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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 þ | |
| Filed by a Party other than the Registrant o | |
| Check the appropriate box: |
| o Preliminary Proxy Statement | |
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| þ Definitive Proxy Statement | |
| o Definitive Additional Materials | |
| o Soliciting Material Pursuant to §240.14a-12 |
Whiting Petroleum
Corporation
(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):
| þ No fee required. | |
| o 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: |
| o Fee paid previously with preliminary materials. |
| o 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: |
| SEC 1913 (11-01) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
WHITING PETROLEUM CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 10, 2005
To the Stockholders of Whiting Petroleum Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of
stockholders of Whiting Petroleum Corporation will be held on
Tuesday, May 10, 2005, at 9:00 a.m., local time, at
the John D. Hershner Room located in the Wells Fargo Building at
1700 Lincoln Street, Denver, Colorado 80203, for the following
purposes:
| (1) to elect two directors to hold office until the 2008 annual meeting of stockholders and until their successors are duly elected and qualified; | |
| (2) to ratify the appointment of Deloitte & Touche LLP as independent auditors; and | |
| (3) to consider and act upon such other business as may properly come before the meeting or any adjournment or postponement thereof. |
The close of business on March 16, 2005 has been fixed as
the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting and any adjournment or
postponement thereof.
A proxy for the meeting and a proxy statement are enclosed
herewith.
| By Order of the Board of Directors | |
| WHITING PETROLEUM CORPORATION | |
| Bruce R. DeBoer | |
| Corporate Secretary |
Denver, Colorado
April 1, 2005
Your vote is important no matter how large or small your
holdings may be. To assure your representation at the meeting,
please date the enclosed proxy, which is solicited by the Board
of Directors, sign exactly as your name appears thereon and
return immediately.
WHITING PETROLEUM CORPORATION
1700 Broadway, Suite 2300
Denver, Colorado 80290-2300
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 10, 2005
This proxy statement is being furnished to stockholders by the
Board of Directors (the “Board”) of Whiting
Petroleum Corporation beginning on or about April 1, 2005
in connection with a solicitation of proxies by the Board for
use at the annual meeting of stockholders to be held on Tuesday,
May 10, 2005, at 9:00 a.m., local time, at the John D.
Hershner Room located in the Wells Fargo Building at 1700
Lincoln Street, Denver, Colorado 80203, and all adjournments or
postponements thereof (the “Annual Meeting”)
for the purposes set forth in the attached Notice of Annual
Meeting of Stockholders.
Execution of a proxy given in response to this solicitation will
not affect a stockholder’s right to attend the Annual
Meeting and to vote in person. Presence at the Annual Meeting of
a stockholder who has signed a proxy does not in itself revoke a
proxy. Any stockholder giving a proxy may revoke it at any time
before it is exercised by giving notice thereof to us in writing
or in open meeting.
A proxy, in the enclosed form, which is properly executed, duly
returned to us and not revoked will be voted in accordance with
the instructions contained therein. The shares represented by
executed but unmarked proxies will be voted FOR the two nominees
for election as directors referred to in this proxy statement,
FOR the ratification of the appointment of Deloitte &
Touche LLP as our independent auditors and in accordance with
the judgment of the persons named as proxies in the enclosed
form of proxy on such other business or matters which may
properly come before the Annual Meeting. Other than the election
of two directors and the ratification of the appointment of
Deloitte & Touche LLP as our independent auditors, the
Board has no knowledge of any other matters to be presented for
action by the stockholders at the Annual Meeting.
Only holders of record of our common stock at the close of
business on March 16, 2005 are entitled to vote at the
Annual Meeting. On that date, 29,793,676 shares of our
common stock were outstanding and entitled to vote, each of
which is entitled to one vote per share.
ELECTION OF DIRECTORS
Our certificate of incorporation and By-Laws provide that our
directors are divided into three classes, with staggered terms
of three years each. At the Annual Meeting, the stockholders
will elect two directors to hold office until the 2008 annual
meeting of stockholders and until their successors are duly
elected and qualified. Unless stockholders otherwise specify,
the shares represented by the proxies received will be voted in
favor of the election as directors of the persons named as
nominees in this proxy statement. The Board has no reason to
believe that the listed nominees will be unable or unwilling to
serve as directors if elected. However, in the event that any
nominee should be unable to serve or for good cause will not
serve, the shares represented by proxies received will be voted
for another nominee selected by the Board. Each director will be
elected by a plurality of the votes cast at the Annual Meeting
(assuming a quorum is present). Consequently, any shares not
voted at the Annual Meeting, whether due to abstentions, broker
non-votes or otherwise, will have no impact on the election of
the directors.
1
The following sets forth certain information, as of
March 16, 2005, about the Board’s nominees for
election at the Annual Meeting and each director whose term will
continue after the Annual Meeting.
Nominees for Election at the Annual Meeting
| Terms to expire at the 2005 Annual Meeting |
Kenneth R. Whiting, 78, has been a director of Whiting
Petroleum Corporation since 2003 and has served as a director of
Whiting Oil and Gas Corporation since its inception in 1980. He
was President and Chief Executive Officer of Whiting Oil and Gas
Corporation from its inception until 1993, when he was appointed
Vice President of International Business for IES Diversified.
From 1978 to late 1979, he served as President of Webb
Resources, Inc. He has many years of experience in the oil and
natural gas industry, including his position as Executive Vice
President of Ladd Petroleum Corporation. He was a partner and
associate with Holme Roberts & Owen, Attorneys at Law.
Mr. Whiting received his Bachelor’s Degree in business
from the University of Colorado and his J.D. from the University
of Denver.
Palmer L. Moe, 61, has served as a director of Whiting
Petroleum Corporation since October 2004. He is Managing
Director of Kronkosky Charitable Foundation in San Antonio,
Texas, a position he has held since 1997. Mr. Moe is a
certified public accountant and was a partner of Arthur
Andersen & Co. in its San Antonio, Houston and
Denver offices from 1965 to 1983. From 1983 until 1992, he
served as President and Chief Operating Officer and a director
of Valero Energy Corporation. He received his Bachelor’s
Degree in accounting from the University of Denver and completed
the Senior Executive Development Course at the Alfred P. Sloan
School of Management at the Massachusetts Institute of
Technology. Mr. Moe was recommended to our Nominating and
Governance Committee by one of our independent directors.
The Board recommends the foregoing nominees for election as
directors for terms expiring at the 2008 Annual Meeting and
urges each stockholder to vote “for” such nominees.
Shares of common stock represented by executed but unmarked
proxies will be voted “for” such nominees.
Directors Continuing in Office
| Terms expiring at the 2006 Annual Meeting |
Graydon D. Hubbard, 71, has served as a director of
Whiting Petroleum Corporation since September 2003. He is a
retired certified public accountant and was a partner of Arthur
Andersen LLP in its Denver office for more than five years prior
to his retirement in November 1989. Since 1991, he has served as
a director of Allied Motion Technologies Inc., a company engaged
in the business of designing, manufacturing and selling motion
control products. Mr. Hubbard is also an author. He
received his Bachelor’s Degree in accounting from the
University of Colorado.
James J. Volker, 58, has been a director of Whiting
Petroleum Corporation since 2003 and a director of Whiting Oil
and Gas Corporation since 2002. He joined Whiting Oil and Gas
Corporation in August 1983 as Vice President of Corporate
Development and served in that position through April 1993. In
March 1993, he became a contract consultant to Whiting Oil and
Gas Corporation and served in that capacity until August 2000,
at which time he became Executive Vice President and Chief
Operating Officer. Mr. Volker was appointed President and
Chief Executive Officer and a director of Whiting Oil and Gas
Corporation in January 2002. Mr. Volker was co-founder,
Vice President and later President of Energy Management
Corporation from 1971 through 1982. He has over thirty years of
experience in the oil and natural gas industry. Mr. Volker
has a degree in finance from the University of Denver, an MBA
from the University of Colorado and has completed H. K.
VanPoolen and Associates’ course of study in reservoir
engineering.
| Terms expiring at the 2007 Annual Meeting |
Thomas L. Aller, 56, has been a director of Whiting
Petroleum Corporation since 2003 and has served as a director of
Whiting Oil and Gas Corporation since 1997. Mr. Aller has
served as Senior Vice President — Energy Delivery of
Alliant Energy Corporation and President of Interstate Power and
Light Company since January 2004. Prior to that, he served as
President of Alliant Energy Investments, Inc. since April 1998
and
2
interim Executive Vice President — Energy Delivery of
Alliant Energy Corporation since September 2003. From 1993 to
1998, he served as Vice President of IES Investments. He
received his Bachelor’s Degree in political science from
Creighton University and his Master’s Degree in municipal
administration from the University of Iowa.
J.B. Ladd, 81, has been a director of Whiting Petroleum
Corporation since 2003 and has served as a director of Whiting
Oil and Gas Corporation since its inception in 1980. He is an
independent oil and natural gas operator with offices in Los
Angeles, California and Denver, Colorado. He has over
50 years of experience in the oil and natural gas industry
working for Texaco and Consolidated Oil and Gas, Inc. and as an
independent oil and natural gas operator. He founded Ladd
Petroleum Corporation in 1968, which was merged into Utah
International in 1973 and merged into General Electric Company
in 1976. Mr. Ladd received a degree in petroleum
engineering from the University of Kansas.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines that are
available, free of charge, on our website at www.whiting.com
or in print to any stockholder who requests it in writing
from our Corporate Secretary.
Code of Business Conduct and Ethics
The Board has adopted the Whiting Petroleum Corporation Code of
Business Conduct and Ethics that applies to our directors and
employees that is available, free of charge, on our website at
www.whiting.com or in print to any stockholder who
requests it in writing from our Corporate Secretary.
Independence of Directors
Of the six directors currently serving on the Board, the Board
has determined that each of Messrs. Hubbard, Ladd, Moe and
Whiting has no material relationship with us and is independent
under New York Stock Exchange listing standards. The Board has
established categorical standards within our Corporate
Governance Guidelines to assist in making determinations of
director independence. These categorical standards are attached
as Appendix A to this proxy statement. In making its
determination of independence, the Board found that each of
Messrs. Hubbard, Ladd, Moe and Whiting met these standards.
Board Committees
The Board has standing Audit, Compensation and Nominating and
Governance Committees. The Board has adopted a formal written
charter for each of these committees that is available, free of
charge, on our website at www.whiting.com or in print to
any stockholder who requests it in writing from our Corporate
Secretary.
The Audit Committee’s primary duties and responsibilities
are to assist the Board in monitoring the integrity of our
financial statements, the independent auditor’s
qualifications and independence, the performance of our internal
audit function and independent auditors and our compliance with
legal and regulatory requirements. The Audit Committee is
directly responsible for the appointment, retention,
compensation, evaluation and termination of our independent
auditors and has the sole authority to approve all audit and
permitted non-audit engagement fees and terms. The Audit
Committee is presently comprised of Messrs. Hubbard
(Chairperson), Ladd and Moe, each of whom is an independent
director under New York Stock Exchange listing standards and
Securities and Exchange Commission rules applicable to audit
committee members. The Board has determined that
Mr. Hubbard qualifies as an “audit committee financial
expert,” as defined by Securities and Exchange Commission
rules. The Audit Committee held four meetings in 2004.
3
The Compensation Committee discharges the responsibilities of
the Board with respect to our compensation programs and
compensation of our executives and directors. The Compensation
Committee has overall responsibility for approving and
evaluating the compensation of executive officers (including the
chief executive officer) and directors and our executive officer
and director compensation plans, policies and programs. The
Compensation Committee is presently comprised of
Messrs. Hubbard (Chairperson), Ladd and Whiting, each of
whom is an independent director under New York Stock Exchange
listing standards. The Compensation Committee held three
meetings in 2004.
The principal functions of the Nominating and Governance
Committee are to identify individuals qualified to become
directors and recommend to the Board nominees for all
directorships, identify directors qualified to serve on Board
committees and recommend to the Board members for each
committee, develop and recommend to the Board a set of
corporation governance guidelines and otherwise take a
leadership role in shaping our corporate governance. The
Nominating and Governance Committee is presently comprised of
Messrs. Hubbard, Moe and Whiting (Chairperson), each of
whom is an independent director under New York Stock Exchange
listing standards. The Nominating and Governance Committee held
two meetings in 2004.
In identifying and evaluating nominees for director, the
Nominating and Governance Committee seeks to ensure that the
Board possesses, in the aggregate, the strategic, managerial and
financial skills and experience necessary to fulfill its duties
and to achieve its objectives, and seeks to ensure that the
Board is comprised of directors who have broad and diverse
backgrounds, possessing knowledge in areas that are of
importance to us. In addition, the Nominating and Governance
Committee believes it is important that at least one director
have the requisite experience and expertise to be designated as
an “audit committee financial expert.” The Nominating
and Governance Committee looks at each nominee on a case-by-case
basis regardless of who recommended the nominee. In looking at
the qualifications of each candidate to determine if their
election would further the goals described above, the Nominating
and Governance Committee takes into account all factors it
considers appropriate, which may include strength of character,
mature judgment, career specialization, relevant technical
skills or financial acumen, diversity of viewpoint and industry
knowledge. At a minimum, each director nominee must have
displayed the highest personal and professional ethics,
integrity and values and sound business judgment. In addition,
the Nominating and Governance Committee believes that the
following minimum qualifications are necessary for a director
nominee to possess to be recommended by the Committee to the
Board:
| • | Each director must be highly accomplished in his or her respective field, with superior credentials and recognition and broad experience at the administrative and/or policy-making level in business, government, education, technology or public interest. | |
| • | Each director must have relevant expertise and experience, and be able to offer advice and guidance to the Chief Executive Officer based on that expertise and experience. | |
| • | Each director must be independent of any particular constituency, be able to represent all of our stockholders and be committed to enhancing long-term stockholder value. | |
| • | Each director must have sufficient time available to devote to activities of the Board and to enhance his or her knowledge of our business. |
The Nominating and Governance Committee will consider persons
recommended by stockholders to become nominees for election as
directors in accordance with the foregoing and other criteria
set forth in our Corporate Governance Guidelines and Nominating
and Governance Committee Charter. Recommendations for
consideration by the Nominating and Governance Committee should
be sent to our Corporate Secretary in writing together with
appropriate biographical information concerning each proposed
nominee. Our By-Laws also set forth certain requirements for
stockholders wishing to nominate director candidates directly
for consideration by the stockholders. With respect to an
election of directors to be held at an annual meeting, a
stockholder must, among other things, give notice of an intent
to make such a nomination to our Corporate Secretary in advance
of the meeting in compliance with the terms and within the time
period specified in the By-Laws. Pursuant to these requirements,
a stockholder must give a written notice of intent to our
Corporate
4
Secretary not less than 60 days or more than 90 days
prior to the first anniversary of the date on which we first
mailed our proxy materials for the preceding year’s annual
meeting of stockholders.
Presiding Director
A presiding director is designated to preside over each
executive session of the non-management directors at Board
meetings. The role of the presiding director rotates among the
chairs of the Audit Committee, Compensation Committee and
Nominating and Governance Committee.
Communication with Directors
Stockholders and other interested parties may communicate with
the full Board, non-management directors as a group or
individual directors, including the presiding director, by
submitting such communications in writing to our Corporate
Secretary at Whiting Petroleum Corporation, c/o the Board
of Directors (or, at the stockholder’s option, c/o a
specific director or directors), 1700 Broadway, Suite 2300,
Denver, Colorado 80290. Such communications will be delivered
directly to the Board.
Meetings and Attendance
The Board held thirteen meetings in 2004. No director attended
less than 90% of the total number of Board and committee
meetings on which they served. Directors are expected to attend
our annual meeting of stockholders each year and all of our
directors serving at the time attended our 2004 annual meeting
of stockholders.
Director Compensation
Directors who are our employees receive no compensation for
service as members of either the Board or Board committees.
During 2004, non-employee directors were compensated as follows:
| Committee Service | ||||||||||||||||
| Nominating | ||||||||||||||||
| Board | and | |||||||||||||||
| Service | Audit | Compensation | Governance | |||||||||||||
|
Annual Retainer
|
$ | 20,000 | ||||||||||||||
|
Restricted Stock, vesting over three years
|
$ | 30,000 | ||||||||||||||
|
Committee Chair
|
$ | 12,000 | $ | 5,000 | $ | 5,000 | ||||||||||
|
Committee Member
|
$ | 2,500 | $ | 1,000 | $ | 1,000 | ||||||||||
|
Meeting Fee
|
$ | 1,500 | $ | 1,500 | $ | 1,000 | $ | 1,000 | ||||||||
In addition, Mr. Whiting receives payments under our
Production Participation Plan with respect to his vested plan
interests relating to his employment with us from 1980 to 1993.
Mr. Whiting was paid $31,175 under the Production
Participation Plan for 2004. Prior to the sale of all of our
remaining common stock that was owned by Alliant Energy
Corporation, our former parent company, in November 2004,
Mr. Aller received no compensation for his service on the
Board because of his employment status with Alliant.
5
Effective February 24, 2005, non-employee director
compensation is as follows:
| Committee Service | ||||||||||||||||
| Nominating | ||||||||||||||||
| Board | and | |||||||||||||||
| Service | Audit | Compensation | Governance | |||||||||||||
|
Annual Retainer
|
$30,000 | |||||||||||||||
|
Restricted Stock, three year vesting
|
1,500 shares | |||||||||||||||
|
Committee Chair
|
$ | 16,000 | $ | 10,000 | $ | 8,000 | ||||||||||
|
Committee Member
|
$ | 3,000 | $ | 1,500 | $ | 1,000 | ||||||||||
|
Meeting Fee
|
$1,500 | $ | 1,500 | $ | 1,000 | $ | 1,000 | |||||||||
|
Telephonic meetings over one hour
|
$1,500 | $ | 1,500 | $ | 1,000 | $ | 1,000 | |||||||||
|
Telephonic meetings of one hour or less
|
$ 750 | $ | 750 | $ | 500 | $ | 500 | |||||||||
PRINCIPAL STOCKHOLDERS
Certain Beneficial Owners
The following table sets forth information regarding beneficial
ownership by persons known to us to own more than 5% of our
outstanding common stock. The beneficial ownership information
set forth below has been reported in filings made by the
beneficial owners with the Securities and Exchange Commission.
| Amount and Nature of Beneficial Ownership | ||||||||||||||
| Voting Power | Investment Power | |||||||||||||
| Name and Address of | Percent | |||||||||||||
| Beneficial Owner | Sole | Shared | Sole | Shared | Aggregate | of Class | ||||||||
|
Neuberger Berman, Inc.
|
1,748,750 | — | — | 2,163,450 | 2,163,450 | 7.3% | ||||||||
|
605 Third Avenue
|
||||||||||||||
|
New York, NY 10158
|
||||||||||||||
|
T. Rowe Price Associates, Inc.(1)
|
626,300 | — | 2,069,400 | — | 2,069,400 | 6.9% | ||||||||
|
100 E. Pratt Street
|
||||||||||||||
|
Baltimore, MD 21202
|
||||||||||||||
|
Third Avenue Management LLC
|
1,824,450 | — | 1,837,075 | — | 1,837,075 | 6.2% | ||||||||
|
622 Third Avenue
|
||||||||||||||
|
New York, NY 10017
|
||||||||||||||
|
Wellington Management Company LLP
|
— | 1,312,110 | — | 1,511,680 | 1,532,780 | 5.1% | ||||||||
|
75 State Street
|
||||||||||||||
|
Boston, MA 02109
|
||||||||||||||
| (1) | These securities are owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. serves as investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, T. Rowe Price Associates, Inc. is deemed to be the beneficial owner of such securities; however, T. Rowe Price Associates, Inc. has expressly disclaimed beneficial ownership of such securities. |
6
Management and Directors
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of March 16,
2005 by: (i) each director and nominee; (ii) each of
the executive officers named in the Summary Compensation Table
set forth below; and (iii) all of the directors, nominees
and executive officers (including the executive officers named
in the Summary Compensation Table) as a group. Each of the
holders listed below has sole voting and investment power over
the shares beneficially owned.
| Shares of | Percent of | |||||||
| Common Stock | Common Stock | |||||||
| Name of Beneficial Owner | Beneficially Owned | Beneficially Owned | ||||||
|
James J. Volker
|
70,887 | * | ||||||
|
Thomas L. Aller
|
4,345 | * | ||||||
|
Graydon D. Hubbard
|
8,892 | * | ||||||
|
J. B. Ladd
|
63,045 | * | ||||||
|
Palmer L. Moe
|
2,500 | * | ||||||
|
Kenneth R. Whiting
|
3,045 | * | ||||||
|
D. Sherwin Artus
|
30,828 | * | ||||||
|
John R. Hazlett(1)
|
24,368 | * | ||||||
|
James R. Casperson(2)
|
27,760 | * | ||||||
|
Mark R. Williams
|
29,724 | * | ||||||
|
All directors, nominees and executive officers as a group
(16 persons)
|
367,559 | 1.2% | ||||||
| * | Denotes less than 1%. |
| (1) | Mr. Hazlett retired effective January 1, 2005 and his listed share total is as of that date less 7,724 unvested shares of restricted stock which were forfeited upon retirement. |
| (2) | Mr. Casperson resigned effective March 1, 2005 and his listed share total is as of that date less 6,865 unvested shares of restricted stock which were forfeited upon resignation. |
7
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table sets forth certain information concerning
the compensation earned each of the last three fiscal years by
our Chief Executive Officer and each of four other most highly
compensated executive officers whose total cash compensation
exceeded $100,000 in the fiscal year ended December 31,
2004. The persons named in the table are sometimes referred to
herein as the “named executive officers.”
Summary Compensation Table
| Annual | Long Term | |||||||||||||||||||
| Compensation(1) | Compensation | |||||||||||||||||||
| Restricted | All Other | |||||||||||||||||||
| Salary | Bonus | Stock Awards | Compensation | |||||||||||||||||
| Name and Principal Position | Year | ($) | ($)(2) | ($)(3) | ($)(4) | |||||||||||||||
|
James J. Volker
|
2004 | 342,488 | 309,683 | 650,340 | 0 | |||||||||||||||
|
Chairman, President and
|
2003 | 168,713 | 262,792 | 0 | 659,044 | |||||||||||||||
|
Chief Executive Officer |
2002 | 165,000 | 205,041 | 0 | 0 | |||||||||||||||
|
D. Sherwin Artus
|
2004 | 105,000 | 277,351 | 162,590 | 13,000 | |||||||||||||||
|
Senior Vice President
|
2003 | 102,250 | 183,211 | 0 | 680,044 | |||||||||||||||
| 2002 | 100,000 | 156,641 | 0 | 11,000 | ||||||||||||||||
|
James R. Casperson(5)
|
2004 | 177,391 | 181,062 | 216,773 | 11,004 | |||||||||||||||
|
Vice President, Finance and
|
2003 | 139,565 | 97,712 | 0 | 669,061 | |||||||||||||||
|
Chief Financial Officer
|
2002 | 134,125 | 78,370 | 0 | 11,000 | |||||||||||||||
|
Mark R. Williams
|
2004 | 113,847 | 239,213 | 162,590 | 13,000 | |||||||||||||||
|
Vice President,
|
2003 | 95,406 | 150,672 | 0 | 626,041 | |||||||||||||||
|
Exploration and Development
|
2002 | 91,510 | 124,819 | 0 | 11,000 | |||||||||||||||
|
John R. Hazlett(6)
|
2004 | 119,200 | 226,972 | 162,590 | 163,000 | |||||||||||||||
|
Vice President,
|
2003 | 115,952 | 139,133 | 0 | 653,042 | |||||||||||||||
|
Acquisitions and Land
|
2002 | 112,050 | 114,941 | 0 | 11,000 | |||||||||||||||
| (1) | Certain personal benefits provided to the named executive officers are not included in the table. The aggregate amount of such personal benefits for each named executive officer in each year reflected in the table did not exceed the lesser of $50,000 or 10% of the sum of such officer’s salary and bonus in each respective year. |
| (2) | Except for incentive bonuses to Mr. Volker of $76,000 for 2003 and $54,788 for 2002, all amounts presented under the Bonus column were paid under our Production Participation Plan, which is allocated a specific percentage of net income with respect to certain oil and natural gas wells. | |
| (3) | These amounts are the dollar value of restricted stock awards under our 2003 Equity Incentive Plan with the common stock valued at the grant date price of $21.05 per share. Messrs. Volker, Artus, Casperson, Williams and Hazlett, received 30,895, 7,724, 10,298, 7,724 and 7,724, shares, respectively, on February 23, 2004 which vest in three equal increments on each anniversary of the grant date. The value of such shares at the closing market price on December 31, 2004 of $30.25 per share was $934,574, $233,651, $311,515, $233,651 and $233,651, respectively. Dividends are payable on these restricted shares; however, we have not historically paid any dividends and do not anticipate paying any dividends on our common stock in the foreseeable future. As a result of Mr. Hazlett’s retirement effective January 1, 2005, prior to the vesting of any of his shares of restricted stock, all of his 10,298 shares were forfeited. As a result of Mr. Casperson’s resignation effective March 1, 2005, 6,865 shares of his restricted stock that had not vested were forfeited. | |
| (4) | These amounts for 2004 are matching contributions by us under our 401(k) Employee Savings Plan, other than Mr. Hazlett who received an additional $150,000 as a retirement bonus upon his retirement effective January 1, 2005. These amounts for 2003 consist of (i) matching contributions of $12,000 by us under our 401(k) Plan to each of the named executive officers other than Mr. Volker, who received no |
8
| matching contribution, and Mr. Casperson, who received a matching contribution of $1,017 and (ii) payments valued at $659,044 to Mr. Volker, $668,044 to Mr. Artus, $668,044 to Mr. Casperson, $614,041 to Mr. Williams and $641,042 to Mr. Hazlett pursuant to our Phantom Equity Plan in connection with our initial public offering in November 2003. After withholding for taxes, these payments were made in the form of shares of our common stock resulting in the issuance of 25,052 shares to Mr. Volker, 25,394 shares to Mr. Artus, 25,394 shares to Mr. Casperson, 23,341 shares to Mr. Williams and 24,368 shares to Mr. Hazlett. The Phantom Equity Plan terminated after the issuance of such shares. These amounts for 2002 are matching contributions by us under our 401(k) Plan. | ||
| (5) | Mr. Casperson resigned effective March 1, 2005. | |
| (6) | Mr. Hazlett retired effective January 1, 2005. |
Compensation Committee Interlocks and Insider
Participation
During 2004, Graydon D. Hubbard, J. B. Ladd and Kenneth R.
Whiting served on the Compensation Committee of our Board.
Mr. Whiting was President and Chief Executive Officer of
Whiting Oil and Gas Corporation from its inception in 1980 until
1993. None of our executive officers serve as a member of the
board of directors or compensation committee of any entity that
has one or more of its executive officers serving as a member of
our Board or Compensation Committee.
9
PERFORMANCE INFORMATION
We completed our initial public offering in November 2003. Our
common stock began trading on the New York Stock Exchange on
November 20, 2003. The following graph compares on a
cumulative basis changes since November 20, 2003 in
(a) the total stockholder return on our common stock with
(b) the total return on the Standard & Poor’s
Composite 500 Index and (c) the total return on the Dow
Jones US Oil Companies, Secondary Index. Such changes have been
measured by dividing (a) the sum of (i) the amount of
dividends for the measurement period, assuming dividend
reinvestment, and (ii) the difference between the price per
share at the end of and the beginning of the measurement period,
by (b) the price per share at the beginning of the
measurement period. The graph assumes $100 was invested on
November 20, 2003 in our common stock, the
Standard & Poor’s Composite 500 Index and the Dow
Jones US Oil Companies, Secondary Index.
| 11/20/03 | 12/31/03 | 12/31/04 | ||||||||||
|
Whiting Petroleum Corporation
|
$ | 100 | $ | 113 | $ | 186 | ||||||
|
Standard & Poor’s Composite 500 Index
|
$ | 100 | $ | 108 | $ | 120 | ||||||
|
Dow Jones US Oil Companies, Secondary Index
|
$ | 100 | $ | 114 | $ | 160 | ||||||
10
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
As members of the Compensation Committee of Whiting Petroleum
Corporation (the “Company”), our work is guided
by the Compensation Committee charter. We have developed a task
matrix to help assure compliance with the charter and control
timing of our work.
The Company’s executive compensation program is designed to
promote a strong, direct relationship between compensation and
performance achievements (on both a company and an individual
level) to reward superior corporate performance and to recognize
individual initiative and accomplishment. The Company’s
overall compensation strategy includes specific compensation
plans that are intended to foster the creation of long-term
stockholder value and the successful execution of business
plans. Other objectives of this strategy include making
executive compensation generally competitive and having a
significant portion of total compensation contingent upon
Company and individual performance.
In our 2004 reviews of executive compensation, we considered the
Company’s compensation philosophy, the analyses and
recommendations of management, and the Company’s
performance in executing a number of large acquisitions while
maintaining a well-balanced financial structure through the
successful completion of debt and equity offerings. We also
considered other Company achievements in the areas of return on
equity, return on capitalization, annual reserve and production
increases, production replacement ratios, unit costs of finding,
developing and acquiring oil and gas reserves, stock price
appreciation, and the Company’s performance in these and
other areas compared to a peer group of companies.
The key elements of the Company’s executive compensation
program consist of base salary, awards under the Production
Participation Plan and awards under the Equity Incentive Plan.
Base Salary. Base salaries are determined by evaluating
the responsibilities of the position, the experience and
contributions of the individual and the salaries for comparable
positions in the competitive marketplace. We concluded that base
salaries for 2004 should be adjusted so that total annual
compensation, including payments under the Production
Participation Plan (discussed below), is more in line with peer
group medians reported by the Company’s compensation
consultant, KPMG, and we approved salary increases accordingly.
Production Participation Plan. Adopted in 1981, the
Company’s Production Participation Plan is imbedded in the
Company’s history and culture. It has been an important
component of the Company’s strategy for recruiting capable
employees and officers, rewarding their performance and
encouraging them to remain with the Company. Viewed primarily as
an annual incentive plan, it has also provided long-term
incentives and retirement benefits similar to a variable
annuity. Each year, after reviewing management recommendations,
the Board allocates on a discretionary basis (but does not
legally convey) interests in oil and natural gas wells acquired
or developed during the year to the plan. Once allocated to plan
participants, the interests are fixed and generally vest ratably
at 20% per year over five years. For plan years prior to
2004, forfeitures are re-allocated among other plan
participants. For plan years after 2003, forfeitures revert to
the Company. The Company’s executive officers were awarded
1/3 of the 2.5% interest in 2004 wells allocated to the
Production Participation Plan. Well acquisition and development
costs attributable to the executive officer awards were
approximately $5 million.
Equity Incentive Plan. The Company adopted an Equity
Incentive Plan in 2003, and in February 2004, we approved
initial restricted stock grants under the plan for executives
and non-employee directors, with the shares vesting ratably over
three years. In recommending these grants, we considered,
in addition to performance measures previously discussed,
individual responsibilities and executive efforts and
performance in relation to business plans and forecasts. We also
considered customary business practices, long-term incentives
provided to other executives in similar peer company positions,
the Company’s need to retain qualified officers and
directors in a rapidly expanding industry, market performance of
the Company’s common stock, and the benefits expected from
aligning executive and shareholder interests.
Chief Executive Officer (James J. Volker) Compensation.
In establishing Mr. Volker’s 2004 compensation, we
considered Company performance measures discussed above and
Mr. Volker’s specific performance
11
in guiding the Company through a period of rapid expansion and
in managing many of the Company’s external as well as
internal relationships. In April 2004, we increased
Mr. Volker’s annual base salary from $169,950 to
$400,000. Mr. Volker was awarded 5.3% of the
2.5% interest in 2004 wells allocated to the
Production Participation Plan. Well acquisition and development
costs attributable to Mr. Volker’s award were
approximately $800,000. We also approved a restricted stock
grant of 30,895 shares of our common stock to
Mr. Volker under the Equity Incentive Plan, which vests in
three equal increments on each anniversary of the grant date.
Section 162(m) Limitation. Section 162(m) of
the Internal Revenue Code limits the Company’s income tax
deduction for compensation paid to the named executive officers
to $1,000,000, subject to several exceptions. We intend to use
our best efforts to cause any compensation paid to executives in
excess of such dollar limit to qualify for such exceptions,
except in limited appropriate circumstances.
Conclusion. We believe the Company’s executive
compensation program provides compensation for executive
officers that is competitive with that offered by peer companies
and also aligns the interests of executive management with the
interests of our stockholders toward a successful future for
Whiting Petroleum Corporation.
| COMPENSATION COMMITTEE | |
| Graydon D. Hubbard, Chairperson | |
| J. B. Ladd | |
| Kenneth R. Whiting |
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Deloitte & Touche LLP has served as our
independent auditors since 2003 and the Audit Committee has
selected Deloitte & Touche LLP as our independent
auditors for 2005. The Board of Directors recommends to the
stockholders the ratification of the selection of
Deloitte & Touche LLP, independent auditors, to
audit our financial statements for 2005. Unless otherwise
specified, the proxies solicited hereby will be voted in favor
of the ratification of Deloitte & Touche LLP as
our independent auditors for 2005.
If the stockholders fail to ratify the appointment of
Deloitte & Touche LLP, then the Audit Committee
will consider it a direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Audit
Committee, in its discretion, may select a new independent
auditing firm at any time during the year if it feels that such
a change would be in the best interests of us and our
stockholders.
The Board recommends a vote FOR the ratification of the
appointment of Deloitte & Touche LLP as our
independent auditors. Shares of our common stock represented by
executed but unmarked proxies will be voted “for”
ratification of the appointment of Deloitte &
Touche LLP.
Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting with the
opportunity to make a statement if they so desire. Such
representatives are also expected to be available to respond to
appropriate questions.
12
The following table presents fees for audit services rendered by
Deloitte & Touche LLP for the audit of our financial
statements for the years ended December 31, 2004 and 2003
and fees for other permitted services rendered by
Deloitte & Touche LLP during those periods.
| 2004 | 2003 | |||||||
|
Audit Fees
|
$ | 868,486 | $ | 197,550 | ||||
|
Audit-Related Fees(1)
|
116,000 | — | ||||||
|
Tax Fees(2)
|
105,975 | 41,691 | ||||||
|
All Other Fees
|
— | — | ||||||
|
Total Fees
|
$ | 1,090,461 | $ | 239,241 | ||||
| (1) | For audit services regarding property acquisitions and our 401(k) plan. |
| (2) | For 2004, services consisted of preparation of corporate and partnership tax returns, state property tax filings and consulting on the tax sharing agreement with our former parent company. The 2003 amount consisted of preparation of partnership and state property tax filings. |
Fees for services of Deloitte & Touche LLP in
connection with our initial public offering in 2003 were paid
for by our former parent company, Alliant Energy Corporation.
The Audit Committee has concluded that the provision of
non-audit services listed above is compatible with maintaining
the independence of Deloitte & Touche LLP.
The Audit Committee has established pre-approval policies and
procedures with respect to audit and permitted non-audit
services to be provided by our independent auditors. Pursuant to
these policies and procedures, the Audit Committee may delegate
authority to one or more of its members when appropriate to
grant such pre-approvals, provided that decisions of such member
or members to grant pre-approvals are presented to the full
Audit Committee at its next scheduled meeting. In addition, the
Audit Committee pre-approves particular services, subject to
certain monetary limits, after the Audit Committee is presented
with a schedule describing the services to be approved, which is
accompanied by detailed back-up information regarding the
specific services to be provided. The Audit Committee’s
pre-approval policies do not permit the delegation of the Audit
Committee’s responsibilities to management.
13
REPORT OF THE AUDIT COMMITTEE
As members of the Audit Committee of Whiting Petroleum
Corporation (the “Company”), our work is guided
by the Audit Committee charter. Regulatory requirements
applicable to audit committees are extensive, and we have
developed a task matrix to help assure compliance with the
charter and related regulations and to control timing of our
work. In addition, we monitor published information related to
audit committee best practices.
We have completed all charter tasks scheduled to be performed in
2004 prior to year-end, and we have completed all charter tasks
scheduled to be performed in 2005 prior to the end of the first
quarter. Our work included, among other procedures, the
following:
| • | We pre-approved audit and permitted non-audit services of the Company’s independent auditors. | |
| • | We discussed with the independent auditors their independence and the matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees,” as amended. The independent auditors provided us with the written disclosures required by the Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees.” | |
| • | Prior to their publication, we reviewed and discussed with management and the independent auditors the Company’s December 31, 2004, audited financial statements, the related audit report, the related certifications of the Company’s chief executive officer and chief financial officer, and the applicable management’s discussion and analysis. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The independent auditors are responsible for expressing an opinion on the fairness of the presentation of audited financial statements in conformity with accounting principles generally accepted in the United States. | |
| • | We recommended to the Board, based on the reviews and discussions described above, that the material reviewed above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, for filing with the Securities and Exchange Commission. | |
| • | During the year, we monitored the Company’s progress in its initial assessment of internal control over financial reporting pursuant to the requirements of the Sarbanes-Oxley Act. We reviewed and discussed with management and the independent auditors Management’s Annual Report on Internal Control Over Financial Reporting and the related audit report. No material weaknesses were identified or reported. | |
| • | We studied the earnings guidance practices of a peer group of companies in the oil and natural gas exploration, exploitation and production business and reviewed the Company’s guidance for 2005. |
| AUDIT COMMITTEE | |
| Graydon D. Hubbard, Chairperson | |
| J. B. Ladd | |
| Palmer L. Moe |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers to file reports
concerning their ownership of our equity securities with the
Securities and Exchange Commission and us. Based solely upon
information provided to us by individual directors and executive
officers, we believe that, during the fiscal year ended
December 31, 2004, all of our directors and executive
officers complied with the Section 16(a) filing
requirements.
14
MISCELLANEOUS
Stockholder Proposals
Proposals which stockholders intend to present at and have
included in our proxy statement for the 2006 annual meeting
pursuant to Rule 14a-8 under the Securities Exchange Act of
1934 (“Rule 14a-8”) must be received at
our offices by the close of business on December 2, 2005.
In addition, a stockholder who otherwise intends to present
business at the 2006 annual meeting (including, nominating
persons for election as directors) must comply with the
requirements set forth in our By-Laws. Among other things, to
bring business before an annual meeting, a stockholder must give
written notice thereof, complying with the By-Laws, to our
Corporate Secretary not less than 60 days and not more than
90 days prior to the anniversary date of the 2005 annual
meeting of stockholders (subject to certain exceptions if the
annual meeting is advanced or delayed a certain number of days).
Under the By-Laws, if we do not receive notice of a stockholder
proposal submitted otherwise than pursuant to Rule 14a-8
(i.e., proposals stockholders intend to present at the
2006 annual meeting but do not intend to include in our proxy
statement for such meeting) during the time period between
February 9, 2006 and March 11, 2006, then the notice
will be considered untimely and we will not be required to
present such proposal at the 2006 annual meeting. If the Board
chooses to present such proposal at the 2006 annual meeting,
then the persons named in proxies solicited by the Board for the
2006 annual meeting may exercise discretionary voting power with
respect to such proposal.
Other Matters
The cost of soliciting proxies will be borne by us. In addition
to soliciting proxies by mail, proxies may be solicited
personally and by telephone by certain of our officers and
regular employees. We will reimburse brokers and other nominees
for their reasonable expenses in communicating with the persons
for whom they hold our common stock.
Pursuant to the rules of the Securities and Exchange Commission,
services that deliver our communications to stockholders that
hold their stock through a bank, broker or other holder of
record may deliver to multiple stockholders sharing the same
address a single copy of our annual report to stockholders and
proxy statement. Upon written or oral request, we will promptly
deliver a separate copy of the annual report to stockholders
and/or proxy statement to any stockholder at a shared address to
which a single copy of each document was delivered. Stockholders
may notify us of their requests by calling or writing Corporate
Secretary, Whiting Petroleum Corporation, 1700 Broadway,
Suite 2300, Denver, Colorado 80290-2300.
| By Order of the Board of Directors | |
| WHITING PETROLEUM CORPORATION | |
| Bruce R. DeBoer | |
| Corporate Secretary |
April 1, 2005
15
APPENDIX A
The Board of Directors has established categorical standards to
assist it in making determinations of director independence.
Under these categorical standards, the following relationships
that currently exist or that have existed, including during the
preceding three years, will not be considered to be material
relationships that would impair a director’s independence:
| 1. | A family member of the director is or was an employee (other than an executive officer) of the Company. | |
| 2. | A director, or a family member of the director, has received less than $100,000 during each twelve-month period in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided that such compensation is not contingent in any way on continued service with the Company). Compensation received by (a) a director for former service as an interim Chairperson, Chief Executive Officer or other executive officer of the Company or (b) a family member of the director for service as an employee of the Company (other than an executive officer) need not be considered. | |
| 3. | A director or a family member of a director is or was affiliated with or employed by a firm that is the Company’s internal or external auditor, so long as (a) the director or the family member is not a current partner of a firm that is the Company’s internal or external auditor; (b) the director is not a current employee of such a firm; (c) the family member is not a current employee of such a firm who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; and (d) the director or the family member, if he or she was within the past three years (but is no longer) a partner or employee of such a firm, did not personally work on the Company’s audit within that time. | |
| 4. | A director, or a family member of the director, is or was employed other than as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee. | |
| 5. | A director is a current employee of, or has any other relationship (including through a family member) with, another company (including any tax exempt organization), that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, does not exceed the greater of $1 million or 2% of such other company’s consolidated gross revenues. Both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year. This test applies solely to the financial relationship between the Company and the director’s (or family member’s) current employer. Former employment of the director or family member need not be considered. | |
| 6. | A director is or was an executive officer, employee or director of, or has or had any other relationship (including through a family member) with, a tax exempt organization to which the Company’s discretionary contributions in any of the last three fiscal years do not exceed the greater of $1 million or 2% of such organization’s consolidated gross revenues. | |
| 7. | In addition, any relationship that a director (or an “immediate family member” of the director) previously had that constituted an automatic bar to independence under NYSE listing standards will not be considered to be a material relationship that would impair a director’s independence three years after the end of such relationship in accordance with NYSE listing standards. |
For relationships not covered by the guidelines above, the
determination of whether the relationship is material or not,
and therefore whether the director would be independent or not,
shall be made by the directors who satisfy the independence
guidelines set forth in above.
A-1
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DESIGNATION (IF ANY)
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Mark
this box with an X if you have made changes to your name or address details above. |
The Board of Directors recommends a vote FOR the nominees listed in Item 1 and a vote FOR Item 2.
| 1. |
ELECTION OF DIRECTORS (for terms expiring at the 2007 Annual Meeting and until their successors are duly elected and qualified). |
|||||
| For Withhold | ||||||
| 01-Kenneth R. Whiting
02-Palmer L. Moe |
 |
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| For Against Abstain | ||||||
| 2. |
RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS |
 |
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| 3. |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournments or postponements thereof. | |||||
| Please check this box if you plan to attend the Annual Meeting.
Number of persons attending: |
|
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|
Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed. | ||||||
|
Please sign exactly as the name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by an authorized person.
| ||||||
| Signature 1 - Please keep signature within the box |
Signature 2 - Please keep signature within the box |
Date (mm/dd/yyyy) |
| 1 U P X H H H P P P P 005103 |
2005 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
| The undersigned hereby appoints James J. Volker and Bruce R. DeBoer, and each of them, as proxies, with full power of substitution (to act jointly or if only one acts then by that one), for the undersigned at the Annual Meeting of Stockholders of Whiting Petroleum Corporation to be held on Tuesday, May 10, 2005, at 9:00 A.M., local time, at the John D. Hershner Room in the Wells Fargo Building at 1700 Lincoln Street, Denver, Colorado 80203, or any adjournments or postponements thereof, to vote thereat as designated on the reverse side of this card all of the shares of Common Stock of Whiting Petroleum Corporation held of record by the undersigned on March 16, 2005 as fully and with the same effect as the undersigned might or could do if personally present at said Annual Meeting or any adjournments or postponements thereof, hereby revoking any other proxy heretofore executed by the undersigned for such Annual Meeting.
This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted FOR the election of the director nominees listed and FOR the ratification of the appointment of Deloitte & Touche LLP as independent auditors.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY |