Texas Energy Industry Corporate Governance Diversity Report 2014Tom FurlongManaging DirectorHarvard Group International

Key Learnings01

table of contents

Overview02Overall Board Demographics03

Board Member Status Metrics04Methodology & Top 100 Texas Energy Companies 05About Harvard Group International and the author06

3

conclusions from this studyKey Learnings

section 01

Board Size for the Texas Top 100 (8.5 seats) is nearly a full seat less than peer Market Cap Value (MCV) companies in other industrial sectors

Female participation on Texas Top 100 boards is half the average of public companies in the U.S.A. (8.3% vs 16.9% of all board members)

Energy and Financial industry executives hold 80% of all board seats with these companies, limiting exposure to best practices from other industries

The Texas Top 100 boards can easily become more diverse by adding an additional seat and attracting quality executives of both genders from outside the Energy and Financial sectors

4

what is diversity?

This report* is a diversity analysis of the top 100 MCV (Market Cap Value) Texas-based public Energy corporations.

Gender and Ethnicity are the most commonly considered forms of diversity- but other factors should be considered to determine the “diversity” level of a corporate board.

Six Diversity Criteria were reviewed for this report:

• Gender

• Industry Focus (from inside/outside the Energy sector)

• Education Background

• Age

• Length of Board Service

• Other Public Board Activity

Overview

section 02

* A more detailed report, including individual company Board analysis, is available by contacting the author

5

why is diversity important?

For high MCV companies, having a board that reflects the breadth of American industry will offer additional insights into a company’s strategic direction and focus. The result: improved advice and guidance for the executive team.

Diversity of experience is important in helping to prevent “group think” among the board. This risk is most glaring when the directors are all from the same industry or other similar backgrounds and experiences.

Corporate Governance diversity can also impact the investment community. Investment funds might look for boards that reflect the make-up of successful boards from other industries; investors might choose to target companies whose board shows a breadth of experience; and having a high level of diversity demonstrates the board’s commitment to look at a larger pool of talent for their members- and would look at a larger pool of talent when making key executive hiring decisions.

Overview

section 02

6

overall board size

There are 845 total seats among the 100 boards.

Board sizes range from 4 to 13 across all MCV groups. Average board size is just below 8.5 directors:

• 25 boards > 9 members

• 43 boards = 8 or 9 members

• 32 boards < 8 members

Overall Board demographics

section 03

Board Size for Company

SizeAll

Boards > $15B $5B-$15B $2B-$5B$500M-

$2B

10+ Directors 25 13 7 3 2

8 to 9 43 10 8 10 15

6 to 7 26 1 5 7 13

4 to 5 6 0 0 5 1

Total 100 24 20 25 31

7

energy industry sector breakout

There are seven different sectors within the Texas Energy industry.

Nearly 90% of the companies are based in either the Houston or Dallas/ Fort Worth markets; the rest are scattered between Midland, Austin/San Antonio, and El Paso.

Overall Board demographics

section 03

Sector All > $15B $5B-$15B $2B-$5B$500M-

$2B

Downstream 6 3 2 1 0

Integrated 2 2 0 0 0

Midstream 14 4 2 5 3

Offshore 9 1 1 4 3Oilfield Services 26 5 5 4 12

Upstream 37 8 7 10 12

Utilities 6 1 3 1 1

Total 100 24 20 25 31

8

female representation

Women hold 8.3% of the Texas Top 100 board seats.

• 16 companies have two women on their boards

• 38 companies have one female director

• 46 companies have no women executives on their boards

Overall Board demographics

section 03

Board Composition by Women

StatusAll

Boards > $15B$5B-$15B $2B-$5B

$500M-$2B

Women Serving 70 30 17 11 12

Total Board Seats 845 237 179 185 244

% Women Members 8.3% 12.7% 9.5% 5.9% 4.9%

9

industry background (1)

Boards with too many (or too few) Energy industry insiders can become blind to outside influences.

Over 1/2 (457 out of 845) of board members come from the energy industry- with 266 from the same sector as the company that they offer governance and guidance.

Board Member Status Metrics

section 04

Board Composition of Energy Industry Insiders

StatusAll

Boards > $15B$5B-$15B $2B-$5B

$500M-$2B

Industry Insiders < 50% 32 12 4 7 9Industry Insiders 50%-60% 29 5 8 9 7

Industry Insiders > 60% 39 7 8 9 15

Total 100 24 20 25 31

10

industry background (2)

Financial industry directors form the largest group of industry outsiders.

Over 1/4 (216 out of 845) of board members come from Private Equity, Accounting, Investment, and Banking firms- reflecting the high levels of Investment and Capital Expenditures in the industry.

Board Member Status Metrics

section 04

Board Composition of Financial Sector Professionals

StatusAll

Boards > $15B$5B-$15B $2B-$5B

$500M-$2B

Financial < 15% 36 10 10 5 11

Financial 15-25% 21 6 4 7 4

Financial > 25% 43 8 6 13 16

Total 100 24 20 25 31

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education backgroundBoard Member Status Metrics

section 04

A strong mix of educational backgrounds on a board balances the technical and capitalization needs of Energy companies.

Currently 537 board members (63%) have undergraduate degrees in either:

• Business/Accounting

• Engineering/Geology

Undergraduate Degree of Board Members

DisciplineAll

Boards > $15B$5B-$15B $2B-$5B

$500M-$2B

Engineering 218 60 54 36 68

Business 319 71 55 90 103

Other 308 106 70 59 73

Total 845 237 179 185 244

12

ageBoard Member Status Metrics

section 04

A broad age range on a Board can offer differing perspectives of guidance and operation for their management team.

Boards have to prepare for the Great Crew Change: those skewed with too many members over 70 risk a rapid drain of experience due to retirements.

Age of Directors

StatusAll

Boards > $15B$5B-$15B $2B-$5B

$500M-$2B

< 60 Years 339 77 62 90 110

60-70 Years 399 126 96 75 102

> 70 Years 107 34 21 20 32

Total 845 237 179 185 244

13

length of board serviceBoard Member Status Metrics

section 04

Board tenure (and turnover) can impact the quality of guidance offered to management.

For this report, 142 of the 845 board members (16.8%) are considered to be “long-tenured”- having served on their board for over 13 years. Boards with more than 2 “long-tenured” directors risk complacency and loss of independent oversight.

Board Composition of Directors

All Boards > $15B

$5B-$15B

$2B-$5B

$500M-$2B

# Long-tenured > 2 22 8 6 2 6

# Long-tenured = 2 22 6 3 5 8

# Long-tenured < 2 56 10 11 18 17

Total 100 24 20 25 31

14

outside public board activityBoard Member Status Metrics

section 04

A majority (482 out of 845) of Texas Top 100 directors sit on other public company boards.

Multiple board service offers a director exposure to an additional dynamic team- and also the potential for conflicts on the time and effort required to effectively serve their company and it’s management team.

Multiple Board DirectorsAll

Boards > $15B$5B-$15B $2B-$5B

$500M-$2B

# on Multiple Boards 482 146 109 105 122# on Energy Boards 307 70 77 75 85

All Board Members 845 237 179 185 244% on Multiple Boards 57.0% 61.6% 60.9% 56.8% 50.0%

15

Compiled data for this report

Market Cap Value (MCV) was utilized in this report since a company’s Board focus is to look out for the investment interest of the shareholders.

This report looks at the Top 100 companies both as a whole and by MCV size groupings:

MCV greater then $15 billion

MCV between $5 billion and $15 billion

MCV between $2 billion and $5 billion

MCV between $500 million and $1 billion

A few other points about this data:

• MCV were of July 3, 2014

• Directors were taken from each companies website on July 1,2014

• Demographic and other status criteria were gathered through exhaustive research of multiple data sources

• Changes that may have occurred between the compilation of data and the report’s publication date are not reflected in the commentary or chart data

Methodology

section 05

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who is on the the list?The Texas Top 100 Energy companies

section 05

Anadarko Denbury Resources Key Energy Services Plains All AmericanApache Diamondback Energy Kinder Morgan QR EnergyAthlon Energy Dril-Quip Legacy Reserves Quanta ServicesAtmos Energy Dynegy Linn Energy Range ResourcesAtwood Oceanics El Paso Electric Magnum Hunter Resources RigNetBaker Hughes Energy Transfer Marathon Oil Rosetta ResourcesBasic Energy Services Enterprise Products Martin Midstream RSP PermianBoardwalk Pipeline EOG Resources Matador Resources Sanchez EnergyBristow Group EXCO Resources McDermott SchlumbergerBuckeye Partners Exterran Partners Memorial Production Southwestern EnergyC&J Energy Services Exxon Mobil Midcoast Energy Spectra EnergyCabot Oil & Gas Flotek Industries Nabors Summit MidstreamCalpine FMC Technologies National-Oilwell Varco Swift EnergyCameron Genesis Energy Newfield Exploration Targa ResourcesCARBO Ceramics Goodrich Petroleum Newpark Resources TescoCarrizo GulfMark Offshore Noble Energy TesoroCenterPoint Energy Halcon Resources NuStar Energy TETRA TechnologiesCheniere Energy Halliburton Oasis Petroleum TransoceanClayton Williams Helix Energy Solutions Oceaneering International Ultra PetroleumCOBALT Hercules Offshore Oil States International Valero EnergyComstock Resources Hi-Crush Partners Parker Drilling Vanguard Natural ResourcesConcho Resources HollyFrontier Patterson-UTI W&T OffshoreConocoPhillips Ion Geophysical Phillips 66 WeatherfordContango Oil & Gas Jones Energy Pioneer Energy Services Western RefiningCrestwood Midstream KBR Pioneer Natural Resources Willbros Group

17

who are we?

Harvard Group International (HGI) is an Atlanta-based executive search firm that has been helping clients throughout North America build their future since 1996. HGI exceeds performance metrics of the multi-office and multi-national retained search firms in rate of success (99%+), speed of service, and client satisfaction metrics. The HGI team, with over 350 years of search industry experience, attracts best-in-class talent for board roles, C-Suite, senior/junior executive positions, and key individual contributor roles.

Tom Furlong is the Managing Director of the HGI’s Energy practice and also works on the firm’s Corporate Governance team. He has successfully helped clients and candidates build their future for over 15 years by leading executive search projects throughout North America and Asia. Tom also draws upon his 13 years of experience at Novartis to understand the inner workings of individual teams that give strength to enterprises of all sizes and scopes.

About Harvard Group International and the author

section 06

Harvard Group International

1640 Powers Ferry Road #25Marietta, Georgia 30067-1444p) +1 404.459.9045w) www.harvardsearch.comt) @harvardsearch

Tom Furlong

p) +1 678.214.6065e) tfurlong@harvardsearch.comt) @TerrellMillTom

contactinformation