UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Pioneer Natural Resources Company
--------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------
1
PIONEER NATURAL RESOURCES COMPANY
5205 North O'Connor Boulevard
Suite 900
Irving, Texas 75039
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Pioneer Natural Resources Company:
Notice is hereby given that the Annual Meeting of Stockholders of Pioneer
Natural Resources Company (the "Company") will be held in the Carrollton Room at
the Dallas Marriott Las Colinas Hotel, 223 West Las Colinas Blvd., Irving, Texas
75039, on Thursday, May 13, 2004, at 9:00 a.m. Central Time (the "Annual
Meeting"). The Annual Meeting is being held for the following purposes:
1. To elect three directors, each for a term of three years.
2. To ratify the selection of Ernst & Young LLP as the auditors of the
Company for the current year.
3. To transact such other business as may properly come before the
Annual Meeting.
These proposals are described in the accompanying proxy materials. You will
be able to vote at the Annual Meeting only if you are a stockholder of record at
the close of business on March 17, 2004.
YOUR VOTE IS IMPORTANT
Please date, sign and return the enclosed Proxy promptly so that your
shares may be voted in accordance with your wishes and so we may have a quorum
at the Annual Meeting. Instead of returning the paper proxy, you may vote via
the Internet at www.continentalstock.com,our transfer agent's website. Have your
proxy card in hand when you access this website.
By Order of the Board of Directors,
/s/ Mark L. Withrow
----------------------------------------------
Mark L. Withrow
Secretary
Irving, Texas
April 2, 2004
2
PIONEER NATURAL RESOURCES COMPANY
5205 North O'Connor Boulevard
Suite 900
Irving, Texas 75039
PROXY STATEMENT
2004 ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors of the Company requests your Proxy for the Annual
Meeting of Stockholders that will be held Thursday, May 13, 2004, at 9:00 a.m.
Central Time, in the Carrollton Room at the Dallas Marriott Las Colinas Hotel,
Irving, Texas 75039. By granting the Proxy, you authorize the persons named on
the Proxy to represent you and vote your shares at the Annual Meeting. Those
persons will also be authorized to vote your shares to adjourn the Annual
Meeting from time to time and to vote your shares at any adjournments or
postponements of the Annual Meeting.
You may grant your Proxy by signing, dating and returning the enclosed
paper proxy card. Instead of returning the paper proxy card, you may complete a
proxy card electronically through the Internet by accessing the website of the
Company's transfer agent at www.continentalstock.com. See "Internet Voting"
below.
If you attend the Annual Meeting, you may vote in person. If you are not
present at the Annual Meeting, your shares may be voted only by a person to whom
you have given a proper proxy, such as the accompanying Proxy or the Internet
Proxy. You may revoke the Proxy in writing at any time before it is exercised at
the Annual Meeting by delivering to the Secretary of the Company a written
notice of the revocation, by signing and delivering to the Secretary of the
Company a Proxy with a later date or by submitting your vote electronically
through the Internet with a later date. Your attendance at the Annual Meeting
will not revoke the Proxy unless you give written notice of revocation to the
Secretary of the Company before the Proxy is exercised or unless you vote your
shares in person at the Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy are first being sent or given to stockholders of the Company on or about
April 7, 2004.
QUORUM AND VOTING
Voting Stock. The Company has one outstanding class of securities that
entitles holders to vote generally at meetings of the Company's stockholders:
common stock, par value $.01 per share. Each share of common stock outstanding
on the record date is entitled to one vote.
Record Date. The record date for stockholders entitled to notice of and to
vote at the Annual Meeting is the close of business on March 17, 2004. At the
record date, 120,024,319 shares of common stock were outstanding and entitled to
be voted at the Annual Meeting.
Quorum and Adjournments. The presence, in person or by Proxy, of the
holders of a majority of the votes eligible to be cast at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting.
If a quorum is not present, the stockholders entitled to vote who are
present in person or by Proxy at the Annual Meeting have the power to adjourn
the Annual Meeting from time to time, without notice other than an announcement
at the Annual Meeting, until a quorum is present. At any adjourned Annual
Meeting at which a quorum is present, any business may be transacted that might
have been transacted at the Annual Meeting as originally notified.
Vote Required. Directors will be elected by a plurality of the votes
present and entitled to be voted at the Annual Meeting. Ratification of the
selection of the Company's auditors will require the affirmative vote of the
holders of a majority of the shares present and entitled to be voted at the
Annual Meeting. An automated system that the Company's transfer agent
administers will tabulate the votes. Brokers who hold shares in street name for
customers are required to vote shares in accordance with instructions received
3
from the beneficial owners. Brokers are permitted to vote on discretionary items
if they have not received instructions from the beneficial owners, but they are
not permitted to vote (a "broker non-vote") on non-discretionary items absent
instructions from the beneficial owner. Abstentions and broker non-votes will
count in determining whether a quorum is present at the Annual Meeting. Both
abstentions and broker non-votes will not have any effect on the outcome of
voting on director elections. For purposes of voting on the ratification of the
selection of auditors, abstentions will be included in the number of shares
voting and will have the effect of a vote against the proposal, and broker
non-votes will not be included in the number of shares voting and therefore will
have no effect on the outcome of the voting.
Default Voting. A Proxy that is properly completed and returned will be
voted at the Annual Meeting in accordance with the instructions on the Proxy. If
you properly complete and return a Proxy, but do not indicate any contrary
voting instructions, your shares will be voted as follows:
o FOR the election of the three persons named in this Proxy Statement as the
Board of Directors' nominees for election to the Board of Directors.
o FOR the ratification of the selection of Ernst & Young LLP as the Company's
auditors.
If any other business properly comes before the stockholders for a vote at the
meeting, your shares will be voted in accordance with the discretion of the
holders of the Proxy. The Board of Directors knows of no matters, other than
those previously stated, to be presented for consideration at the Annual
Meeting.
ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated the following individuals for election
as Class I Directors of the Company with their terms to expire in 2007 when
their successors are elected and qualified:
R. Hartwell Gardner
James L. Houghton
Linda K. Lawson
Messrs. Gardner and Houghton and Mrs. Lawson are currently serving as
Directors of the Company. Their biographical information is contained in the
"Directors and Executive Officers" section below.
The Board of Directors has no reason to believe that any of its nominees
will be unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to accept nomination or election, either the number of the Company's
directors will be reduced or the persons acting under the Proxy will vote for
the election of a substitute nominee that the Board of Directors recommends.
The Board of Directors recommends that stockholders vote FOR the election
of each of the nominees.
ITEM TWO
SELECTION OF AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young
LLP as the auditors of the Company for 2004. Ernst & Young LLP have audited the
Company's financial statements since 1998. The 2003 audit was completed on
January 26, 2004.
Audit Fees. The aggregate fees billed by Ernst & Young LLP for professional
services rendered for the audits of the Company's annual financial statements on
Forms 10-K, reviews of the Company's quarterly financial statements on Forms
10-Q and reviews of the Company's other filings with the Securities and Exchange
Commission (the "SEC") including comfort letters, consents and other research
4
work necessary to comply with generally accepted auditing standards for the
years ended December 31, 2003 and 2002 were $505,642 and $535,756, respectively.
Audit-Related Fees. The aggregate fees earned by Ernst & Young LLP for
audit-related services provided to the Company totaled $10,000 and $13,661
during the years ended December 31, 2003 and 2002, respectively. Audit-related
services were comprised of audits of the Company's benefit plans.
Tax Services Fees. The aggregate fees earned by Ernst & Young LLP for tax
services provided to the Company totaled $68,903 and $73,116 during the years
ended December 31, 2003 and 2002, respectively. Tax services were primarily
comprised of tax return preparation services for expatriates and the Company's
Argentine subsidiaries.
Other Fees. During the year ended December 31, 2003, the aggregate fees
earned by Ernst & Young LLP for other professional services provided to the
Company totaled $13,335. Other services provided to the Company by Ernst & Young
LLP were primarily comprised of employee benefit advisory services. No other
services were provided to the Company by Ernst & Young LLP during the year ended
December 31, 2002.
The Charter of the Company's Audit Committee of the Board of Directors
requires that the Audit Committee review and pre-approve the plan and scope of
Ernst & Young LLP audit, audit-related, tax and other services. The Audit
Committee pre-approved 100 percent of the services provided by Ernst & Young
LLP.
The Company expects that representatives of Ernst & Young LLP will be
present at the Annual Meeting to respond to appropriate questions and to make a
statement if they desire to do so.
The audit report of Ernst & Young LLP on the Company's annual financial
statements for 2003, 2002 and 2001 did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as to uncertainty or
audit scope.
In connection with the audits of the Company's annual financial statements
for 2003, 2002 and 2001, there were no disagreements with Ernst & Young LLP on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to the
satisfaction of such independent accountants, would have caused such independent
accountants to make reference to the matter in their audit report.
The Board of Directors recommends that stockholders vote FOR ratification
of the selection of Ernst & Young LLP.
5
DIRECTORS AND EXECUTIVE OFFICERS
After the Annual Meeting, assuming the stockholders elect the nominees of
the Board of Directors as set forth in "Item One - Election of Directors" above,
the Board of Directors and executive officers of the Company will be:
Name Age Position
Scott D. Sheffield...... 51 Chairman of the Board, President and Chief
Executive Officer
A. R. Alameddine........ 57 Executive Vice President - Worldwide Business
Development
Chris J. Cheatwood...... 43 Executive Vice President - Worldwide Exploration
Timothy L. Dove......... 47 Executive Vice President and Chief Financial
Officer
Danny L. Kellum......... 49 Executive Vice President - Domestic Operations
Mark L. Withrow......... 56 Executive Vice President, General Counsel and
Secretary
James R. Baroffio....... 72 Director
Edison C. Buchanan...... 49 Director
R. Hartwell Gardner..... 69 Director
James L. Houghton....... 73 Director
Jerry P. Jones.......... 72 Director
Linda K. Lawson......... 58 Director
Charles E. Ramsey, Jr... 67 Director
Robert A. Solberg....... 58 Director
The Company has classified its Board of Directors into three classes.
Directors in each class are elected to serve for three-year terms and until
either reelected or their successors are elected and qualified. Each year, the
directors of one class stand for reelection as their terms of office expire.
Messrs. Gardner and Houghton and Mrs. Lawson are designated as Class I Directors
and their terms of office expire at the Annual Meeting. Messrs. Baroffio,
Buchanan and Sheffield are designated as Class II Directors and their terms of
office expire in 2005. Messrs. Jones, Ramsey and Solberg are designated as Class
III Directors and their terms of office expire in 2006.
Executive officers serve at the discretion of the Board of Directors.
Set forth below is biographical information about each of the Company's
executive officers and directors named above.
Scott D. Sheffield. Mr. Sheffield, a distinguished graduate of the
University of Texas with a Bachelor of Science degree in Petroleum Engineering,
has been the President and Chief Executive Officer of the Company since August
1997, and assumed the position of Chairman of the Board in August 1999. He was
the Chairman of the Board and Chief Executive Officer of Parker & Parsley
Petroleum Company ("Parker & Parsley") from October 1990 until the formation of
the Company in August 1997. Mr. Sheffield joined Parker & Parsley Development
Company ("PPDC"), a predecessor of Parker & Parsley, as a petroleum engineer in
1979. Mr. Sheffield served as Vice President - Engineering of PPDC from
September 1981 until April 1985, when he was elected President and a Director.
In March 1989, Mr. Sheffield was elected Chairman of the Board and Chief
Executive Officer of PPDC. Before joining PPDC, Mr. Sheffield was employed as a
production and reservoir engineer for Amoco Production Company.
A. R. Alameddine. Mr. Alameddine, who joined the Company in July of 1997 as
Vice President of Domestic Business Development, has been Executive Vice
President - Worldwide Business Development since November 2003. Prior to joining
the Company, Mr. Alameddine spent 26 years with Mobil Exploration and Production
Company ("Mobil"). At the time of his departure from Mobil, Mr Alameddine was
the Acquisition, Trade and Sales Manager, a position he had held since 1990.
Prior to1990, Mr. Alameddine held several managerial positions in the
acquisition and sales group as well as in the reservoir-engineering department.
A native of Lebanon, Mr. Alameddine joined Mobil as an Operations Engineer
following his graduation from Louisiana State University in 1971 with a Bachelor
of Science degree in Petroleum Engineering.
6
Chris J. Cheatwood. Mr. Cheatwood was elected Executive Vice President -
Worldwide Exploration in January 2002. Mr. Cheatwood joined the Company in
August 1997 and was promoted to Vice President - Domestic Exploration in July
1998 and Senior Vice President - Exploration in December 2000. Before joining
the Company, Mr. Cheatwood spent ten years with Exxon Corp. where his focus
included exploration in the Deepwater Gulf of Mexico. Mr. Cheatwood is a
graduate of the University of Oklahoma with a Bachelor of Science degree in
Geology and earned his Master of Science degree in Geology from the University
of Tulsa.
Timothy L. Dove. Mr. Dove was elected Executive Vice President and Chief
Financial Officer in February 2000. Prior to that, Mr. Dove held the position of
Executive Vice President - Business Development since August 1997. Mr. Dove
joined Parker & Parsley in May 1994 as Vice President - International and was
promoted to Senior Vice President - Business Development in October 1996, in
which position he served until August 1997. Before joining Parker & Parsley, Mr.
Dove was employed with Diamond Shamrock Corp., and its successor, Maxus Energy
Corp., in various capacities in international exploration and production,
marketing, refining, and planning and development. Mr. Dove earned a Bachelor of
Science degree in Mechanical Engineering from Massachusetts Institute of
Technology in 1979 and received his M.B.A. in 1981 from the University of
Chicago.
Danny L. Kellum. Mr. Kellum, who received a Bachelor of Science degree in
Petroleum Engineering from Texas Tech University in 1979, was elected Executive
Vice President - Domestic Operations in May 2000. From January 2000 until May
2000, Mr. Kellum served as Vice President - Domestic Operations. Mr. Kellum
served as Vice President - Permian Division from August 1997 until December
1999. From 1989 until 1994 he served as Spraberry District Manager and as Vice
President of the Spraberry and Permian Division for Parker & Parsley until
August of 1997. Mr. Kellum joined Parker & Parsley as an operations engineer in
1981 after a brief career with Mobil Oil Corporation.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University
with a Bachelor of Science degree in Accounting and Texas Tech University with a
Juris Doctorate degree, has been the Executive Vice President, General Counsel
and Secretary of the Company since August 1997. He served as Vice President -
General Counsel of Parker & Parsley from February 1991 until January 1995, and
served as Senior Vice President, General Counsel of Parker & Parsley from
January 1995 until August 1997. He was Parker & Parsley's Secretary from August
1992 until August 1997. Mr. Withrow joined Parker & Parsley in January 1991.
Before joining Parker & Parsley, Mr. Withrow was the managing partner of the law
firm of Turpin, Smith, Dyer, Saxe & MacDonald in Midland, Texas.
James R. Baroffio. Dr. Baroffio received a Bachelor of Arts degree in
Geology at the College of Wooster, Ohio, an M.S. in Geology at Ohio State
University, and a Ph.D. in Geology and Civil Engineering at the University of
Illinois. Before becoming a Director of the Company in December 1997, Dr.
Baroffio enjoyed a long career with Chevron Oil Corporation where he served as
President, Chevron Research and Technology Center and V.P. Exploration and
eventually retired as President of Chevron Canada Resources in 1994. Dr.
Baroffio was Chairman of the U.S. National Committee of the World Petroleum
Congress and is currently a Trustee Associate of the AAPG Foundation. His
community leadership positions included Chairman of the Pacific Symphony of
California and a Director of the Nature Conservancy of Canada, as well as
serving as President of the Alberta Nature Conservancy.
Edison C. Buchanan. Mr. Buchanan received a Bachelor of Science degree in
Civil Engineering from Tulane University in 1977 and an M.B.A. in Finance and
International Business from Columbia University Graduate School of Business in
1981. From 1981 to 1997, Mr. Buchanan was a Managing Director of various groups
in the Investment Banking Division of Dean Witter Reynolds in their New York and
Dallas offices. In 1997, Mr. Buchanan joined Morgan Stanley Dean Witter as a
Managing Director in the Real Estate Investment Banking group. In 2000, Mr.
Buchanan became Managing Director and head of the domestic Real Estate
Investment Banking Group of Credit Suisse First Boston. In 2001, Mr. Buchanan
began working for The Trust for Public Land, a land conservation organization,
in Santa Fe, New Mexico. Mr. Buchanan became a Director of the Company in 2002.
R. Hartwell Gardner. Mr. Gardner became a Director of the Company in August
1997. He served as a Director of Parker & Parsley from November 1995 until
August 1997. Mr. Gardner graduated from Colgate University with a Bachelor of
Arts degree in Economics and then earned an M.B.A. from Harvard University.
7
Until October 1, 1995, Mr. Gardner was the Treasurer of Mobil Oil Corporation
and Mobil Corporation from 1974 and 1976, respectively. Mr. Gardner is a member
of Financial Executives International where he served as Chairman in 1986/1987
and is a Director and Chairman of the Investment Committee of Oil Investment
Corporation Ltd. and Oil Casualty Investment Corporation Ltd. in Hamilton,
Bermuda.
James L. Houghton. Mr. Houghton is a Certified Public Accountant and a
graduate of Kansas University with a Bachelor of Science degree in Accounting,
as well as a Bachelor of Laws degree. Mr. Houghton has served as a Director of
the Company since August 1997, and as a Director of Parker & Parsley from
October 1991 until August 1997. Until October 1, 1991, Mr. Houghton was the lead
oil and gas tax specialist for the accounting firm of Ernst & Young LLP, was a
member of Ernst & Young LLP's National Energy Group, and had served as its
Southwest Regional Director of Tax. Mr. Houghton is a member of the American
Institute of Certified Public Accountants, a member of the Oklahoma Society of
Certified Public Accountants and a former Chairman of its Federal and Oklahoma
Taxation Committee, and past President of the Oklahoma Institute on Taxation. He
has also served as a Director for the Independent Petroleum Association of
America and as a member of its Tax Committee. Mr. Houghton presently serves as a
Trustee of the J. E. and L. E. Mabee Foundation in Tulsa, Oklahoma.
Jerry P. Jones. Mr. Jones earned a Bachelor of Science degree from West
Texas State College in 1953 and a Bachelor of Laws degree from the University of
Texas School of Law in 1959. Mr. Jones has served as a Director of the Company
since August 1997, and as a Director of Parker & Parsley from May 1991 until
August 1997. Mr. Jones was an attorney with the law firm of Thompson & Knight,
L.L.P. in Dallas, Texas, since September 1959 and was a shareholder in that firm
until January 1998, when he retired and became of counsel to the firm. Mr. Jones
specialized in civil litigation, especially in the area of energy disputes.
Linda K. Lawson. Mrs. Lawson holds a Bachelor of Science degree in
Accounting from the University of Denver. Mrs. Lawson was employed by business
units of The Williams Companies, as well as the parent organization from 1980 to
her retirement in 2001. During her tenure she served in a variety of capacities
including accounting and finance positions of the parent, and Controller of a
FERC regulated energy business unit, Vice President of Investor Relations, Vice
President of Human Resources, and as COO of several telecommunication start-up
businesses. She is a Certified Public Accountant and served the Tulsa community
in a variety of nonprofit organizations. Mrs. Lawson became a Director of the
Company in 2002 and resides in Denver, Colorado.
Charles E. Ramsey, Jr. Mr. Ramsey is a graduate of the Colorado School of
Mines with a Petroleum Engineering degree and a graduate of the Smaller Company
Management program at the Harvard Graduate School of Business Administration.
Mr. Ramsey has served as a Director of the Company since August 1997. Mr. Ramsey
served as a Director of Parker & Parsley from October 1991 until August 1997.
Since October 1991, he has operated an independent management and financial
consulting firm. From June 1958 until June 1986, Mr. Ramsey held various
engineering and management positions in the oil and gas industry and, for six
years before October 1991, was a Senior Vice President in the Corporate Finance
Department of Dean Witter Reynolds Inc. in the Dallas, Texas office. His
industry experience includes 12 years of senior management experience with May
Petroleum Inc. in the positions of President, Chief Executive Officer and
Executive Vice President. Mr. Ramsey is also a former director of MBank Dallas,
the Dallas Petroleum Club and Lear Petroleum Corporation.
Robert A. Solberg. Mr. Solberg earned a Bachelor of Science in Civil
Engineering from the University of North Dakota in 1969, and is a licensed
Petroleum Engineer. Mr. Solberg spent over three decades working for Texaco Inc.
throughout the world. He served his last ten years as a Corporate Vice President
with several management roles including President of International E&P and
President of Upstream Commercial Development. He elected to retire in 2002 and
joined the Company's Board of Directors the following month. He continues to
live in Houston, Texas with a focus on investment management and business
consultation. Mr. Solberg recently became an outside director and non-executive
Chairman of JDR Cable Systems, Ltd., a privately owned British company. He also
enjoys a history of civic leadership and currently serves on the University of
North Dakota Alumni Association Board with a director role on their investment
committee.
8
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors of the Company held fourteen meetings of the full
Board of Directors, six telephonic updates and two meetings of the independent
members of the Board of Directors during 2003. No director attended fewer than
75 percent of the total number of meetings of the Board of Directors. No
director attended fewer than 75 percent of the total number of meetings of all
committees of the Board of Directors on which that director served.
The Board of Directors has three standing committees: the "Audit
Committee", the "Compensation and Management Development Committee" and the
"Nominating and Corporate Governance Committee".
Information regarding the functions performed by the Audit Committee and
its membership is set forth in the "Audit Committee Report", included herein,
and the "Audit Committee Charter" that is posted on the Company's website at
www.pioneernrc.com. The members of the Audit Committee are Messrs. Houghton
(Chairman), Gardner, Jones and Solberg and Mrs. Lawson. The Audit Committee held
eight meetings during 2003.
The Compensation and Management Development Committee periodically reviews
the compensation, employee benefit plans and fringe benefits paid to, or
provided for, executive officers of the Company, and approves the annual
salaries, bonuses, stock option awards and restricted stock awards of the
Company's executive officers. The Compensation and Management Development
Committee also administers the Company's Long-Term Incentive Plan and oversees
the Company's succession planning. Additional information regarding the
functions performed by the Compensation and Management Development Committee and
its membership is set forth in the "Compensation and Management Development
Committee Report on Executive Compensation", included herein, and the
"Compensation and Management Development Committee Charter" that is posted on
the Company's website at www.pioneernrc.com. The members of the Compensation and
Management Development Committee are Messrs. Buchanan (Chairman), Baroffio and
Ramsey. The Compensation and Management Development Committee held four meetings
during 2003.
The Nominating and Corporate Governance Committee assists the Board of
Directors in evaluating potential new members of the Board of Directors,
recommending committee members and structure, and advising the Board of
Directors about corporate governance practices. Additional information regarding
the functions performed by the Nominating and Corporate Governance Committee is
set forth in "Corporate Governance", included herein, and the "Nominating and
Corporate Governance Committee Charter" that is posted on the Company's website
at www.pioneernrc.com. The members of the Nominating and Corporate Governance
Committee include all non-employee directors; however, any director whose term
is expiring and who would be eligible for election at the Annual Meeting shall
not participate in the meeting(s) called for such nomination. The Nominating and
Corporate Governance Committee was formed in 2003 and held four meetings during
2003.
MANAGEMENT COMPENSATION
Compensation of Directors
For 2003, each non-employee director received an annual base retainer fee
of $40,000 and an annual fee of $10,000 for service on one or more committees.
Audit Committee members received an additional $7,500 annual fee. Dr. Baroffio
in his role as geosciences advisor to the Board of Directors received an
additional $7,500 annual fee, the lead director and the chairman of the Audit
Committee each received an additional $7,500 annual fee and other committee
chairmen received an additional $2,500 annual fee. Each non-employee director is
also reimbursed for travel expenses to attend meetings of the Board of Directors
or its committees. No additional fees are paid for attendance at Board of
Directors or committee meetings. The Company's Chief Executive Officer does not
receive additional compensation for serving on the Board of Directors.
9
For 2004, the lead director's additional fee will be increased from $7,500
to $15,000 and each director, following their initial three years of service as
a director, in addition to their annual base retainer fee, will receive an
annual equity award of $60,000 equivalent value. For 2004, the annual equity
award will be in the form of restricted stock.
Under the Company's Long-Term Incentive Plan, non-employee directors are
eligible to receive their fees in the form of stock options, stock appreciation
rights, restricted stock or performance units. The Company can use these awards
instead of cash to pay its non-employee directors all or part of their annual
fees. The Board of Directors determines the form (or combination of forms) of
consideration each year, based on the economic and other circumstances at the
time and based on its view of which awards will best align the interests of the
stockholders and the directors. For the year following the 2004 Annual Meeting,
the Board of Directors has determined that non-employee directors can elect to
receive their annual fees 100 percent in cash or restricted stock or 50 percent
cash and 50 percent restricted stock.
For 2003, the non-employee directors were given a choice to be compensated
for their annual directors' fees in either (i) 100 percent cash, (ii) 100
percent stock options, (iii) 100 percent restricted stock or (iv) a 50/50
combination of any thereof. Messrs. Baroffio, Jones, Ramsey, Houghton and
Solberg and Mrs. Lawson elected 100 percent cash compensation; Messrs. Gardner
and Buchanan elected to receive 100 percent of their compensation in restricted
stock. The number of shares granted to non-employee directors electing
restricted stock was determined by dividing the director's fees elected to be
paid by restricted stock by the closing price of one share of the Company stock
on May 14, 2003 (the last closing sale price before the date of the grant). The
restricted stock grants vested 25 percent each quarter with the first vesting
date on August 15, 2003. Mr. Buchanan received a restricted stock grant of 2,112
shares to compensate him for 100 percent of his annual fees and Mr. Gardner
received a restricted stock grant of 2,313 shares to compensate him for 100
percent of his annual fees.
Each non-employee director, upon commencement of initial service as a
director, receives $125,000 of restricted stock. The price used to calculate the
number of shares to be granted is based on the closing stock price on the day
prior to the day the director is elected to serve on the Board of Directors. The
shares granted are subject to vesting and transfer restrictions that lapse with
respect to one-third of the shares each year following the grant over a
three-year period. The vesting of ownership and the lapse of transfer
restrictions may be accelerated in the event of the death, disability or
retirement of the director or a change in control of the Company. Each recipient
is required to make an election under the Internal Revenue Code to include the
value of the restricted stock in the recipient's income in the year of grant.
The Company agrees to provide a cash award to the non-employee director in an
amount sufficient to pay the federal income taxes due with respect to the grant
and such cash payment.
Compensation of Executive Officers
The compensation paid to the Company's executive officers generally
consists of base salaries, annual bonuses, awards under the Long-Term Incentive
Plan, contributions to the Company's 401(k) retirement plan, contributions to
the Company's deferred compensation retirement plan and miscellaneous
perquisites. The following table summarizes the total compensation for 2003,
2002 and 2001 awarded to, earned by or paid to the following persons:
10
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation ----------------------
------------------------------------- Restricted Shares
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus(a) Compensation(b) Awards(c) Options Compensation(d)
------------------------- ---- -------- -------- --------------- ---------- ---------- ---------------
Scott D. Sheffield 2003 $700,000 $919,000 $ 19,482 $ 302,400 90,000 $ 93,155
President and 2002 $700,000 $971,250 $ 19,211 $1,766,880 150,000 $ 92,797
Chief Executive Officer 2001 $660,000 $617,891 $ 18,279 $ - 138,000 $ 87,774
Chris J. Cheatwood 2003 $315,000 $283,500 $ 5,651 $ 100,800 30,000 $ 51,500
Executive Vice President - 2002 $260,000 $288,600 $ 5,651 $ 588,960 50,000 $ 46,024
Worldwide Exploration 2001 $205,000 $153,750 $ 5,651 $ - 40,500 $ 37,500
Timothy L. Dove 2003 $315,000 $302,000 $ 5,004 $ 100,800 30,000 $ 51,500
Executive Vice President 2002 $315,000 $349,650 $ 4,954 $ 588,960 50,000 $ 51,531
and Chief Financial Officer 2001 $300,000 $224,688 $ 4,816 $ - 53,000 $ 47,577
Danny L. Kellum 2003 $315,000 $283,500 $ 8,981 $ 100,800 30,000 $ 52,125
Executive Vice President - 2002 $315,000 $349,650 $ 8,981 $ 588,960 50,000 $ 51,531
Domestic Operations 2001 $270,000 $201,563 $ 8,166 $ - 53,000 $ 46,223
Mark L. Withrow 2003 $315,000 $142,000 $ 13,258 $ 100,800 30,000 $ 51,500
Executive Vice President 2002 $315,000 $349,650 $ 10,858 $ 588,960 50,000 $ 52,096
and General Counsel 2001 $300,000 $224,688 $ 5,770 $ - 53,000 $ 47,000
---------------
(a) Represents the amount awarded under the Company's annual bonus program.
(b) This column represents miscellaneous perquisites.
(c) The value of the 2003 restricted stock reported in this column was
determined using the August 19, 2003 grant date closing price of $25.20 per
share for the Company's common stock as reported by the New York Stock
Exchange. The restricted stock grant includes vesting restrictions that
lapse on August 19, 2006. The restricted stock is entitled to receive
dividends, if any, paid on the Company's common stock. Aggregate restricted
Company common stockholdings as of December 31, 2003 and the corresponding
value based on the closing price of the common stock as reported on the New
York Stock Exchange on December 31, 2003 ($31.93 per share) are: Mr.
Sheffield, 84,000 shares, $2,682,120; Messrs. Cheatwood, Dove, Kellum and
Withrow, 28,000 shares each, $894,040 each.
(d) For 2003, this column includes (i) contributions to qualified retirement
plans of $20,000 each to Messrs. Sheffield, Cheatwood, Dove, Kellum and
Withrow; (ii) contributions to the Company's nonqualified deferred
compensation retirement plan for Mr. Sheffield of $70,000; for Messrs.
Cheatwood, Dove, Kellum and Withrow of $31,500 each; (iii) a $2,860 premium
with respect to a term life insurance policy for the benefit of Mr.
Sheffield and (iv) reimbursement for financial counseling services for
Messrs. Sheffield and Kellum of $295 and $625, respectively.
Long-Term Incentive Plan. The Long-Term Incentive Plan (the "Plan")
provides for employee and non-employee director grants in the form of stock
options, stock appreciation rights, restricted stock or performance units. The
maximum number of shares of common stock that may be issued under the Plan is
equal to 10 percent of the total number of shares of common stock equivalents
outstanding from time to time minus the total number of shares of stock subject
to outstanding grants on the date of calculation under any other stock-based
plan for employees or directors of the Company. The Plan had 6,305,591 shares
available for additional awards at December 31, 2003.
No performance units or stock appreciation rights have been awarded under
the Plan.
11
The following table sets forth information about stock options granted
during 2003 to the named executive officers:
OPTIONS GRANTED DURING THE YEAR ENDED DECEMBER 31, 2003
Individual Grants
-------------------------------------------------
Number of % of Total
Securities Options Granted Exercise or Grant Date
Underlying to Employees Base Price Expiration Present
Name Options Granted During 2003 Per Share (c) Date Value (d)
---- --------------- --------------- ------------- --------------- ----------
Scott D. Sheffield........ 60,000 (a) 4.43 $ 24.25 2/18/09-10-11 $ 550,200
30,000 (b) 2.22 $ 25.58 8/19/09-10-11 $ 267,000
Chris J. Cheatwood........ 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
Timothy L. Dove........... 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
Danny L. Kellum........... 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
Mark L. Withrow........... 20,000 (a) 1.48 $ 24.25 2/18/09-10-11 $ 183,400
10,000 (b) .74 $ 25.58 8/19/09-10-11 $ 89,000
--------------
(a) These options were granted on February 18, 2003, vest at the rate of
one-third each year, commencing on the first anniversary of the grant date,
and have a term of five years from date of vesting. The Compensation and
Management Development Committee retains discretion, subject to Plan
limits, to modify the terms of the options. In the event of a change in
control of the Company as defined in the Plan, the options will immediately
become fully vested and exercisable in full.
(b) These options were granted on August 19, 2003, vest at the rate of
one-third each year, commencing on the first anniversary of the grant date,
and have a term of five years from date of vesting. The Compensation and
Management Development Committee retains discretion, subject to Plan
limits, to modify the terms of the options. In the event of a change in
control of the Company as defined in the Plan, the options will immediately
become fully vested and exercisable in full.
(c) The exercise price per share is equal to the closing price of the common
stock as reported by the New York Stock Exchange on the day before the date
of grant.
(d) The estimated grant date present value of shares in footnotes (a) and (b)
is determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options included the following:
o An interest rate of 3.10 percent for footnote (a) and 3.08 percent for
footnote (b), which represents the interest rate on a U.S. Treasury
security with a maturity date corresponding to the expected option
term.
o Volatility of 37.6 percent for footnote (a) and 33.6 percent for
footnote (b) calculated using the lesser of (i) daily stock prices for
the 120-day period prior to the grant date or (ii) 50 percent.
No other adjustments were made to the model for nontransferability or risk
of forfeiture. The ultimate values of the options will depend on the future
market price of the Company's common stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will realize
upon exercise of the option will depend on the excess of the market value
of the Company's common stock over the exercise price on the date the
option is exercised.
12
The following table sets forth, for each named executive officer,
information concerning the exercise of stock options during 2003, and the value
of unexercised stock options as of December 31, 2003:
AGGREGATED OPTIONS EXERCISED DURING THE YEAR ENDED DECEMBER 31, 2003
AND VALUE OF UNEXERCISED OPTIONS AT DECEMBER 31, 2003
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at December 31, 2003 Options at December 31, 2003(a)
Acquired on Value ---------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ----------- -------------
Scott D. Sheffield.... 72,500 $1,114,924 212,000 236,000 $3,377,980 $2,387,140
Chris J. Cheatwood.... 47,999 $ 705,845 42,501 76,832 $ 543,447 $ 634,349
Timothy L. Dove....... 31,000 $ 507,158 100,166 80,999 $1,603,208 $ 827,659
Danny L. Kellum....... 80,866 $ 945,887 6,667 80,999 $ 48,069 $ 827,659
Mark L. Withrow....... 22,167 $ 357,121 116,832 80,999 $2,001,822 $ 827,659
---------------
(a) Amounts were calculated by multiplying the number of unexercised options by
$31.93, which was the closing price of the Company's common stock on
December 31, 2003, and subtracting the aggregate exercise price, which was
determined by multiplying the unexercised options by their respective
exercise prices and summing the result.
Retirement Plan. The Company provides a 401(k) retirement plan but does not
provide a defined benefit retirement plan or a restoration plan. Hewitt
Associates advised the Company that it was not providing competitive retirement
benefits for its officers by offering only a 401(k) plan. To maintain a
competitive position, the Company also provides a nonqualified deferred
compensation retirement plan for officers of the Company. Each participant is
allowed to contribute up to 25 percent of base salary and 100 percent of annual
bonus payments. The Company provides a matching contribution of 100 percent of
the participant's contribution limited to the first 10 percent of the officer's
base salary. The Company's matching contribution vests immediately.
Severance Agreements. The Company has entered into severance agreements
with its officers. Salaries and bonuses are set by the Compensation and
Management Development Committee independent of these agreements and the
Compensation and Management Development Committee can increase or reduce base
salaries at its discretion.
Either the Company or the officer may terminate the officer's employment
under the severance agreement at any time. The Company must pay the officer an
amount equal to one year's base salary if the officer's employment is terminated
because of death, disability or normal retirement. The Company must pay the
officer an amount equal to one year's base salary and continue health insurance
for the officer's family for one year if the Company terminates the officer's
employment without cause or if the officer terminates employment for good
reason, which is when reductions in the officer's base annual salary exceed
specified limits or when the officer's responsibilities have been significantly
reduced. If within one year after a change in control of the Company, the
Company terminates the officer without cause, or if the officer terminates
employment for good reason, the Company must pay the officer an amount equal to
2.99 times the sum of the officer's base salary plus target bonus for the year
and continue health insurance for the officer's family for three years. If the
officer terminates employment with the Company without reason between six months
and one year after a change in control, or at any time within one year after a
change in control if the officer is required to move, then the Company must pay
the officer one year's base salary and continue health insurance for the
officer's family for one year. Officers are also entitled to additional payments
for certain tax liabilities that may apply to severance payments following a
change in control.
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and officers, including the named
executive officers. Those agreements require the Company to indemnify the
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law and to advance expenses in connection with certain claims
against directors and officers. The Company expects to enter into similar
agreements with persons selected to be directors and officers in the future.
13
Each indemnification agreement also provides that, upon a potential change in
control of the Company and if the indemnified director or officer so requests,
the Company will create a trust for the benefit of the indemnified director or
officer in an amount sufficient to satisfy payment of all liabilities and suits
against which the Company has indemnified the director or officer.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During 2003, no member of the Compensation and Management Development
Committee also served as an executive officer of the Company. During 2003, there
were no Compensation and Management Development Committee interlocks with other
companies.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors submits the following report with respect to the executive
compensation program of the Company.
Compensation Principles and Philosophy
The overriding responsibility of the committee is to maintain the Company's
executive compensation program so that it attracts and retains a capable and
highly motivated senior management team and aligns the compensation of the
Company's executives with the Company's strategic business plan to increase
stockholder value. During 2003, the committee retained Hewitt Associates to
assist and advise it in its efforts to establish and administer fair and
competitive compensation and incentive policies. These policies emphasize
variable compensation and structure the annual bonus and long-term incentive
awards to be a significant portion of an executive's total compensation so that
total compensation is reflective of the executive's performance and the
Company's performance. Beginning in 2004, the Committee elected to change the
long-term incentive awards from a combination of stock options and restricted
stock to a performance-based restricted stock program to further emphasize
performance and alignment of stockholder and executive interests. The committee
has adopted a policy of not repricing stock options and incorporated that policy
into the Plan. Other critical elements of the Company's compensation and
incentive policies provide for:
o Base salaries at or slightly above median levels compared to industry
survey information and peer group proxy analysis.
o Annual target bonus levels slightly above median with payouts that are
based on both individual and Company performance.
o Long-term incentive target award levels that are above median.
o Significant stock ownership by directors and the Chief Executive Officer.
To support the commitment to significant stock ownership, the Company's current
common stock ownership guidelines are as follows:
o Non-employee directors' stock value equal to at least three times each
director's annual base retainer fee.
o Chairman of the Board and Chief Executive Officer stock value equal to at
least five times his annual base salary.
In determining compliance with these guidelines, the committee considers
its expectations of the long-term value of the Company's common stock and the
current trading levels. Mr. Sheffield and all directors are in compliance with
the ownership guidelines.
14
The Omnibus Budget Reconciliation Act of 1993 ("OBRA93") placed
restrictions on the deductibility of executive compensation paid by public
companies. Under the restrictions, the Company is not able to deduct
compensation paid to any of the named executive officers in excess of $1,000,000
unless the compensation meets the definition of "performance-based compensation"
in the legislation. Nondeductibility could result in additional tax costs to the
Company. While the committee cannot assess with certainty how the Company's
compensation program will ultimately be affected by OBRA93, the committee
generally tries to preserve the deductibility of all executive compensation if
it can do so without interfering with the Company's ability to attract and
retain capable and highly motivated senior management.
Elements of Compensation
The elements of the compensation program the committee administers for
executive officers, including the Chief Executive Officer, consist of base
salaries, annual bonuses, awards made under the Plan, contributions to the
Company's 401(k) retirement plan, contributions to the Company's deferred
compensation retirement plan and miscellaneous perquisites. Base salaries,
annual bonuses and long-term incentives are discussed separately below; however,
the committee considers the aggregate remuneration of executives when evaluating
the executive compensation program.
Base Salaries. An executive's base salary is viewed as a fixed component of
total compensation that should be competitive with companies similar in terms of
business strategy to the Company. The committee has targeted base salaries at or
slightly above the median level for companies of similar business strategy to
the Company. The committee evaluates the base salaries of the Company's
executive officers on the basis of competitive base salary survey data provided
by Hewitt Associates and consideration of each officer's duties and
responsibilities. The committee views the executives below the Chief Executive
Officer level as a team with diverse duties but with similar authority and
responsibility. Hewitt Associates historically has provided base salary survey
data on the majority of the Company's peer group companies, a group of
independent exploration and production companies with similar asset, revenue and
capital investment profiles as the Company. While the peer group provided by
Hewitt Associates includes some of the members of the Dow Jones U.S. Oil
Companies, Secondary Index (the "DJ Secondary Oil Index") reflected in the
performance graph set forth under "Company Performance" below, it does not
include all of the companies in that peer group and includes other companies
with which the Company competes. The committee determines the base salary for
all executives, including Mr. Sheffield, using the same methodology.
For 2004, Mr. Sheffield's annual base salary was increased from $700,000 to
$775,000. Mr. Sheffield elected to take the equivalence of the amount of the
increase ($75,000) in shares of the Company's stock. Hewitt Associates indicated
Mr. Sheffield's annual base salary is slightly above the 50th percentile. The
base salary of one other named executive officer was increased for 2004 but the
other named executive officer's base salaries were not increased. Hewitt
Associates advised that their 2004 base salaries, as a group, continue to be
slightly above the median.
Annual Bonuses. Each year the committee establishes a target bonus for each
executive based on the target bonus median levels of executives in similar
positions at peer group companies. To maintain internal equity, the level of
responsibility, scope and complexity of the executive's position are considered.
The range of awards for the annual incentive bonus plan can range from 0 to 200
percent of target. The 2004 target bonus levels for Mr. Sheffield and one other
named executive increased to reflect competitive market conditions; however, the
target bonus levels for the other named executive officers did not change from
the 2003 target bonus levels. The target bonus levels were identified by Hewitt
Associates as being slightly above the median level. In awarding 2003 bonuses,
the Company reviewed the following criteria that are important to the success of
the Company's business plan:
o Operating cost per BOE
o Debt/Book capitalization
o Reserve replacement
o Finding and development cost per BOE
o Production growth
o General and administrative costs per BOE
o Return on equity
15
o Net asset value per share
o Growth of share value
In determining the executive officers' annual bonus awards, the committee
also evaluated the Company's stock performance in relation to its peer group.
The committee did not employ a formula, specific targets or predetermined
weighting of the above financial and operational performance criteria. The
committee evaluates Company performance in light of oil and gas industry
fundamentals and assesses how effectively management adapts to changing industry
conditions and opportunities during the year. The committee observes and
evaluates the individual performance of executive officers throughout the year
and specifically evaluates Mr. Sheffield's performance relative to the Company's
performance in achieving the Company's goals.
For 2003, the committee awarded Mr. Sheffield and all but one of the other
executives cash bonuses above the target bonus levels. Specific Company
performance which resulted in bonus payouts above target for 2003 included:
o Base operating costs of $3.07 per BOE
o Improved leverage position
o Reserve replacement of 193 percent
o Finding and development costs of $6.64 per BOE
o Production growth of 36 percent
o General and administrative cost of $1.07 per BOE
o Return on equity of 26 percent
o 2003 stock price increase of 26 percent
Regarding stock performance, the Company's three-year cumulative total
return based on stock price performance has exceeded both the Standard & Poor's
500 Index (the "S&P 500") and the DJ Secondary Oil Index per the graph below. In
addition, the Company's stock price hit a five-year high of $32.90 in December
2003.
COMPARISON OF THREE-YEAR CUMULATIVE TOTAL RETURN (a)
AMONG THE COMPANY, THE S&P 500 INDEX
AND THE DJ SECONDARY OIL INDEX
Pioneer DJ
Natural Secondary
Year ended Resources S&P Oil
December 31, Company 500 Index
------------ --------- --------- ----------
2000 100 100 100
2001 98 88 92
2002 128 69 94
2003 162 88 123
---------------
(a) Assumes $100 invested on December 31, 2000 in stock or index,
including reinvestment of dividends.
Long-Term Incentives. The value of the long-term incentive awards granted
to Mr. Sheffield in 2003 was determined by a comparison of long-term incentive
grants made to the Chief Executive Officers of peer group companies. The other
executive officers were reviewed as a team. The value of long-term incentives
granted to each executive was determined by comparing the value of awards
granted to peer company executives holding similar positions, and their
individual award levels were averaged to determine the actual awards to
executives of the Company. The award levels were not influenced by the current
stock holdings of the executives. The Company's philosophy is to award long-term
incentives with values that are above market average. For 2003, Mr. Sheffield
was awarded 90,000 stock options and 12,000 shares of restricted stock. Hewitt
Associates concluded the 2003 award levels placed Mr. Sheffield and the other
named executives as a group between the 60th and 70th percentile for long-term
incentive awards among the peer group.
16
A significant portion of an executive officer's total compensation
opportunity is comprised of long-term incentive awards, which are intended to
align executive management's interests in long-term growth and success more
closely with the interests of the Company's stockholders.
Beginning in 2004, to achieve this alignment and to emphasize long-term
performance, the committee adopted a performance share program under the
Long-Term Incentive Plan for executives. No stock options will be awarded to Mr.
Sheffield or the named executives for 2004. This program establishes restricted
stock award targets for Mr. Sheffield and each named executive determined by
comparing the value of awards granted to peer company executives holding similar
positions. The target award levels were not influenced by the current stock
holdings of executives. Restricted stock awarded under this program will have a
three-year cliff vesting requirement.
The number of restricted shares awarded each year as a percent of target
award levels will be determined by a three-step process. First, the committee
will conduct a subjective evaluation of the internal Company performance against
the following one- and three-year metrics:
One-year metrics Three-year metrics
---------------- ------------------
Production growth Reserve replacement
Operating cost per BOE Finding and development cost per BOE
General and administrative costs per BOE Net asset value per share
Debt statistics
Next, to finalize the award level for the executive group, the committee
will consider the Company's Total Shareholder Return results compared to the
Total Shareholder Return of the Company's peer group. As its final step, the
committee will conduct an evaluation of each executive's individual performance.
In summary, the Company believes a significant portion of executive
compensation should be variable and performance-based so that an executive's
total compensation opportunity is linked to the performance of the individual,
the Company and its stock price. The majority of an executive officer's total
compensation is variable and at-risk. This structure allows the Company to
administer overall compensation that rises or falls based on the Company's
performance while maintaining a balance between the Company's short-term and
long-term objectives.
Compensation and Management Development Committee of
The Board of Directors
Edison C. Buchanan, Chairman
James R. Baroffio, Member
Charles E. Ramsey, Jr., Member
17
AUDIT COMMITTEE REPORT
The Audit Committee's purpose is to assist the Board of Directors in its
oversight of the Company's internal controls, financial statements and the audit
process. The Board of Directors, in its business judgment, has determined that
all members of the committee are independent as required under the listing
standards of the New York Stock Exchange ("NYSE"). The committee operates
pursuant to a charter adopted by the Board of Directors. A copy of the current
charter is posted on the Company's website at www.pioneernrc.com.
Management is responsible for the preparation, presentation and integrity
of the Company's financial statements, accounting and financial reporting
principles, and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors, Ernst & Young LLP, are responsible for performing an independent audit
of the consolidated financial statements in accordance with generally accepted
auditing standards.
In performing its oversight role, the committee has reviewed and discussed
the audited financial statements with management and the independent auditors.
The committee has also discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The committee has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1, Independent with Audit
Committees, as currently in effect. The committee has also considered whether
the performance of other non-audit services by the independent auditors is
compatible with maintaining the auditors' independence and has discussed with
the auditors the auditors' independence.
Based on the reports and discussions described in this Report, and subject
to the limitations on the roles and responsibilities of the committee referred
to below and in the charter, the committee recommended to the Board of Directors
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2003, for filing with the SEC. The
committee has also recommended the selection of the Company's independent
auditors.
The members of the committee are not professionally engaged in the practice
of auditing or accounting for the Company and are not experts in auditor
independence standards. Members of the committee rely without independent
verification on the information provided to them and on the representations made
by management and the independent auditors. Accordingly, the committee's
oversight does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the
committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that Ernst & Young LLP is in fact independent.
Audit Committee of
The Board of Directors
James L. Houghton, Chairman
R. Hartwell Gardner, Member
Jerry P. Jones, Member
Linda K. Lawson, Member
Robert A. Solberg, Member
18
CORPORATE GOVERNANCE
Corporate Governance Principles
The Board of Directors believes that sound governance practices and
policies provide an important framework to assist it in fulfilling its duty to
shareholders. In March 2003, the Board of Directors formally adopted the
Company's Corporate Governance Principles, which cover the following principal
subjects:
o Role and functions of the Board of Directors
o Qualifications and independence of directors
o Size of the Board of Directors and selection process
o Committee functions and independence of committee members
o Meetings of non-employee directors
o Self-evaluation
o Ethics and conflicts of interest (a copy of the current Code of
Business Conduct and Ethics is posted on the Company's website
at www.pioneernrc.com)
o Reporting of concerns to non-employee directors or the Audit
Committee
o Compensation of the Board of Directors and stock ownership
requirements
o Succession planning and annual compensation review of senior
management
o Access to senior management and to independent advisors
o Director orientation and continuing education
o Evaluation of corporate governance principles
The Corporate Governance Principles are posted on the Company's website at
www.pioneernrc.com. The Corporate Governance Principles will be reviewed
periodically and as necessary by the Company's Nominating and Corporate
Governance Committee, and any proposed additions to or amendments of the
Corporate Governance Principles will be presented to the Board of Directors for
its approval.
The NYSE has adopted rules that require listed companies to adopt
governance guidelines covering certain matters. The Company believes that the
Corporate Governance Principles comply with the NYSE rules.
Director Independence
The Company's existing standards for determining director independence
require the assessment of directors' independence on an annual basis. In
February 2004, the Board of Directors again assessed the independence of each
director in accordance with the independence standards for directors set forth
in the Company's Corporate Governance Principles, which generally define an
independent director as one who does not have any relationship with management
or the Company that may interfere with the exercise of his or her independent
judgment. The Board of Directors has determined, after careful review, that each
member of the Board of Directors is independent, with the exception of Mr.
Sheffield, who is an employee of the Company. Accordingly, eight out of the nine
current members of the Board of Directors are independent directors.
The NYSE has adopted rules that define director independence for listed
companies. The Board of Directors has adopted Corporate Governance Principles to
ensure that the Company's standards for director independence meet or exceed
those in the NYSE rules, and evaluates director independence in accordance with
those standards. Based on the NYSE rules, the Board of Directors believes that
all non-employee directors are independent.
Election of Lead Director
In February 2004, the Board of Directors reelected Mr. Ramsey, a
non-employee director, to serve as chairman of the regular private meetings of
the independent directors and as Chairman of the Company's Nominating and
Corporate Governance Committee (the "Lead Director"). Utilizing input from all
directors, the Lead Director will (i) work with the CEO and Chairman of the
Board to determine the appropriate agenda and information package for Board of
Director meetings; (ii) meet with the CEO and Chairman of the Board, senior
19
management and individual directors, as required, to facilitate effective
communications and information flow; (iii) take a leadership role in CEO
succession and senior management development; (iv) take a leadership role in
director evaluation, continuing education, recruiting and orientation and (v)
serve as the Board of Directors contact in the process for direct employee and
stockholder communications with the Board of Directors.
Financial Literacy of Audit Committee and Designation of Financial Experts
In March 2003, the Board of Directors evaluated the members of the Audit
Committee for financial literacy and the attributes of a financial expert. The
Board of Directors determined that each of the Audit Committee members is
financially literate and that three of the Audit Committee members (Mrs. Lawson
and Messrs. Gardner and Houghton) are financial experts as defined by the SEC.
Procedure for Directly Contacting the Board of Directors and Whistleblower
Policy
A means for stockholders and employees to contact the Board of Directors
directly has been established and is published on the Company's website at
www.pioneernrc.com. Matters for which this contact may be used include
allegations about actions of the Company or its directors, officers or employees
involving (i) questionable accounting, internal controls and auditing matters;
(ii) materially misleading statements or omissions in SEC reports, press
releases, or other public statements or other forms of wire, mail or securities
fraud or (iii) dishonest or unethical conduct, conflicts of interest, violations
of the Company's code of ethics or business conduct, or violation of laws.
Information may be submitted confidentially and anonymously, although the
Company may be obligated by law to disclose the information or identity of the
person providing the information in connection with government or private legal
actions and in some other circumstances. The Company's policy is not to
retaliate against any director, officer or employee who provides truthful
information relating to a violation of law or Company policies.
20
COMPANY PERFORMANCE
The following graph and chart compare the Company's cumulative total
stockholder return on common stock during the five-year period ended December
31, 2003, with cumulative total stockholder return during the same period for
the S&P 500 and the DJ Secondary Oil Index as prescribed by the SEC rules. The
following graph and chart show the value, at December 31 in each of 1999, 2000,
2001, 2002 and 2003 of $100 invested at December 31, 1998, and assume the
reinvestment of all dividends:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN (a)
AMONG THE COMPANY, THE S&P 500 INDEX
AND THE DJ SECONDARY OIL INDEX
Pioneer DJ
Natural Secondary
Year ended Resources S&P Oil
December 31, Company 500 Index
------------ --------- ---------- ---------
1998 100 100 100
1999 102 121 115
2000 225 110 184
2001 220 97 169
2002 289 76 173
2003 365 97 227
Year ended December 31,
------------------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Pioneer Natural Resources Company 100 102 225 220 289 365
S&P 500 100 121 110 97 76 97
DJ Secondary Oil Index 100 115 184 169 173 227
---------------
(a) Assumes $100 invested on December 31, 1998 in stock or index,
including reinvestment of dividends.
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of common stock as of March 17, 2004, by (i) each person who is known
by the Company to own beneficially more than five percent of the outstanding
shares of common stock, (ii) each director of the Company, (iii) each named
executive officer of the Company and (iv) all directors and executive officers
as a group:
Number of Percentage
Name of Person or Identity of Group Shares Of Class (a)
----------------------------------- ---------- ------------
Southeastern Asset Management, Inc. (c)....................... 18,991,100 15.8
Longleaf Partners Fund
O. Mason Hawkins
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
FMR Corp. (d)................................................. 8,429,590 7.0
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
Scott D. Sheffield (e) (f) (h)................................ 579,926 (b)
Chris J. Cheatwood (e) (g) (h) (i)............................ 117,512 (b)
Timothy L. Dove (e) (h) (i)................................... 188,897 (b)
Danny L. Kellum (e) (h) (i)................................... 87,286 (b)
Mark L. Withrow (e) (h) (i)................................... 217,936 (b)
James R. Baroffio (e) (j)..................................... 51,211 (b)
Edison C. Buchanan (h)........................................ 9,225 (b)
R. Hartwell Gardner (e) (h)................................... 72,793 (b)
James L. Houghton (e) (k)..................................... 30,631 (b)
Jerry P. Jones (e)............................................ 35,552 (b)
Linda K. Lawson (h) (l)....................................... 6,281 (b)
Charles E. Ramsey, Jr. (e).................................... 37,307 (b)
Robert A. Solberg (h) ........................................ 7,581 (b)
All directors and executive officers as a group
(14 persons) (h) (m).......................................... 1,553,672 1.3
---------------
(a) Based on 120,024,319 shares of common stock outstanding.
(b) Does not exceed one percent of class.
(c) The Schedule 13G/A filed with the SEC on February 10, 2004, which is a
joint statement on Schedule 13G/A filed by Southeastern Asset Management,
Inc. ("Southeastern"), Longleaf Partners Fund and O. Mason Hawkins
("Hawkins"), states that the statement is being filed by Southeastern as a
registered investment adviser, and that all of the securities covered by
the statement are owned legally by Southeastern's investment advisory
clients and none are owned directly or indirectly by Southeastern. The
Schedule 13G/A further states that the statement is also being filed by
Hawkins, Chairman of the Board and CEO of Southeastern, in the event he
could be deemed to be a controlling person of that firm as the result of
his official positions with or ownership of its voting securities. The
existence of such control is expressly disclaimed. Hawkins does not own
directly or indirectly any securities covered by the Schedule 13G/A for his
own account.
22
(d) The Schedule 13G filed with the SEC on February 17, 2004 is a joint
statement on Schedule 13G filed by FMR Corp.; Edward C. Johnson 3d,
Chairman of FMR Corp. and Abigail P. Johnson, Director of FMR Corp. The
Schedule 13G states that FMR Corp., Edward C. Johnson 3d and Abigail P.
Johnson may be deemed as beneficial owners of 8,151,590 shares of the
Company's common stock as a result of the beneficial ownership of shares by
wholly-owned subsidiaries of FMR Corp. and of 278,000 shares of the
Company's common stock as a result of the beneficial ownership of a former
subsidiary of FMR Corp. FMR Corp. and its former subsidiary are of the view
that they are not acting as a group and that they are not required to
attribute to each other the beneficial ownership of securities beneficially
owned by the other.
(e) Includes the following number of shares subject to stock options that were
exercisable at or within 60 days after March 17, 2004: Mr. Sheffield,
272,000; Mr. Cheatwood, 65,001; Mr. Dove, 112,833; Mr. Kellum, 31,000; Mr.
Withrow, 118,666; Dr. Baroffio, 40,458; Mr. Gardner, 57,991; Mr. Houghton,
20,000; Mr. Jones, 20,000 and Mr. Ramsey, 28,307.
(f) Includes 5,000 shares held in Mr. Sheffield's investment retirement account
and 10,280 shares held in Mr. Sheffield's 401(k) account.
(g) Includes 2,000 shares held in Mr. Cheatwood's investment retirement
account.
(h) Includes the following number of unvested restricted shares: Mr. Sheffield,
133,350; Mr. Cheatwood, 43,750; Mr. Dove, 44,800; Mr. Kellum, 43,750; Mr.
Withrow, 43,750; Mr. Buchanan, 3,915; Mr. Gardner, 578; Mrs. Lawson, 3,387;
Mr. Solberg, 3,387; and all directors and executive officers as a group,
353,417.
(i) Includes the following number of shares held in each respective officer's
401(k) account: Mr. Cheatwood, 503; Mr. Dove, 339; Mr. Kellum, 516 and Mr.
Withrow, 11,143.
(j) Includes 10,753 shares held in trust that are shares beneficially owned by
Dr. Baroffio.
(k) Includes 8,631 shares held by two trusts of which Mr. Houghton is a trustee
and over which shares he has sole voting and investment power and 2,000
shares held in Mr. Houghton's investment retirement account.
(l) Includes 1,200 shares held in Mrs. Lawson's investment retirement accounts.
(m) Includes 837,005 shares of common stock subject to stock options that were
exercisable at or within 60 days after March 17, 2004. Including
outstanding option awards to directors and executive officers for an
additional 424,329 shares of common stock which do not become exercisable
within 60 days after March 17, 2004, directors and executive officers as a
group own 1.6 percent of class.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The executive officers and directors of the Company are required to file
reports with the SEC, disclosing the amount and nature of their beneficial
ownership in common stock, as well as changes in that ownership.
Based solely on its review of reports and written representations that the
Company has received, the Company is aware that Thomas C. Halbouty, the
Company's Vice President and Chief Information Officer, and Guimar Vaca Coca,
the President of the Company's Argentine subsidiaries, did not timely file one
report each on Form 4 covering transactions effected during 2003. The Company
believes that all other required reports were timely filed during 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2003, the Company did not enter into any transactions with
management and others, nor was it a party to business relationships or other
arrangements or transactions, that would be reportable as certain relationships
and related transactions. Mr. Jones is of counsel to the firm of Thompson &
Knight, L.L.P. since his retirement from the firm in January 1998. Thompson &
Knight, L.L.P. provides periodic legal services to the Company. Thompson &
Knight, L.L.P. customarily gives the "of counsel" title to retired partners of
the firm. Mr. Jones has no role in, and receives no pay from, Thompson & Knight,
L.L.P. except payments under a retirement savings plan. Accordingly, the Board
of Directors does not consider this relationship to be relevant to Mr. Jones'
independence.
STOCKHOLDER PROPOSALS
Any stockholder of the Company who desires to submit a proposal for action
at the 2005 annual meeting of stockholders and wishes to have such proposal (a
"Rule 14a-8 Proposal") included in the Company's proxy materials, must submit
such Rule 14a-8 Proposal to the Company at its principal executive offices no
later than December 9, 2004, unless the Company notifies the stockholders
otherwise. Only those Rule 14a-8 Proposals that are timely received by the
Company and proper for stockholder action (and otherwise proper) will be
included in the Company's proxy materials.
23
Any stockholder of the Company who desires to submit a proposal for action
at the 2005 annual meeting of stockholders, but does not wish to have such
proposal (a "Non-Rule 14a-8 Proposal") included in the Company's proxy
materials, must submit such Non-Rule 14a-8 Proposal to the Company at its
principal executive offices so that it is received no later than February 21,
2005, unless the Company notifies the stockholders otherwise. If a Non-Rule
14a-8 Proposal is not received by the Company on or before February 21, 2005,
then the Company intends to exercise its discretionary voting authority with
respect to such Non-Rule 14a-8 Proposal.
"Discretionary voting authority" is the ability to vote proxies that
stockholders have executed and returned to the Company, on matters not
specifically reflected in the Company's proxy materials, and on which
stockholders have not had an opportunity to vote by proxy.
It is the responsibility of the Company's Nominating and Corporate
Governance Committee to identify, evaluate and recommend to the Board the
Directors nominees for election at the annual meeting of stockholders, as well
as for filling vacancies or additions on the Board of Directors that may occur
between annual meetings. The Nominating and Corporate Governance Committee
endeavors to recommend only director candidates who possess the highest personal
values and integrity; who have experience and have exhibited achievements in one
or more of the key professional, business, financial, legal and other challenges
that face a large global U.S. independent oil and gas company; who exhibit sound
judgment, intelligence, personal character, and the ability to make independent
analytical inquiries; who demonstrate a willingness to devote adequate time to
Board of Director duties; and who are likely to be able to serve on the Board of
Directors for a sustained period. Consideration will also be given to the Board
of Directors' overall balance of diversity of perspectives, backgrounds and
experiences.
The Nominating and Corporate Governance Committee will consider any nominee
recommended by stockholders for election at the annual meeting of stockholders
to be held in 2005 if that nomination is submitted in writing, not later than
December 9, 2004, to the Corporate Secretary, Pioneer Natural Resources Company,
5205 North O'Connor Boulevard, Suite 900, Irving, Texas 75039. With respect to
each such nominee, the following information must be provided to the Company
with the written nomination:
a) the nominee's name, address and other personal information;
b) the number of shares of each class and series of stock of the Company
held by such nominee;
c) the nominating stockholder's name, residential address and telephone
number, business address and telephone number; and
d) all other information required to be disclosed pursuant to Regulation
14A of the Securities and Exchange Act of 1934.
Each submission must also include a statement of the qualifications of the
nominee, a notarized consent signed by the nominee evidencing a willingness to
serve as a Director, if elected, and a commitment by the nominee to meet
personally with members of the Nominating and Corporate Governance Committee and
the Board of Directors.
Stockholders desiring to propose action at the annual meeting of
stockholders must also comply with Article Nine of the Amended and Restated
Certificate of Incorporation of the Company. Under Article Nine, a stockholder
must submit to the Company, no later than 60 days before the annual meeting or
ten days after the first public notice of the annual meeting is sent to
stockholders, a written notice setting forth (i) the nature of the proposal with
particularity, including the written text of the proposal, (ii) the
stockholder's name, address and other personal information, (iii) any interest
of the stockholder in the proposed business, (iv) the name of any persons
nominated to be elected or reelected as a director by the stockholder and (v)
with respect to each such nominee, the nominee's name, address and other
personal information, the number of shares of each class and series of stock of
the Company held by such nominee, all information required to be disclosed
pursuant to Regulation 14A of the Securities and Exchange Act of 1934, and a
notarized letter containing such nominee's acceptance of the nomination, stating
his or her intention to serve as a director, if elected, and consenting to be
24
named as a nominee in any proxy statement relating to such election. The person
presiding at the annual meeting will determine whether business is properly
brought before the meeting and will not permit the consideration of any business
not properly brought before the meeting.
Written requests for inclusion of any stockholder proposal should be
addressed to Corporate Secretary, Pioneer Natural Resources Company, 5205 North
O'Connor Boulevard, Suite 900, Irving, Texas 75039. The Company suggests that
any such proposal be sent by certified mail, return receipt requested.
SOLICITATION OF PROXIES
Solicitation of Proxies may be made by mail, personal interview, telephone
or telegraph by officers, directors and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the common stock that those companies or persons hold of record, and
the Company will reimburse the forwarding expenses. In addition, the Company has
retained D.F. King & Co., Inc. to assist in solicitation for a fee estimated not
to exceed $7,500. The Company will bear all costs of solicitation.
STOCKHOLDER LIST
In accordance with the Delaware General Corporation Law, the Company will
maintain at its corporate offices in Irving, Texas, a list of the stockholders
entitled to vote at the Annual Meeting. The list will be open to the examination
of any stockholder, for purposes germane to the Annual Meeting, during ordinary
business hours for ten days before the Annual Meeting.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the year ended December 31,
2003, is being mailed to stockholders concurrently with this Proxy Statement and
does not form part of the proxy solicitation material.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003, as filed with the SEC, will be sent to any stockholder
without charge upon written request addressed to Investor Relations, Pioneer
Natural Resources Company, 5205 North O'Connor Boulevard, Suite 900, Irving,
Texas 75039. A copy of this Proxy Statement or our Annual Report on Form 10-K
will also be sent upon written or oral request to any stockholder of a shared
address to which a single copy of this Proxy Statement or Annual Report on Form
10-K was delivered. Requests may be made by writing to Investor Relations,
Pioneer Natural Resources Company, 5205 North O'Connor Boulevard, Suite 900,
Irving, Texas 75039 or by calling 972-969-3583. The Annual Report on Form 10-K
is also available at the SEC's website in its EDGAR database at www.sec.gov.
INTERNET VOTING
For shares of stock that are registered in your name, you have the
opportunity to vote through the Internet using a program provided by the
Company's transfer agent, Continental Stock Transfer & Trust Company
("Continental"). Votes submitted electronically through the Internet under this
program must be received by 5:00 p.m., Eastern Time, on Wednesday, May 12, 2004.
The giving of such a proxy will not affect your right to vote in person should
you decide to attend the Annual Meeting. The Company has been advised by counsel
that the Internet voting procedures that have been made available through
Continental are consistent with the requirements of applicable law.
To vote through the Internet, please access Continental on the World Wide
Web at www.continentalstock.com. Under "ContinentaLink" on the right side,
select "Proxy Voting Log In". You will be prompted to complete an electronic
ballot. Follow the prompts to vote your shares.
The Internet voting procedures are designed to authenticate stockholder
identities, to allow stockholders to give their voting instructions and to
confirm that stockholders' instructions have been recorded properly.
Stockholders voting through the Internet should remember that the stockholder
25
must bear costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies.
******
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO VOTE THROUGH THE
INTERNET OR TO COMPLETE, SIGN AND RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID,
ADDRESSED ENVELOPE.
By Order of the Board of Directors,
/s/ Mark L. Withrow
----------------------------------------
Mark L. Withrow
Secretary
Irving, Texas
April 2, 2004
26
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
- You can vote your shares electronically through the Internet.
- This eliminates the need to return the proxy card.
- Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have this proxy card in hand when you access the above website. At
"ContinentaLink" on the right side, select "Proxy Voting Log In". You will be
prompted to complete an electronic ballot. Follow the prompts to vote your
shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card below, detach it and return it in the
postage-paid envelope provided.
PLEASE DO NOT RETURN THE CARD BELOW IF VOTED
ELECTRONICALLY
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
27
PROXY BY MAIL
Please mark your votes like this [ X ]
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. TO BE VALID, THIS PROXY MUST BE SIGNED.
The Board of Directors recommends a
vote FOR Items 1 and 2.
ITEM 1 - ELECTION OF DIRECTORS
FOR WITHHELD
ALL FOR ALL
Nominees:
01 R. Hartwell Gardner
02 James L. Houghton [ ] [ ]
03 Linda K. Lawson
WITHHELD FOR: (List below each nominee that you do not wish to vote for.)
--------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES MAY VOTE ON ANY OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS ABOVE
Signature Signature Date
------------------- ----------------------- ---------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
28
Access to Pioneer shareholder account information
and other shareholder services are available on the
Internet!
Visit Continental Stock Transfer's website at
www.continentalstock.com
for their Internet Shareholder Service -
ContinentaLink
Through this service, shareholders can change addresses, receive electronic
forms, and view account transaction history and dividend history.
To access this service, visit the website listed above. At "ContinentaLink" on
the right side of the home page, select "Shareholder Log In". From there, you
can either "View a Sample Account" or you can sign-up (choose "First Time
Visitor" then "New Member Sign-Up"). Guidance is provided on the website.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
29
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PIONEER NATURAL RESOURCES COMPANY
The undersigned hereby appoints Scott D. Sheffield and Mark L. Withrow as
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Pioneer Natural Resources Company standing in the
name of the undersigned with all powers which the undersigned would possess if
present at the Annual Meeting of Stockholders of the Company to be held May 13,
2004 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
30
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
- You can vote your shares electronically through the Internet.
- This eliminates the need to return the proxy card.
- Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have this proxy card in hand when you access the above website. At
"ContinentaLink" on the right side, select "Proxy Voting Log In". You will be
prompted to complete an electronic ballot. Follow the prompts to vote your
shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card below, detach it and return it in the
postage-paid envelope provided.
PLEASE DO NOT RETURN THE CARD BELOW IF VOTED
ELECTRONICALLY
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
31
PROXY BY MAIL
Please mark your votes like this [ X ]
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED IN ACCORDANCE WITH THE TERMS OF THE TRUST AGREEMENT. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. TO BE VALID, THIS PROXY MUST BE
SIGNED.
The Board of Directors recommends a
vote FOR Items 1 and 2.
ITEM 1 - ELECTION OF DIRECTORS
FOR WITHHELD
ALL FOR ALL
Nominees:
01 R. Hartwell Gardner
02 James L. Houghton [ ] [ ]
03 Linda K. Lawson
WITHHELD FOR: (List below each nominee that you do not wish to vote for.)
--------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES MAY VOTE ON ANY OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS ABOVE
Signature Signature Date
------------------------ -------------------- --------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
32
The Stockholders' meeting will be held on May 13, 2004. Your voting instruction
must be received by 5:00 p.m., New York time, on May 10, 2004 to allow Vanguard
to vote according to your instruction.
FOLD AND DETACH HERE AND READ THE RESERVE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
33
PIONEER NATURAL RESOURCES USA, INC. 401(k) PLAN
To: THE VANGUARD FIDUCIARY TRUST COMPANY, TRUSTEE FOR THE EMPLOYER MATCHING
CONTRIBUTION (STOCK ACCOUNT) OF THE PIONEER NATURAL RESOURCES USA, INC.
401(k) AND MATCHING PLAN
In connection with the proxy materials I received relating to the annual
meeting of shareholders of Pioneer Natural Resources Company to be held on
Thursday, May 13, 2004, I direct you to execute a proxy as indicated with
respect to all shares of common stock of Pioneer to which I have the right to
give voting directions under the 401(k) plan. I understand you will hold these
directions strictly confidential.
(Continued, and to be marked, dated and signed, on the other side)
34