Thank you for your confidence and investment in Gulfport Energy.

Respectfully submitted by the Compensation Committee,

Ben T. Morris, Chairman

Dated: May 27, 2020

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, the next three highest paid executives for 2019 and two former executives who departed from the Company during 2019. These officers, known as our NEOs, are:

2019 was a challenging year for the oil and natural gas industry. Our ability to generate free cash flow despite a declining price environment was made possible by our strong commitment to capital discipline and the dedication and focus of our operations teams who worked to optimize efficiencies and improve our cost structure throughout the year. We continued to simplify our portfolio by divesting non-core assets and utilizing sale proceeds to improve our balance sheet through discounted bond repurchases, taking advantage of opportunities to retire debt on a heavily discounted basis.

Key accomplishments in 2019 included:

Strategic

•        Enhanced senior management team with hiring of a highly-qualified CFO and General Counsel and Corporate Secretary;

•        Completed non-core asset divestitures that generated $49 million in proceeds in 2019; closed additional non-core divestiture for $50 million in January 2020;

•        Reduced Company headcount by 13%, the majority of which was achieved through a voluntary program; and

•        Refreshed key finance, accounting and control functions through several key management hires.

Financial

•        Generated free cash flow in a challenged commodity price environment;

•        Repurchased $190 million of bonds in the open market capturing $50 million discount;

•        Reduced general and administrative expense by 4% to $48 million from $50 million during 2018;

•        Ended 2019 with available borrowing of $636 million; further enhanced with $50 million non-core asset divestiture in January 2020; and

•        Significantly improved financial planning and analysis process to optimize performance.

Operational

•        Increased production 1% year-over-year while reducing capital expenditures by 26% year-over-year;

•        Reduced our unit lease operating expense by 10% to $0.17 per Mcfe year-over-year; and

•        Reduced average SCOOP drilling days by 36% and Utica by 12% year-over-year.

Health, Safety & Environmental

•        Reduced reportable spills 38% year-over-year;

•        Reduced Total Recordable Incident Rate (combined employee and contractor) 36% year-over-year;

•        Reduced Loss Time Incident Rate (combined employee and contractor) 82% year-over-year; and

•        Reduced Preventable Motor Vehicle Accident (PMVA) rate 85% year-over-year by implementing numerous initiatives, including a safe driver training and recognition program.

Corporate Social Responsibility

•        Awarded approximately 30 educational and environmental grants through the Ohio Gulfport Energy Fund and the Oklahoma Gulfport Energy Fund during 2019;

•        Awarded grants for programs that improve the lives of more than 15,000 individuals in our operating counties in Ohio;

•        Partnered with the Imagination Library in Ohio to provide books to more than 7,900 children in Belmont, Jefferson and Monroe Counties;

•        Provided educational grants through the Oklahoma Gulfport Energy Fund that will benefit more than 5,000 Oklahomans; and

•        Participated in a partnership with the American Heart Association and sponsorships with the American Red Cross, Big Brothers Big Sisters of Oklahoma, National Kidney Foundation, St. Jude and the United Way.

In consideration of our long-term strategy and considering stockholder feedback following a robust program of engagement (see “Proposal to Approve on an Advisory, Non-Binding Basis, the Compensation Paid to the Company’s Named Executives” on page [73] of this proxy statement), the Company took the following actions in 2019:

•        Implemented key changes to the equity award structure in 2019:

•        (i) 50% of the equity awards granted to our NEOs consisting of performance-based restricted stock units, vesting after a three-year performance period, based on the Company’s achievement of targeted weighted average RTSR during the performance period and the executive’s continuous service through the last day of the performance period with target performance set at the 55th percentile of the peer group and a cap of 100% in case of negative absolute TSR; and

•        (ii) 50% of the equity awards granted to our NEOs will consist of time-vesting restricted stock units, vesting over a three-year period;

•        Adjusted annual performance bonus opportunities and long-term equity award targets to more closely align our executives’ financial interests with those of our stockholders and to continue to link a larger portion of each executive’s compensation to the performance of our stock and operational performance;

•        Modified metrics in the annual incentive plan to include financial metrics directly tied to the financial health of the Company and including specific and quantifiable health, safety and environmental metrics:

•        Added a Free Cash Flow metric to further align with long-term value creation, peer benchmarking and stockholder feedback; and

•        Evaluated annual incentive award achievement, resulting in a payout of 50% against preset, aggressive targets for 2019, and included achievement of predetermined HSE goals as measured against improvement on 2018 results;

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

•        Enhanced the senior leadership team with the hiring of Patrick Craine as the General Counsel and Corporate Secretary in May 2019 and Quentin Hicks as Chief Financial Officer in August 2019;

•        Entered into employment agreements with our CEO, CFO, COO and General Counsel to evidence the terms and conditions of their employment, their compensation and severance benefits and their obligations to Gulfport during their employment and thereafter (e.g., confidentiality, non-solicitation, etc.);

•        Adjusted the base salaries of our CEO and our COO to reflect competitive pay levels when compared to other median base pay levels for similar positions at peer firms. Mr. Wood’s base salary was set at $834,000 and Mr. Moore’s base salary was set at $505,000, which more accurately reflected base pay at the 50th percentile for the CEO and COO positions as compared to our compensation peer group. No other changes to our NEOs’ base salaries were made during 2019; and

•        Adopted 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.

Philosophy and Objectives

Our executive compensation philosophy is guided by the following objectives:

Our executive compensation programs play an important role in helping us achieve our business objectives and effectively reward executive officers for our Company’s annual and long-term performance and individual contributions to performance.

Overview of NEO Total Direct Compensation Components for Fiscal Year 2019

As part of our compensation philosophy, the Compensation Committee places a significant portion of NEO pay at risk, with the largest single component of pay in the form of long-term equity awards, which for 2019 is equally divided between performance-based and time-vesting equity awards vesting over a three-year period.

Emphasis on At-Risk Variable Compensation

Benchmarking Against Our Compensation Peer Group

Gulfport utilizes a peer group of companies, or the Compensation Peer Group, as a reference point when establishing both compensation levels for executives and program structures to achieve competitiveness in the market.

2019 Compensation Peer Group

The Compensation Committee directed its independent compensation consultant to conduct a thorough review of the Compensation Peer Group for 2019. It was decided after that review that significant changes were needed to properly position the peer group against similarly situated companies. Some of the companies were removed following mergers or acquisitions that left the surviving company as either not publicly-traded or no longer a suitable peer. The companies added to the 2019 Compensation Peer Group reflected a peer group of North American, onshore exploration and production companies that compete with Gulfport Energy for people, resources and investments and are appropriate comparators given factors such as market capitalization, revenue, production and oil and gas product mix.

The revision of the Compensation Peer Group resulted in relative alignment of Gulfport’s key metrics at the time the peer group was established, as follows: 2019 Projected Revenue=55%; Market Cap=38%; Enterprise Value=49% and Commodity Mix=21%. This represents, on average, Gulfport’s close alignment to the median of the 2019 Compensation Peer Group. The table below shows companies removed or added as peers to formulate the final 2019 Compensation Peer Group:

The Compensation Committee of our Board of Directors oversees our compensation programs for executive officers and all employees. During 2019, the Compensation Committee was comprised of Deborah G. Adams, Craig Groeschel, David L. Houston, Ben T. Morris, Scott Streller and Paul D. Westerman, all of whom 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 quarter of each year. These decisions include:

•        Certifying annual performance-based incentive awards;

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

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

•        Granting long-term 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, our lead representative to the investment community and other criteria. The total compensation package is ultimately 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.

Each year, 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

The Compensation Committee has retained Pearl Meyer as its independent compensation consultant. For 2019, Pearl Meyer assisted the Compensation Committee in developing a competitive total compensation program that is consistent with our philosophy of goal-oriented pay for performance. This allows us to attract, retain and motivate talented executives. Pearl Meyer’s services included providing an annual analysis of the compensation of our top executive officers and their counterparts at peer companies, as well as the peer group review described above. The analysis compares each element of compensation and total direct compensation awarded by Gulfport and our peers. In addition, Pearl Meyer helped the Compensation Committee consider the allocation between annual incentive and long-term equity-based compensation and between the types of long-term equity-based incentive awards. Pearl Meyer 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.

During early 2019, Pearl Meyer provided input to the Compensation Committee with respect to the executive compensation program design for 2019, the metrics and targets under the Company’s annual incentive plan for 2019 and considerations relevant to the Compensation Committee’s 2019 compensation decisions.

Pearl Meyer reported exclusively to the Compensation Committee. The Compensation Committee reviewed the independence of Pearl Meyer and determined that there were no conflicts of interest as a result of the Compensation Committee’s engagement.

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

During 2019, management engaged Frederic W. Cook & Co., Inc., or FW Cook, to serve as management’s outside compensation consultant, who provided market data and other information to management in connection with the design of the Company’s executive compensation program for 2019, including a review of base salary, total cash compensation and total direct compensation levels for the Chief Executive Officer and other senior executives. Certain of the market data and other information provided by FW Cook was also made available to the Compensation Committee and Pearl Meyer.

Base Salary

The Compensation Committee engaged Pearl Meyer to review the overall competitiveness of our executive compensation programs for 2019, 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 executive officer 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 one factor when determining the base pay for NEOs.

Other factors the Compensation Committee considers in determining base pay for each of the NEOs are: the executive officer’s responsibilities, experience, leadership, potential future contribution and demonstrated individual performance. The relative weighting of these factors varies by executive depending on his or her position and responsibilities. In August 2019, the base salaries of our CEO and COO were adjusted to reflect competitive pay levels when compared to other similar positions after reviewing median base pay levels at our Company’s selected peer group firms. As reflected in the employment agreements for Mr. Wood and Mr. Moore, which were entered into effective August 1, 2019, Mr. Wood’s base salary was set at $834,000, and Mr. Moore’s base salary was set at $505,000, which more accurately reflected base pay at the 50th percentile for the CEO and COO positions as compared to our compensation peer group. Mr. Hicks’ base salary was set at $425,000 in his employment agreement entered into on August 9, 2019. Mr. Craine’s base salary was set at $435,000 upon his hire date of May 20, 2019. No other changes were made to NEOs’ base salaries during 2019.

Annual Incentive Awards

The Compensation Committee established a performance-based annual incentive program for 2019 that tied our executives’ 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.

2019 Annual Incentive Bonus Metrics

In 2019, the Compensation Committee continued to incentivize our executives to increase Gulfport’s value through our pay for performance Annual Incentive Plan. This Annual Incentive Plan aligns our executives’ interests with those of our stockholders by making the executive compensation heavily dependent on increasing Gulfport’s operational and financial performance, as well as rewarding our executives for executing the Company’s long-term strategic goals, including in the areas of health, safety and environmental responsibility. The Compensation Committee, after carefully reviewing the operational plan and commodity pricing forecast for 2019, established performance targets as described below in the first quarter of 2019.

To achieve these objectives, the Compensation Committee, consistent with market practices, identified critical performance metrics that are based on objective criteria, including total stockholder return relative to the Company’s peer group for 2019 and stimulating appropriate levels of growth versus capital efficiencies, and established a set of balanced metrics discussed below and assigned weights that it deemed appropriate to each metric. In setting these metrics and assigning weights, the Compensation Committee carefully considered each of these metrics’ impact on our business, profitability, production and stockholder return, as well as our desire to balance operational, financial and stockholder return targets with the goal to execute on our strategic goals and continue to improve our safety and environmental record, including the following specific considerations:

•        Free Cash Flow Metric (35%).    This metric is a strong measure of our Company’s health as it improves ability for future investment and is aligned with Company strategy and investor expectations. We define free cash flow as cash flow from operating activities before changes in operating assets and liabilities less capital expenditures incurred. This metric was integrated into the 2019 annual incentive bonus plan in direct response to our stockholders’ feedback.

•        Return on Average Capital Employed Metric (20%).    This metric is a strong capital efficiency measure which measures the Company’s balance sheet health through two core metrics of debt and profitability and is aligned with investor expectations.

•        Cash Flow Margin (Adjusted EBITDA per MCFE) Metric (20%).    This metric is a good indicator of operating efficiency and profitability and is aligned with investor expectations. We define this measure as EBITDA less non-cash derivative change in fair value, litigation settlement, insurance proceeds, rig terminations fees, restructuring costs, gain on debt extinguishment, non-recurring general and administrative expenses and loss from equity method investments divided by our total production on an MCFE basis.

•        Production Per Debt Adjusted Share Metric (15%).    This metric motivates maintenance of balance sheet strength while pursuing growth, keeps the incentive plan from rewarding growth at all costs and is aligned with Company strategy and investor expectations. This metric is measured on a per debt adjusted share basis, calculated as outstanding debt at year-end divided by share price plus total shares outstanding.

•        Health, Safety and Environmental (10%).    This metric is focused on balancing our operational targets with our commitment to continue improving in the areas of environmental responsibility, motor vehicle safety and other health and safety initiatives.

The 2019 annual incentive thresholds, targets and maximums set by the Compensation Committee were based on predetermined financial and key performance measures determined in the first quarter of 2019. The Compensation Committee reviewed financial results, as disclosed below, and key performance indicators and approved 2019 payout results based on those achievements which resulted in an overall payout of 50% of target awards. Below is a summary of results for 2019.

2019 STI Metrics

(1)  Based on 36% decrease in Total Recordable Incident Rate year-over-year, 82% decrease in loss-time injuries year-over-year, 38% reduction in reportable spills year-over-year, and 85% reduction in preventable motor vehicle accidents year-over-year.

2019 Target Annual Incentive Opportunities and Actual Annual Incentive Payments

The Compensation Committee established the target annual incentive opportunity for each NEO, taking into consideration the terms of any applicable employment agreement, and approved the following payments based on the Company’s 2019 performance as described above.

(1)  Mr. Hicks’ and Mr. Craine’s annual incentive payments were pro-rated based on their hire dates.

(2)   Ms. Crowell and Mr. Maier terminated employment with the Company during 2019, and did not receive an annual incentive payment for 2019.

Inducement/Sign-On Bonus

Pursuant to Mr. Hicks’ employment agreement, Mr. Hicks received a one-time $150,000 cash inducement bonus when he joined the Company. Additionally, Mr. Craine received a sign-on bonus of $50,000 and Mr. Sluiter received a sign-on bonus of $150,000 in 2019.

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.

Subsequent Events

Pursuant to our Current Report on Form 8-K, filed with the SEC on March 17, 2020, Gulfport approved a new form of incentive plan which allows for the grant of cash awards in 2020 and thereafter, in each case, subject to the achievement of one or more performance goals or service-based compensation conditions.

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 companies as well as executive compensation data provided by Pearl Meyer and FW Cook when determining the appropriate value of awards to grant for 2019. The Compensation Committee targeted long-term equity-based incentive opportunity at approximately the median of the Compensation Peer Group. Awards were made after the financial results for the most recently completed fiscal quarter had been reported. The Compensation Committee had an opportunity to evaluate the Company’s operating results for 2018 and at the same time the Company was making its major compensation decisions for 2019.

For 2019, in response to our stockholders’ feedback, the Compensation Committee determined that for our NEOs: (i) 50% of the equity awards will consist of performance-based restricted stock units, vesting after a three-year performance period, based on the Company’s achievement of targeted weighted average RTSR in comparison to the peer group during the performance period and the executive’s continuous service through the last day of the performance period, and (ii) 50% of the equity awards will consist of time-vesting restricted stock units, vesting over a three-year period commencing on the one-year anniversary of the grant. TSR for a company is its average fair market value for the 20-trading days at the end of the performance period, minus its average fair market value for the 20-trading days ending on the first day of the performance period, plus dividends paid per share of common stock during the performance period, divided by the fair market value on the first day of the performance period. The RTSR generally requires the Company’s TSR to be ranked at the 55th percentile of the peer group to result in target payout of 100%, and any payout is capped at 100% if absolute TSR is negative over the measurement period.

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 2019 Amended and Restated Stock Incentive Plan (“the Stock Incentive Plan”) in determining the aggregate number of shares to be awarded as individual long-term incentive awards for our executives. The Compensation Committee evaluates stockholder dilution based on equity compensation “burn rates,” which refers to a measure of the speed at which companies use (or burn) shares available for grant in their 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. In 2019, we provided long-term incentive awards for our NEOs at target levels that, on average, were aligned with the 50th percentile of our Compensation Peer Group, depending on their respective targeted total direct compensation. Mr. Wood, who joined us as our Chief Executive Officer and President on December 18, 2018, received his long-term incentive awards in February of 2019, which was approved by stockholders at the 2019 Annual Meeting. In determining the equity awards to be granted to Mr. Wood in connection with his employment, the Compensation Committee considered the total compensation of top executives at the companies in the 2019 Compensation Peer Group, Mr. Wood’s extensive experience as an executive and director in public oil and gas companies and the competitive hiring environment for top executives.

2019 Long-Term Incentive Awards – Introduced Performance-Based LTI Awards

The Compensation Committee has determined equity awards granted to our NEOs in 2019 would be equally divided between performance-based restricted stock units tied to RTSR, vesting at the end of a three-year cumulative performance period as compared to the 2019 Compensation Peer Group, and time-vesting restricted stock units, vesting ratably over a three-year period.

For the performance-based restricted stock units, the Compensation Committee selected the RTSR performance measure because it believes executive pay under a long-term, capital accumulation program such as this should mirror our long-term performance in stockholder return as compared to other public companies in our industry. Payments pursuant to the performance-based restricted stock units will be made in Company stock.

From 0% to 200% of the target award will be paid out following a three-year performance period (January 1, 2019 to December 31, 2021) based upon the Company’s TSR relative to the TSR of companies in our 2019 Compensation Peer Group; provided that the grantee must remain in continuous employment with the Company through December 31, 2021. Based on the Company’s RTSR rank among the 2019 Compensation Peer Group for the performance period, a grantee will receive a payout equal to a percentage of the target award determined by the Company’s percentile rank as follows:

For percentile ranks falling between the 30th and 55th percentile or between the 55th and the 80th percentile of the 2019 Compensation Peer Group, the payout percentage of the target award will be linearly interpolated based on the actual percentile ranking of the Company in relation to the payout levels. If the Company’s absolute TSR is negative, the payout percentage will be limited to a maximum of 100% of the target award.

While any payout for the performance-based restricted stock units would occur after the performance period (2019-2021) and would be based on the RTSR of Gulfport Energy stock, the period-to-date performance is below the threshold performance goal and would not result in any payout at this time.

Equity Awards – Performance-based Restricted Stock Units/Time-vesting Restricted Stock Units

Payments with respect to performance-based restricted stock unit awards (PSUs) are only earned if performance measurements are achieved and the individual continues to be employed at the end of the performance period. Payments with respect to time-vesting restricted stock unit awards (RSUs) are only earned if the individual continues to be employed by us on each applicable vesting date of the award. The following table provides each NEO’s annual target equity award and the total number of performance-based and time-vesting restricted stock unit awards provided to each NEO in August 2019 as part of the annual compensation review process, after giving consideration to their respective targeted total direct compensation and, for Mr. Wood, in accordance with the terms of his appointment.

(1)   On February 26, 2019, in accordance with the terms of his appointment and his offer letter, Mr. Wood was granted an award of 121,951 time-vesting restricted stock units granted under the Stock Incentive Plan, with a value of $1,000,000 determined based on the closing price

per share of our common stock on The Nasdaq Global Market on February 25, 2019. In addition, he received a grant of 228,659 time-vesting restricted stock units that will vest annually in three approximately equal installments beginning February 26, 2020 and 228,659 performance-based restricted stock units that will vest based on performance and continued service over a three-year period, in accordance with the Stock Incentive Plan.

(2)   Mr. Hicks, who was appointed as our Executive Vice President, Chief Financial Officer on August 26, 2019, did not receive any equity awards in 2019.

(3)   Mr. Craine, who joined the Company as Executive Vice President, General Counsel and Corporate Secretary, effective May 20, 2019, was granted an inducement award of 71,942 restricted stock units under the Stock Incentive Plan, with a value of $386,329, determined based on the closing price per share of common stock on the Nasdaq Global Market on June 6, 2019. In addition, he received a grant of 140,323 time-vesting restricted stock units that will vest annually in three approximately equal installments beginning August 6, 2020 and 140,323 performance-based restricted stock units that will vest based on performance and continued service over a three-year period, in accordance with the Stock Incentive Plan.

(4)   Mr. Sluiter, who joined the Company as Senior Vice President of Reservoir Engineering, effective December 3, 2018. On February 26, 2019, in accordance with the term of his appointment and offer letter, Mr Sluiter was granted an inducement award of 119,993 restricted stock units under the Stock Incentive Plan, with a value of $983,943, determined based on the closing price per share of common stock on the Nasdaq Global Market on February 25, 2019. In addition, he received a grant of 116,129 time-vesting restricted stock units that will vest annually in three approximately equal installments beginning August 6, 2020 and 116,129 performance-based restricted stock units that will vest based on performance and continued service over a three-year period, in accordance with the Stock Incentive Plan.

(5)   Mr. Maier separated from the Company as Senior Vice President of Geosciences, effective December 20, 2019. All unvested stock units were forfeited in connection with Mr. Maier’s departure in December 2019.

Compensation Risk Management

The Compensation Committee reviews the risks and rewards associated with our compensation policies and programs. We believe that our policies and programs encourage and reward prudent business judgment, encourage short-term stockholder value creation, and prioritize long-term growth by discouraging excessive risk taking. Specific elements of compensation include:

•        Integrated Approach – Our programs balance short- and long-term incentives for our executive officers by providing an appropriate mix of fixed, performance-based, discretionary and equity compensation, with the goal of creating both short- and long-term stockholder value.

•        Attract Top Talent – Annual base salaries for our NEOs do not encourage excessive risk-taking as they are fixed amounts that are subject to discretionary increases by our Compensation Committee that may be based on, among other factors, annual performance evaluations. We believe that annual base salaries are set at reasonable levels, as compared to the base salaries of similarly-situated individuals at our peer group companies, and do not negate the effect of other compensation elements that encourage long-term service, growth and performance that may increase stockholder value.

•        Support Business Objectives and Strategic Goals – Our annual incentive awards are determined based on Company and individual performance measures, both operational and strategic, which mitigate excessive risk-taking that could produce unsustainable gains in one area of performance at the expense of our overall long-term interests. The Company’s goals are designed to ensure a proper balance between stock performance, operational measures, financial goals and strategic goals. In addition, the Compensation Committee sets performance goals that it believes are reasonable considering our past performance, then-current business projections and market conditions.

•        Pay for Performance – The Compensation Committee believes that performance-based equity awards tied to RTSR and cash compensation, with meaningful performance targets, such as those under the Annual Incentive Plan, will further align our executives’ interests with those of our stockholders, will motivate our executives to contribute to the Company’s growth and profitability and will link a larger portion of our executives’ compensation to the performance of the Company.

•        Maximize Stockholder Value – Our annual incentive awards are subject to maximum payout caps that limit the amount an executive may earn on inputs for certain of our operational measures.

•        Create Ownership Culture – Performance-based and time-vesting restricted stock unit awards, in each case, vesting over a three-year period, granted to our executive officers, as well as the implementation of robust stock ownership guidelines for our executive officers and non-employee directors, promote stock ownership culture and ensure that

our executives and directors have a continuing stake in the long-term success of the Company. We believe that our long-term equity awards to our executive officers discourage excessive risk taking, as they are equally balanced between performance-based and time-vesting awards and moderates the risk that may otherwise exist if equity awards were to vest based strictly on achieving certain targets.

The Compensation Committee believes that the Company utilizes compensation policies and programs that minimize risks that may have a material adverse impact on the Company.

Clawback Provisions

Under the Sarbanes-Oxley Act of 2002, incentive compensation received by our Chief Executive Officer and Chief Financial Officer may be subject to clawback in the event of a restatement of our financial statements. Under the Stock Incentive Plan, each award pursuant to the Stock Incentive Plan is conditioned on repayment or forfeiture in accordance with applicable laws, our Company policies and any relevant provisions in the related award agreements. Further, under the terms of our employment agreements effective as of January 1, 2017, with Ms. Crowell and Mr. Maier, August 1, 2019, with Messrs. Wood, Moore, and Craine, and August 9, 2019 with Mr. Hicks (the “Employment Agreements”), any equity awards granted, any proceeds of any equity awards that previously have been sold, transferred or otherwise disposed of, and any annual incentive award will be subject to clawback by us, now or in the future, under the Dodd-Frank Act and the Sarbanes-Oxley Act, each as amended, and their rules, regulations and binding, published guidance.

Stock Ownership Guidelines for Executive Officers

We believe it is important for our executive officers to align their financial interests with those of our stockholders. Accordingly, effective January 1, 2019, our Board of Directors adopted a formal stock ownership policy that requires our CEO to achieve a stock ownership level equal to the value of common stock that is five times the value of his annual base salary within five years of the effective date of the stock ownership policy. The Compensation Committee also designated that NEOs are subject to the stock ownership policy. The stock ownership level for our NEOs is three times the value of their respective annual base salaries to be achieved within five years of the effective date of our stock ownership policy. None of our executive officers have been in their position long enough to be required to meet the minimum stock ownership guidelines, however all are on track to do so within the prescribed timeframe, either through expected grants or open market purchases made by several executives.

Our non-employee directors are also subject to the stock ownership policy discussed above under “Stock Ownership Guidelines for Directors.”

Anti-Hedging and Pledging Policies

We have a policy prohibiting directors, executive officers and certain other designated employees from speculative trading in our securities, including hedging transactions, short selling, and trading in put options, call options, swaps or collars or holding our securities in margin accounts. We also have a policy prohibiting directors, executive officers and certain other designated employees from pledging Gulfport securities. To our knowledge, all individuals are in compliance with these policies.

Termination and Change of Control Benefits

As noted above, certain of our NEOs are (or were formerly) parties to Employment Agreements with the Company which provides (or provided) for certain payments and benefits in the event of a termination under specific circumstances. The agreements are designed to avoid distraction potentially detrimental to stockholder value upon a change in control and to enhance protection for the executives in connection with such events. These agreements are described in more detail under “Employment Agreements and Termination and Change of Control Benefits.”

Perquisites and Other Personal Benefits

We provide certain of our NEOs with a limited number of perquisites or other personal benefits, primarily consisting of life insurance premiums, Company-sponsored sporting events tickets, and in Mr. Wood and Mr. Hicks’ cases, customary relocation and moving expenses. We believe these limited benefits help provide a competitive compensation package. The value of these benefits is disclosed in the “Summary Compensation Table.”

In February 2019, we adopted an aircraft use policy for aircraft chartered or owned by the Company. We restrict personal use of Company-owned or chartered aircraft by our executive officers and other employees, as well as by members of our Board of Directors. Our aircraft use policy requires that any personal use of Company-owned or chartered aircraft by any NEO be reported as a perquisite, based on the aggregate incremental value of such personal use. There was no personal use of Company-owned or chartered aircraft in 2019.

Accounting Implications of Executive Compensation Policy

We are required to recognize compensation expense of all stock-based awards pursuant to the provisions of FASB ASC Topic 718, “Compensation-Stock Compensation.” Under U.S. generally accepted accounting principles, or GAAP, only vested shares are included in basic shares outstanding. Also, under GAAP, non-vested shares are included in diluted shares outstanding when the effect is dilutive.

The Compensation Committee believes that linking a large portion of our executive officers’ compensation to both performance-based long-term equity incentive awards and performance-based bonus arrangements, with meaningful performance metrics, appropriately aligns our executives’ interests with those of our stockholders and are consistent with market practices. The Compensation Committee also believes that our current compensation policies and practices enhance retention of executive talent through multi-year vesting of stock awards and discourage unnecessary and excessive risk taking. The Compensation Committee further believes that our other compensation policies and practices, such as our policy prohibiting pledging and hedging of our stock by our executive officers and directors, as well as the lack of significant perquisites and absence of pension or supplemental retirement benefits (aside from those afforded under our broad-based 401(k) plan) for our executive officers are consistent with prudent compensation philosophy and the interests of our stockholders. The Compensation Committee will continue to consider the outcome of our stockholders’ future “say-on-pay” votes when making compensation decisions for our NEOs.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on its review and discussion with management, the Compensation Committee recommended that the Compensation Discussion and Analysis be included in this proxy statement.

Respectfully submitted by the Compensation Committee:

Ben T. Morris, Chairman

Deborah G. Adams

Alvin Bledsoe

Dated: May 27, 2020

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee during the past fiscal year is or has ever been an officer or employee of ours, or has engaged in any related party transaction in which our Company was a participant. None of our executive officers during the past fiscal year serves, or has served during the past fiscal year, as a member of the Board of Directors or Compensation Committee of any other company that has one or more executive officers serving, or that has served during the past fiscal year, as a member of our Board of Directors or Compensation Committee.

The following table provides information concerning each grant of an award made to our NEOs in the fiscal year ended December 31, 2019 under any Company plan.

(1)   Reflects performance-based annual incentives granted under the 2019 Annual Incentive Plan and assumes threshold performance achievement on all metrics as described above.

(2)   Reflects performance-based restricted stock units granted under the 2019 Long Term Incentive Plan.

(3)   Reflects time-vesting restricted stock units granted under the Stock Incentive Plan.

(4)   The amounts reported for performance and time-based restricted stock units in the “Grant Date Fair Value of Stock Awards” column reflect the fair value of the applicable awards on the award date. The amounts were calculated in accordance with FASB ASC Topic 718 using certain assumptions, as set forth in Note 1 and Note 7 to our consolidated financial statements for the fiscal year ended December 31, 2019 under the headings “Summary of Significant Accounting Policies — Accounting for Stock-based Compensation” and “Stock-Based Compensation,” respectively, included in our Annual Report on Form 10-K, filed with the SEC on February 27, 2020.

(5)   Mr. Hicks’ and Mr. Craine’s annual incentive awards were pro-rated based on their hire dates.

The following table provides information concerning equity awards outstanding for our NEOs and our next three most highly paid executive officers at December 31, 2019.

(1)   Market value of shares or units that have not vested is based on the closing price of $3.04 per share of our common stock on the Nasdaq Global Select Market on December 31, 2019, the last trading day of 2019.

(2)   Performance-based restricted stock units granted during 2019 shown at the threshold level based on results for the first year of the 2019-2021 performance period. The performance units awarded in 2019 will vest based on performance and continued service over a three-year period, and payout occurs in shares of common stock or cash at the end of the three-year period.

(3)   Mr. Wood was granted an inducement award amount of 121,951 restricted stock units under the Plan, that will vest annually in three approximately equal installments beginning February 26, 2020. In addition, he received a grant of 228,659 restricted stock units that will vest annually in three approximately equal installments beginning February 26, 2020, and 228,659 performance-based restricted stock units that will vest based on performance and continued service over a three-year period, in accordance with the plan, per the terms of his offer letter, which was approved by stockholders at the 2019 Annual Meeting.

(4)   Mr. Hicks, who was appointed as our Chief Financial Officer on August 26, 2019, did not receive any equity awards in 2019.

(5)   Mr. Moore’s award of 137,143 restricted stock units was granted on February 19, 2018, of which 45,714 vested on February 27, 2019, 45,714 vested on February 27, 2020 and the remaining 45,715 restricted stock units will vest on February 27, 2021. In addition, Mr. Moore received a grant of 242,742 restricted stock units that will vest in three approximately equal installments beginning August 6, 2020, and 242,742 performance share units that will vest based on performance and continued service over a three-year period, in accordance with the plan.

(6)   Mr. Craine received an inducement award of 71,942 restricted stock units that will vest in three approximately equal installments beginning June 6, 2020. In addition, he received a grant of 140,323 restricted stock units that will vest in three approximately equal installments beginning August 6, 2020, and 140,323 performance share units that will vest based on performance and continued service over a three-year period, in accordance with the plan.

(7)   Mr. Sluiter received an inducement award of 119,993 restricted stock units that will vest in three approximately equal installments beginning February 26, 2020. In addition, he received a grant of 116,129 restricted stock units that will vest in three approximately equal installments beginning August 6, 2020, and 116,129 performance share units that will vest based on performance and continued service over a three-year period, in accordance with the plan.

(8)   Ms. Crowell separated from the Company as Chief Financial Officer, effective August 9, 2019. All of Ms. Crowell’s unvested restricted stock or restricted stock units were forfeited as of that date.

(9)   Mr. Maier separated from the Company as Senior Vice President of Geosciences, effective December 20, 2019. All of Mr. Maier’s unvested restricted stock or restricted stock units were forfeited as of that date.

The following table provides the number of shares acquired upon vesting of restricted stock awards for our named executive officers.

(1)   Value realized on vesting is based on the vesting date closing price per share of our common stock on The Nasdaq Global Select Market. If the vesting date was not a trading day, the value is based on the closing price per share of our common stock on The Nasdaq Global Select Market on the last trading day prior to the vesting date.

(2)   Mr. Wood was appointed to serve as our Chief Executive Officer and President, and as a member of our Board of Directors, effective December 18, 2018. On February 26, 2019, Mr. Wood received an inducement award of 121,951 restricted stock units and a long-term equity incentive award of 228,659 restricted stock units which will vest in three approximately equal installments. None of his previous grants vested in 2019.

(3)   Mr. Hicks, who was appointed as our Chief Financial Officer on August 26, 2019, did not receive any equity awards in 2019.

(4)   Mr. Craine joined the Company as General Counsel and Corporate Secretary on May 24, 2019. He received an inducement award of 71,942 on June 6, 2019, and a long-term equity incentive award of 140,323 restricted stock units on August 6, 2019, which will vest in three approximately equal installments. None of his previous grants vested in 2019.

(5)   Mr. Sluiter joined the Company as Senior Vice President of Reservoir Engineering, effective December 3, 2018. He received an inducement award of 119, 993 on February 26, 2019, and a long-term equity incentive award of 116,129 restricted stock units on August 6, 2019, which will vest in three approximately equal installments. None of his previous grants vested in 2019.

(6)   Ms. Crowell separated from the Company on August 9, 2019. All of Ms. Crowell’s remaining unvested restricted stock awards were forfeited as of that date.

(7)   Mr. Maier separated from the Company on December 20, 2019. All of Mr. Maier’s remaining unvested restricted stock or restricted stock units were forfeited as of that date.

We maintain a retirement savings plan, or a 401(k) Plan, for the benefit of our eligible employees who have attained the age of 18. Currently, employees may elect to defer their compensation up to the statutorily prescribed limit. During the year, we make a safe harbor contribution equal to 3% of each eligible employee’s eligible annual compensation with each pay period. We also have the ability to make an additional, discretionary contribution based on each eligible employee’s eligible annual compensation for the prior calendar year. Both contributions are made, regardless of employees’ deferrals into the plan. In 2019, we made safe harbor contributions of 3% and discretionary contributions of 3% of eligible compensation for eligible employees, subject to certain limitations provided by our 401(k) Plan and Internal Revenue Service (“IRS”) regulations. All contributions made by us on behalf of an employee are 100% vested when contributed. The 401(k) Plan is intended to qualify under Sections 401(a) and 501(a) of the Code. Contributions to the 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) Plan, and all contributions are deductible by us when made.

The Stock Incentive Plan, which amended and restated our 2013 Restated Stock Incentive Plan, was adopted and approved by our stockholders during the 2019 Annual Meeting. The Stock Incentive Plan authorizes the grant of various forms of stock-based compensation, referred to as equity awards. The Board believes that stock-based compensation is a very important factor in attracting and retaining experienced and talented employees who can contribute significantly to the management, growth and profitability of our business. This authorization enabled us to attract and retain the services of the types of employees, consultants and directors who will contribute to our long-term success and to provide incentives that are linked directly to increases in share value that will benefit our stockholders. The Board believes that stock-based compensation is critical for alignment of the interests of our management with the interests of our stockholders. The availability of equity awards not only increases employees’ focus on the creation of stockholder value, but also enhances employee retention and generally provides increased motivation for our employees to contribute to the future success of the Company.

The Stock Incentive Plan provides eligible recipients an opportunity to receive awards and benefit from increases in value of our common stock through the granting of incentive stock options, nonstatutory stock options, restricted awards (restricted stock and restricted stock units), performance awards and stock appreciation rights. The Compensation Committee serves as the plan administrator and as of December 31, 2019, an aggregate of 9,306,056 shares of restricted common stock, restricted stock units and incentive stock options had been granted under this plan and there remained 3,193,944 shares available for future grants under this plan. The amendment and restatement of the Stock Incentive Plan added 5,000,000 shares to the Stock Incentive Plan’s share reserve, by increasing the maximum number of shares available for issuance from 7,500,000 shares to 12,500,000 shares.

The 2014 Annual Incentive Compensation Plan, or Annual Incentive Plan, was approved by our Board of Directors on April 1, 2014, and by our stockholders at the 2014 Annual Meeting of Stockholders on June 11, 2014. Our executive officers and selected employees are eligible to receive awards under the Annual Incentive Plan. The Annual Incentive Plan provides for awards of incentive compensation that are contingent on the attainment of specific performance targets. Under the Annual Incentive Plan, the Compensation Committee, as the plan administrator, establishes the performance targets for each award and the performance period during which the performance is to be measured, which will generally be our fiscal year. Performance targets may include a minimum level of performance below which no payment will be made, levels of performance at which specified percentages of the award will be paid, and a maximum level of performance above which payment will be capped at the highest specified percentage.

Performance targets for each award will be based on pre-established performance factors that may relate to the performance of the Company or the performance of a business unit, product line, territory or any combination of these. Performance targets for employees who are not executive officers may also be based on other additional objective or subjective performance criteria established by the plan administrator.

The plan administrator may at any time establish additional conditions and terms of payment of awards, including additional financial, strategic or individual goals, which may be objective or subjective.

Unless the plan administrator provides otherwise, a participant must be employed by us on the date that awards are paid to receive an award payment, except in the case of death or disability. If a participant dies or becomes disabled during a performance period, the participant (or the participant’s beneficiary) will receive a pro-rated award payment at the same time all other awards are paid for the performance period. In the event of a change in control, each named executive officer will be paid the target award amount (mid-point of any specified range of potential award payment amount) based on the assumption that the performance target was attained at the target level (mid-point of any specified range of performance targets) for the entire performance period. The target award amount will be paid within 10 days following the consummation of the change in control transaction.

The plan administrator may at any time amend or terminate the Annual Incentive Plan in whole or in part.

Our Board of Directors has delegated its authority to administer the Annual Incentive Plan to the Compensation Committee, to whom we refer as the plan administrator. The plan administrator has the authority to administer the Annual Incentive Plan and to exercise all the powers and authorities either specifically granted to it under the Annual Incentive Plan or necessary or advisable in the administration of the Annual Incentive Plan, including (but not limited to) the following:

•        Interpret the Annual Incentive Plan and any award;

•        Prescribe rules relating to the Annual Incentive Plan;

•        Determine the persons to receive awards;

•        Determine the terms, conditions, restrictions and performance criteria, including performance factors and performance targets, relating to any award;

•        Accelerate an award that is designed not to be deferred compensation subject to Code Section 409A (after the attainment of the applicable performance target or targets);

•        Adjust performance targets in recognition of specified events such as unusual or non-recurring events affecting us or our financial statements, including certain asset dispositions, cessation of operations resulting from a natural disaster, or in response to changes in applicable laws, regulations, or accounting principles as specified in the Annual Incentive Plan or in the performance targets established for any performance period;

•        Waive restrictive conditions for an award (but not performance targets); and

•        Make any other determinations that may be necessary or advisable for administration of the Annual Incentive Plan.

The following table sets forth, as of December 31, 2019, certain information with respect to all compensation plans under which equity securities are authorized for issuance.30

(1)   Refers to the Stock Incentive Plan (which amended and restated our 2013 Restated Stock Incentive Plan, which in turn, amended and restated our Amended and Restated 2005 Stock Incentive Plan) and our 1999 Stock Option Plan.

(2)   Includes an aggregate of 4,672,300 unvested restricted stock units and shares of unvested restricted stock granted under the Stock Incentive Plan.

(3)   No options were outstanding as of December 31, 2019, and neither restricted stock units nor shares of restricted common stock have an exercise price.

Employment Agreements and Termination and Change of Control Benefits

As indicated above, certain of our NEOs are (or were formerly) parties to an Employment Agreement with the Company. Pursuant to the Employment Agreements (“Current Employment Agreements”) with Messrs. Wood, Moore, Hicks and Craine (“Covered NEOs”), each Current Employment Agreement provides for an initial term that extends through December 31, 2023; provided that the agreement will automatically renew for successive one-year terms unless the Company or the Covered NEOs gives written notice not to renew at least 90 days before the end of the initial term or any renewal term. If a change of control (as described in the Current Employment Agreement) occurs during the term thereof, the term will be extended to the later of the original expiration date of the term or the date that is 24 months after the effective date of the change of control. The Current Employment Agreements provide each Covered NEO with, among other things: (i) an annual base salary of $834,000, $505,000, $425,000 and $435,000, for Messrs. Wood, Moore, Hicks and Craine, respectively, (ii) eligibility to earn a target annual bonus under the Company’s annual incentive plan equal to 125%, 100%, 90% and 90% of base salary for Messrs. Wood, Moore, Hicks and Craine, respectively, (iii) eligibility for annual grants of equity awards as determined in the sole discretion of the Compensation Committee pursuant to the Company’s equity compensation plans; provided that, with respect to the calendar year ending December 31, 2020, each of Messrs. Wood, Moore, Hicks and Craine will receive awards that have a target aggregate fair value of 500%, 350%, 200% and 200% of base pay, respectively, and (iv) benefits that are customarily provided to similarly situated executives of the Company. In addition, our Covered NEOs will be entitled to receive specified payments and benefits upon certain termination events pursuant to the Current Employment Agreements, including termination following a change of control. The Compensation Committee believes that these provisions will encourage our Covered NEOs to remain in our employment in the event of a change of control of the Company and during circumstances which indicate that a change of control might occur. The Compensation Committee believes termination and change of control benefits are important in maintaining strong leadership and in encouraging retention in these situations and encourages our Covered NEOs to act in the best interests of stockholders without distraction based on uncertainty regarding their employment status. Under the Current Employment Agreements, if a Covered NEO’s employment is terminated without “cause” by the Company or by the Covered NEO for “good reason” during such time that is not within the 24 month period following a “change of control” (as such terms are defined or described in the Current Employment Agreements), such Covered NEO will be entitled to severance compensation equal to:

•        100% of annual base salary and target annual bonus;

•        pro-rata target annual bonus;

•        pro-rata vesting of the Covered NEO’s unvested equity awards (with performance award vesting based on performance through the termination date);

•        immediate vesting of any Company matching or other contributions to the Company’s non-qualified deferred compensation plans, if any (“Company Non-Qualified Contributions”); and

•        a lump sum payment equal to the Covered NEO’s monthly COBRA premium for a 12-month period.

If, however, such Covered NEO’s employment is terminated without cause by the Company or by the Covered NEO for good reason, in each case, within 24 months following a change of control, such Covered NEO will be entitled to severance compensation equal to:

•        200% of annual base salary and target annual bonus;

•        pro-rata target annual bonus;

•        immediate vesting of the Covered NEO’s unvested equity awards (with performance award vesting based on performance through the termination date);

•        immediate vesting of any Company Non-Qualified Contributions; and

•        a lump sum payment equal to the Covered NEO’s monthly COBRA premium for an 18-month period.

Under the Current Employment Agreements:

“Good reason” is generally defined as (i) the elimination of the Covered NEO’s position, a material reduction in the duties and/or reassignment of the Covered NEO to a new position of materially less authority; or (ii) a material reduction in the Covered NEO’s base salary, in either case, subject to a cure period of 30 days.

“Cause” is generally defined as (i) the Covered NEO’s willful and continued failure to perform substantially such Covered NEO’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) or (ii) the Covered NEO’s willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

Severance benefits payable under the Current Employment Agreements are generally conditioned on timely execution of a waiver and release of claims. Each such Current Employment Agreement also contains a one-year post-employment non-solicitation clause and standard confidentiality, trade secrets and cooperation provisions.

We previously entered into Employment Agreements (the “Legacy Employment Agreements”) with each of Keri Crowell, our former Chief Financial Officer, and Stuart Maier, our former Senior Vice President of Geosciences, each effective as of January 1, 2017.

Ms. Crowell and Mr. Maier each agreed to certain restrictive covenants in his or her Legacy Employment Agreement, including such executive’s agreement (i) not to interfere with any of our employees, suppliers, vendors, joint venturers or licensors and not to solicit our customers or employees, in each case during such executive’s employment with us and for a period of two years thereafter, (ii) not to disclose our confidential information or trade secrets and (iii) not to compete with us while using our trade secrets. Upon a termination without “cause,” the Legacy Employment Agreements provided that the applicable executive would be entitled to receive (i) any accrued benefits (defined below), (ii) severance pay in an amount equal to one months’ base salary for each full year of employment with us, not to exceed 12 months, and (iii) COBRA coverage as required by applicable law; provided that, in the case of clauses (ii) and (iii), the executive continues to comply with the restrictive covenants described above and the executive executes a full general release in our favor.

On August 9, 2019, Ms. Crowell separated from the Company. As part of her severance arrangement, Ms. Crowell was paid, $362,500 and reimbursement for COBRA benefits for a period of up to 12 months. Ms. Crowell forfeited any unvested shares upon her termination. In addition, Mr. Maier separated from the Company effective December 20, 2019, as part of a headcount reduction program. As part of his severance arrangement, Mr. Maier was paid, $7,103 for COBRA benefits for a period of up to 12 months. Mr. Maier forfeited any unvested shares upon his termination.

The following tables provide information regarding potential payments as of December 31, 2019 to each of our named executive officers as of December 31, 2019 in connection with certain termination events, including a termination related to a change of control of the Company.