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  "documentTitle": "Oil Gas EP Incentive Compensation",
  "authorId": "AlvarezMarsal",
  "authorName": "Alvarez & Marsal",
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  "notes": "The slide discusses the shift from formulaic to discretionary compensation and provides a bar chart showing the prevalence of specific performance metrics.",
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      "text": "Production, including production growth, is again the most prevalent metric used by E&P companies (81 percent), followed by health / safety / environmental metrics, used by 59 percent of companies.",
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      "text": "Companies utilize formulaic compensation programs to provide clarity to executives and shareholders on how compensation will be determined. Previously, formulaic plan designs allowed companies to benefit from favorable tax treatment under the now-repealed \"performance-based compensation\" exemption under Internal Revenue Code (IRC) section 162(m). The Tax Cuts and Jobs Act of 2017 eliminated this exception for calendar years beginning on or after January 1, 2018.",
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      "text": "The chart below displays the most prevalent metrics used in AIPs. Production, including production growth, is again the most prevalent metric used by E&P companies (81 percent), followed by health / safety / environmental metrics, used by 59 percent of companies. This year, reserves / reserve growth dropped from the second-most prevalent (used by 61 percent of companies in 2016) to the third position (now used by only 45 percent of companies).",
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      "text": "Some companies maintain discretion over the payout of annual bonus plans to allow them to adjust the payouts for events that are unforeseen and/or out of the executives' control. This is particularly useful considering the volatility of the commodity markets in recent years. Some companies exercise discretion by implementing an AIP with a formulaic trigger (e.g., achieving a certain level of EBITDA or cash flow, etc.) to fund the bonus pool, which can then be allocated at the discretion of the board.",
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      "text": "Generally, as market capitalization increases, companies have a stronger preference to utilize stated performance metrics. It is important to note that a plan may not necessarily be classified as \"formulaic\" merely because it utilizes performance metrics. Based on the terms of the plan, it may ultimately be classified as \"discretionary\" if the board retains full discretion to adjust payouts (higher or lower) under the plan.",
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      "text": "ANNUAL INCENTIVE PLANS",
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