Diversified Energy Co
For the period ended May 6, 2026. Filed Mar 24, 2026.
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May 6, 2026 · Filed Mar 24, 2026
Contents
ELEMENTS OF OUR COMPENSATION PROGRAM
BASE SALARY
Base salary is the principal fixed component of our compensation program. It is intended to provide our NEOs with a regular source of income to compensate them for their day-to-day efforts in managing the Company. Base salary levels vary depending on the NEO’s experience, responsibilities, education, professional standing in the industry, changes in the competitive marketplace and the importance of the position to the Company. The annual base salaries payable to our NEOs for 2025 and 2024 were as follows:
| Annualized Base Salary | |||
|---|---|---|---|
| Name | 2025 | 2024 | % Change |
| Robert Russell Hutson, Jr | $808,000 | $780,000 | 3.6% |
| Bradley Gray | $520,000 | $500,000 | 4.0% |
| Benjamin Sullivan | $470,000 | $450,000 | 4.4% |
| Ronald Ridgway | $362,500 | $350,000 | 3.6% |
| Richard Gideon | $475,000 | — | N/A |
For 2025, the base salary increases for each NEO generally aligned with the average salary increase provided to all full-time employees across the organization. The Compensation Committee determined that no significant adjustments were warranted for 2025 as total cash compensation levels were generally in line with peer compensation based on benchmarking analyses conducted by Mercer. Mr. Gideon’s base salary was negotiated in connection with the Maverick acquisition, taking into account his prior Maverick base salary, his significant leadership and industry expertise and the responsibilities of his new position.
SHORT-TERM INCENTIVE PLAN
The Company’s short-term cash incentive plan (“STIP”) is designed to incentivize and reward annual performance using key financial, operational, and strategic objectives that support the Company’s business strategy and near-term value creation. Our Compensation Committee structures the STIP to emphasize measurable performance outcomes that align with investor priorities and market practice. To that end, in 2025, we entered into Annual Performance Compensation Award Agreements (the “STIP Agreements”) with each of our NEOs. Each STIP Agreement provides for a cash award opportunity based on performance from January 1, 2025 through December 31, 2025 against pre-established performance metrics.
Target Award Opportunity. Target award opportunities are expressed as a percentage of base salary and are intended to reflect each executive’s role, scope of responsibility, and ability to impact Company performance. Under the 2025 STIP Agreements, the target payout was established at 75% of maximum with the threshold payout at 25% of maximum. The 2025 STIP target and maximum opportunities for each NEO were as follows:
| Name | 2025 STIP Target (% of Base Salary) | 2025 STIP Maximum (% of Base Salary) |
|---|---|---|
| Robert Russell Hutson, Jr. | 150.0% | 200% |
| Bradley Gray | 112.5% | 150% |
| Benjamin Sullivan | 112.5% | 150% |
| Richard Gideon (1) | 112.5% | 150% |
| Ronald Ridgway | 93.75% | 125% |
| (1) | Mr. Gideon joined the Company on March 14, 2025. His 2025 STIP target and maximum were prorated as a result. |
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*2025 Performance Scorecard.*For 2025, the Compensation Committee selected a balanced scorecard comprised of financial, cost discipline, environmental and safety measures as provided below. The Compensation Committee determined that these metrics appropriately emphasized profitability, operational efficiency, and the Company’s commitment to environmental stewardship and workplace safety.
| Performance Metric | Weight | Threshold | Target | Stretch | Actual |
|---|---|---|---|---|---|
| Adjusted EBITDA/share(1) | 50% | $10.66 | $10.82 | $11.35 | $12.83 |
| Cash Costs per Unit - LOE, Midstream, Rec G&A ($/Mcfe)(2) | 25% | $1.68 | $1.62 | $1.58 | $1.62 |
| Environmental - Methane Slip & Flaring Assessment, Planning, Mitigation(3) | 8.75% | Assess | Plan | Mitigate | Plan |
| Environmental - Pneumatic Valve Mitigation(4) | 8.75% | 1,000 | 1,100 | 1,200 | 1,200 |
| Social – TRIR(5) | 2.50% | 0.92 | 0.87 | 0.82 | 1.65 |
| Social – LTI(6) | 2.50% | 0.65 | 0.62 | 0.58 | 0.69 |
| Social – MVA(7) | 2.50% | 0.51 | 0.49 | 0.46 | 0.55 |
| (1) | Adjusted EBITDA of the Company (as calculated on a consolidated basis) for a financial year as reported in the Company’s financial results. The threshold, target and stretch goals were increased by the Compensation Committee from $7.35, $7.56 and $7.76 for the Maverick and Canvas acquisitions as permitted by the terms of the STIP Agreements. |
| (2) | Cash Costs per Unit is the cash costs for Base LOE, Midstream Expenses and Recurring General & Administrative (excluding Production Taxes and Gathering & Transportation), excluding unbudgeted acquisition expenses. The threshold, target and stretch goals were increased by the Compensation Committee from $1.45, $1.39 and $1.35 for the Maverick and Canvas acquisitions as permitted by the terms of the STIP Agreements. |
| (3) | Threshold based on assessing and quantifying emissions for 100% of units; target is reached if the threshold is reached and the Company completes creation of an actionable mitigation plan by early 2026; and stretch is reached to the extent target is reached, plus mitigation of emissions at 10% of units. |
| (4) | Based on the number of pneumatic valves remedied during the year. |
| (5) | “TRIR” is the Company’s Total Recordable Incident Rate, calculated by dividing (a) the number of incidents during the performance period, multiplied by 200,000, by (b) the total employee hours worked during the performance period. |
| (6) | “LTI” is the Company’s lost-time injuries per 200,000 hours worked. |
| (5) | “MVA” is the Company’s motor vehicle accidents per million miles driven. |
The STIP Agreements provide that if the threshold is not met with respect to any performance measure, the payout for that measure is zero. Results between the threshold, target and stretch levels are linearly interpolated.
Based on the Company’s achievement of the performance metrics as set forth above at approximately 112% of the NEO’s respective targets, the final bonuses awarded for 2025 under the STIP Agreements were as follows:
| Name | 2025 STIP Target ($) | 2025 STIP Earned ($) |
|---|---|---|
| Robert Russell Hutson, Jr | $1,212,000 | $1,359,056 |
| Bradley Gray | $585,000 | $655,980 |
| Benjamin Sullivan | $528,750 | $592,905 |
| Richard Gideon(1) | $400,781 | $449,409 |
| Ronald Ridgway | $339,844 | $381,078 |
| (1) | Mr. Gideon joined the Company on March 14, 2025. His 2025 STIP target was prorated as a result. |
LONG-TERM INCENTIVES
Long-term equity incentive awards align the interests of our NEOs with those of our shareholders by creating a strong financial incentive for our NEOs to promote our long-term financial and operational success and, along with our executive stock ownership guidelines, encourage NEO stock ownership. We granted both RSUs and PSUs to each of our NEOs in 2025. RSUs provide value based on continued service and long-term stock price performance, while PSUs are earned based on achievement of pre-established performance objectives over the applicable performance period.
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2025 Long-Term Incentive Target Opportunities. For 2025, Mr. Hutson’s LTIP target/maximum was increased from 325% of base salary to 425%, consisting of a 325% target/maximum for PSUs and a 100% target for RSUs. This adjustment followed a review of peer market data provided by Mercer, which indicated that Mr. Hutson’s long-term equity compensation was below the competitive range relative to the 2025 Peer Group. The Compensation Committee determined that the revised target/maximum better aligned his compensation with market practice while maintaining the overall structure of the program. No changes were made to the LTIP target/maximum opportunities for the Company’s other NEOs for 2025. The 2025 long-term incentive awards were granted 70% in the form of RSUs and 30% in the form of PSUs for NEOs other than Mr. Hutson. The 2025 aggregate LTIP targets/maximums for each NEO were as follows:
| Name | Aggregate LTIP Target/Max |
|---|---|
| Robert Russell Hutson, Jr | 425% |
| Bradley Gray | 275% |
| Benjamin Sullivan | 250% |
| Richard Gideon | 250% |
| Ronald Ridgway | 125% |
RSUs. RSU awards are intended to promote long-term shareholder alignment and support retention by delivering value based on continued service and the Company’s stock price performance over time. RSU awards generally vest following the end of a three-year performance period, subject to continuous service with the Company through the applicable vesting date. RSUs generally accrue dividend equivalents as additional RSUs that are subject to the same vesting conditions as the underlying award.
PSUs. Our PSU awards further enhance the link between our executive compensation and our performance. Our PSUs vest, up to 100%, based on our achievement of certain performance metrics over a three-year performance period. PSUs accrue dividend equivalents as additional PSUs that are subject to the same vesting conditions as the underlying award. Performance goals for the three-year performance period are recommended by management based on our historical performance and budget. The Compensation Committee reviews management’s recommendations, determines appropriate revisions and approves the performance metric for each performance period, generally during the first quarter of the performance period. Following completion of the performance period, the Compensation Committee reviews the results and certifies achievement of the performance metrics. For our 2025 PSU NEO grants, vesting will ultimately be determined based on our achievement of the below performance metrics for the period beginning January 1, 2025 and ending December 31, 2027.
2025 PSU Performance Metrics (CEO)
| Performance Metric | Weight | Threshold KPI (15% Payout) | Target/Max KPI (100% Payout) |
|---|---|---|---|
| Three-Year Average Return on Equity | 40% | 15% | 25% |
| Three-Year Absolute Total Shareholder Return (“TSR”) | 20% | 10% | 20% |
| Three-Year TSR Relative to Peer Group(1) | 20% | 50% | 75% |
| Emissions (Methane Intensity Reduction) (the “Emissions Goal”) | 20% | 5% reduction during 2026 – 2027 over 2025 baseline | 10% reduction during 2026 – 2027 over 2025 baseline |
| (1) | Peer Group consists of Amplify Energy Corp., Berry Corporation, CNX Resources Corp., Granite Ridge Resources, Highpeak Energy, Mach Natural Resources, Northern Oil and Gas, Riley Exploration Permian, Ring Energy, TXO Partners, Vital Energy and W&T Offshore. |
2025 PSU Performance Metrics (All Other NEOs)
| Performance Metric | Weight | Threshold KPI (15% Payout) | Target/Max KPI (100% Payout) |
|---|---|---|---|
| Three-Year Absolute TSR | 30% | 10% | 20% |
| Three-Year Average Free Cash Flow Growth | 40% | 3% | 8% |
| Emissions Goal | 30% | 5% reduction during 2026 – 2027 over 2025 baseline | 10% reduction during 2026 – 2027 over 2025 baseline |
If we do not at least attain the threshold level in any given metric, then the weight attributed to that metric is 0%. Performance between threshold and target/max is linearly interpolated.
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Results of 2023 PSUs
The PSU awards granted to the NEOS in early 2023 vested based on achievement of the below performance metrics over the three-year period ending December 31, 2025 as set forth below.
| Component | Weight | Threshold KPI (15% Payout) | Target KPI (100% Payout) | Actual Performance | Weighted Payout Percentage |
|---|---|---|---|---|---|
| Three Year Average Return on Equity | 40% | 15% | 25% | 31% | 40% |
| Three Year Absolute TSR | 30% | 10% | 20% | 9% | — |
| Three Year TSR Relative to FTSE 250 Index TSR | 10% | Median performance | Upper quartile or above | 59th percentile | — |
| Emissions Goal | 20% | 8% reduction | 20% reduction | 16.7% reduction | 15.4% |
Based on our performance, approximately 55.4% of the PSUs granted to our NEOs in 2023 vested as of December 31, 2025, consisting of 80,740 for Mr. Hutson, 20,411 for Mr. Gray, 17,156 for Mr. Sullivan and 5,471 for Mr. Ridgway.
maverick transaction COMPENSATION
On March 14, 2025, we consummated the acquisition of Maverick. In connection with the closing of the transaction, the Board appointed Maverick’s former Chief Executive Officer, Mr. Gideon, to the role of Executive Vice President and Chief Operating Officer of the Company. Pursuant to his pre-existing agreement with Maverick, Mr. Gideon received a change in control payment of $1,805,000, less applicable withholding and deductions, following consummation of the transaction. Additionally, in connection with his appointment, the Company granted 250,000 RSUs as an inducement award to Mr. Gideon, which cliff vest on March 14, 2028, subject to his continuous service through such date.
OTHER BENEFITS AND PERQUISITES
Benefits and Other Perquisites
Our NEOs are entitled to the same health and welfare benefits as our employees generally, including medical, prescription drug, dental and vision insurance, as well as other benefits as described under “Executive Compensation Tables—Summary Compensation Table” Our NEOs are eligible to participate in our tax-qualified 401(k) plan on the same basis as our employees generally and are not entitled to any supplemental executive retirement benefits. Under the 401(k) plan, the Company matches 100% of an employee’s elective deferrals up to a specified percentage of eligible compensation (7% in 2025), subject to applicable limitations under the Internal Revenue Code (the “Code”). The Company does not currently maintain any non-qualified deferred compensation plan. For details and the amounts of such benefits, see the “All Other Compensation” column of the 2025 Summary Compensation Table and the accompanying footnotes below.
Employee Stock Purchase Plan
We also maintain the Diversified Energy Company Employee Stock Purchase Plan. The purpose of the ESPP is to encourage and enable our eligible employees to acquire a proprietary interest in us through the ownership of our Common Stock. The ESPP, and the rights of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. Our NEOs are eligible to participate in the ESPP and purchase a limited number of shares of Common Stock at a 10% discount, on the same basis as our other participants.
Executive Severance Plan
We maintain the Diversified Energy Company Executive Severance Plan (the “Severance Plan”), which is described in more detail under “Executive Compensation Tables—Potential Payments Upon Termination or Change in Control—Executive Severance Plan” below. The purpose of the Severance Plan is to provide severance benefits to eligible employees, which include each of the NEOs. The Compensation Committee believes the severance benefits offered under the Severance Plan aid in attracting and retaining experienced executives and reflect fair compensation in the event of certain termination events.
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Retention Agreements
In April 2024, we entered into retention agreements with each of Messrs. Gray, Sullivan and Ridgway providing for retention payments of $258,000, $159,000 and $44,500 (the “2024 Retention Awards”). The 2024 Retention Awards provided for vesting on March 14, 2025 so long as such NEO remained employed by the Company through the vesting date, executed a release of claims in favor of the Company and complied with all agreements, contracts or Company policies applicable to such NEO. The 2024 Retention Awards vested in accordance with their terms on March 14, 2025.
In April 2025, we entered into retention agreements with each of Messrs. Gray, Sullivan and Ridgway providing for retention payments of $223,000, $190,000 and $60,000 the (“2025 Retention Awards”) for the purpose of retaining key executives through the Redomiciliation and strategic acquisitions. The 2025 Retention Awards provided for vesting on March 20, 2026 so long as such NEO remained employed by the Company through the vesting date, executed a release of claims in favor of the Company and complied with all agreements, contracts or Company policies applicable to such NEO. The 2025 Retention Awards vested in accordance with their terms on March 20, 2026.
The 2024 Retention Awards and the 2025 Retention Awards also provided that in the event such NEO’s employment was terminated as a result of (1) such NEO’s death or permanent disability, (2) the NEO’s resignation from the Company for “Good Reason” (as defined in the agreement) or (3) the Company’s termination of the NEO without “Cause” (as defined in the agreement), the award is accelerated; provided that if such termination of service had occurred prior to October 1 of the award year, the NEO would have only been entitled to receive a pro rata payment based on the period of employment during such period.
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