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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 ý

Filed by a Party other than the Registrant ¨

Check the appropriate box:

ý    Preliminary Proxy Statement

¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨    Definitive Proxy Statement

¨    Definitive Additional Materials

¨    Soliciting Material under §240.14a-12

Sanchez Energy 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):

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SANCHEZ ENERGY CORPORATION

1000 Main Street
Suite 3000
Houston, Texas 77002

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Sanchez Energy Corporation:

Notice is hereby given that the Annual Meeting of Stockholders of Sanchez Energy Corporation (the “Company,” “we,” or “our”) will be held at 1000 Main Street, Houston, Texas 77002 in the Tunnel-level Conference Room on Thursday, May 24, 2018, at 9:00 a.m., Central Time (the “Annual Meeting”).  The Annual Meeting is being held for the following purposes:

1.             To elect two Class III directors for a term of three years.

2.             To approve an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock.

3.             To approve, on an advisory basis, the compensation of our named executive officers.

4.             To ratify the selection of KPMG LLP (“KPMG”) as the Company’s independent registered public accountants for 2018.

5.             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 were a stockholder of record at the close of business on March 28, 2018.

Houston, Texas
April [__], 2018

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SANCHEZ ENERGY CORPORATION

1000 Main Street
Suite 3000
Houston, Texas 77002

PROXY STATEMENT

2018 ANNUAL MEETING OF STOCKHOLDERS

The Board of Directors (the “Board”) of Sanchez Energy Corporation (the “Company,” “Sanchez Energy,” “we,” “us” or “our”) requests your Proxy (“Proxy”) for the Annual Meeting of Stockholders (the “Annual Meeting”) that will be held on Thursday, May 24, 2018, at 9:00 a.m., Central Time, at 1000 Main Street, Houston, Texas 77002 in the Tunnel-level Conference Room, or at such other time and place to which the Annual Meeting may be adjourned or postponed.  References in this Proxy Statement to the “Annual Meeting” also refer to any adjournments, postponements or changes in location of the Annual Meeting, to the extent applicable.  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.

HIGHLIGHTS OF OUR PERFORMANCE IN 2017

At the Annual Meeting, stockholders will be given an opportunity to learn more about our 2017 performance.

Our operating environment in 2017 was characterized by continuing commodity price volatility.  In the face of challenging industry fundamentals and uncertainty, we maintained a focus on financial discipline.  Our goal in 2017 was to position the Company to achieve a sustainable business model that provides opportunities for organic production growth while at the same time delivering full-cycle free cash flow generation at the corporate level.  To achieve this goal, we concentrated efforts on the Western Eagle Ford, an area with multi-bench development potential that we believe offers impressive returns and opportunities for growth even at lower commodity prices.

In January 2017, Sanchez Energy and Blackstone Energy Partners announced a 50/50 partnership to acquire Anadarko Petroleum Corporation’s working interest in approximately 318,000 gross operated acres in the Western Eagle Ford (the “Comanche” asset) for a purchase price, after closing adjustments, of approximately $2.1 billion, subject to additional post-closing adjustments (the “Comanche Transaction”).  This accretive and transformative acquisition substantially increased our drilling inventory, with more than 1,000 net drilling opportunities identified at the time of the transaction, and added 132 DUCs.  Having closed the Comanche Transaction, our operated Eagle Ford Shale position grew to approximately 585,000 gross acres (335,000 net to Sanchez Energy).  As a result of successful integration of the asset, we brought 147 gross (38 net) Comanche wells on-line in 2017.  Comanche well results have shown significant promise with some of the highest initial production rates in the Company’s asset base.  Key among these was the Stumberg Ranch 55H well, an approximately 10,000 foot lateral well completed in 2017 with a 30-day peak production rate of approximately 2,900 Boe/day, 72% of which was oil.

The Comanche Transaction provides opportunities in our Western Eagle Ford asset base for even greater capital efficiency.  As a result, we undertook a number of strategic divestitures in 2017 to better align our operating footprint, and therefore improve operating efficiencies, while providing additional liquidity to operate in today’s more challenging environment.  To that end, in June 2017 we closed the divestiture of our non-core Marquis asset for approximately $44 million in cash, after preliminary closing adjustments, and Lonestar’s Series B Convertible Preferred Stock which subsequently converted into 1.5 million shares of Lonestar’s Class A Common Stock, and the sale of a 10% undivided interest in the Silver Oak II Gas Processing Facility in Bee County, Texas for $12.5 million.  Additionally, we closed the divestiture of our non-core Javelina asset, which consisted of approximately 68,000 undeveloped net acres located in the Eagle Ford Shale in LaSalle and Webb Counties, Texas, for $105 million in September 2017.  As a result of industry conditions in 2016, our leasing efforts related to Javelina were executed at

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attractive terms using available cash.  As a result, the 2017 divestiture of the Javelina asset resulted in a return of approximately 3.5x on our investment.

Even after these strategic divestitures, we continue to maintain a dominant acreage position in the Eagle Ford Shale, with approximately 487,000 gross (285,000 net) leasehold acres and approximately 363 MBoe of proved reserves as of December 31, 2017.  Our acreage is highly concentrated within a 50-mile radius in South Texas and, with approximately 3,700 net drilling locations in the Eagle Ford Shale that comprise our primary development targets, affords us an inventory of more than 15 years of drilling opportunities.

In addition to the highlights referenced above, our achievements in 2017 include:

The following includes a description of the meaning of some of the terms used in the above achievements highlights and throughout this Proxy Statement:

·                  Boe:  One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Boe of oil.

·                  Boe/d:  One Boe per day.

·                  DUCs: Drilled but uncompleted wells.

·                  Mcf: One thousand cubic feet of natural gas.

·                  MMBoe: One million Boe.

·                  TRIR: Total recordable incident rate.

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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND ANNUAL MEETING

 What is the purpose of the Annual Meeting?

At the Annual Meeting, our stockholders will be asked to vote to elect two Class III directors for a term of three years; to approve an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock; to approve, on an advisory basis, the compensation of our named executive officers; and to ratify the selection of KPMG as the Company’s independent registered public accountants for 2018.  We will also consider and vote upon any other business that is properly presented at the Annual Meeting.

 Why did I receive these Proxy Materials?

You received the Notice of Annual Meeting of Stockholders, this Proxy Statement, the proxy card or voting instructions, and our 2017 Annual Report to Stockholders, which includes the Company’s Annual Report on Form 10-K filed on March 1, 2018  for the year ended December 31, 2017 (the “2017 10-K”) (collectively, the “Proxy Materials”) from us in connection with the solicitation by our Board of proxies to be voted at the Annual Meeting because you owned our common stock at the close of business on March 28, 2018.  We refer to this date as the “Record Date.”  This Proxy Statement contains important information for you to consider when deciding how to vote your shares at the Annual Meeting.  Please read this Proxy Statement carefully.

How can I access the Proxy Materials over the Internet?

Your proxy card will contain instructions on how to view our Proxy Materials for the Annual Meeting on the Internet.  Our Proxy Materials are also available at www.proxyvote.com.  You will need the control number available from your proxy card to access our Proxy Materials.  The Proxy Materials will also be available under the investor relations section of our corporate website at http://www.sanchezenergycorp.com.

 What does it mean if I receive more than one set of Proxy Materials?

If you receive more than one set of Proxy Materials, your shares are registered in more than one name or are registered in different accounts.  In order to vote all the shares you own, you must follow the instructions on each proxy card you received.

 What is “householding” and how does it affect me?

We have adopted a procedure known as “householding.”  Under this procedure, we may send a single set of Proxy Materials and other stockholder communications to any household at which two or more stockholders reside unless we have received contrary instructions from those stockholders.  This reduces duplicate mailings and saves printing and postage costs as well as natural resources.  We agree to deliver promptly, upon written or oral request, a separate copy of our Proxy Materials, as requested, to any stockholder at the shared address to which a single copy of these documents was delivered.  If you wish to receive a separate copy of our Proxy Materials, please contact Sanchez Energy Corporation, by writing to 1000 Main Street, Suite 3000, Houston, Texas 77002, Attention: Gregory Kopel - Secretary, or by calling (713) 783-8000, and we will promptly deliver to you the requested material.  You may also contact us in the same manner if you received multiple copies of the Proxy Materials and would prefer to receive a single copy in the future.

Many banks, brokers, and other holders of record have instituted householding.  If you or your family have one or more beneficial ownership accounts, you may have received householding information from your bank, broker, or other holder of record in the past.  Please contact the holder of record directly if you have questions, require additional copies of the Proxy Materials or wish to revoke your decision to household and thereby receive multiple

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copies.  You should also contact the holder of record if you wish to institute householding.  These options are available to you at any time.

 Who can vote at the Annual Meeting?

Only stockholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting.  As of the close of business on the Record Date, 84,765,134 shares of our common stock were issued and outstanding and entitled to be voted at the Annual Meeting.  The Company’s common stock, par value $0.01 per share, is the only class of securities that entitles holders to vote generally at meetings of the Company’s stockholders.  Each share of common stock outstanding on the Record Date is entitled to one vote.

Most of the Company’s stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name.  As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Stockholders of Record.  If your shares are registered directly in your name with the Company’s transfer agent, then you are considered the stockholder of record with respect to those shares, and the Proxy Materials are being provided directly to you by our agent.  As a stockholder of record, you have the right to vote by proxy or to vote in person at the Annual Meeting.  Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted.

Beneficial Owners.  If your shares are held in a brokerage account or by a bank or other nominee, then you are considered the beneficial owner of shares held in “street name,” and the Proxy Materials will be forwarded to you by your broker or nominee.  The broker or nominee is considered the stockholder of record with respect to those shares.  As the beneficial owner, you have the right to direct your broker or nominee how to vote.  You are also invited to attend the Annual Meeting, however, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a proxy card from your broker or other agent.

 If I am a stockholder of record, how do I vote?

If you are a stockholder of record, you may vote by any of the following four methods:

·                  Internet.  Vote on the Internet at http://www.proxyvote.com.  Simply follow the instructions on the proxy card and you can confirm that your vote has been properly recorded.  Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 7:00 p.m. (Eastern Daylight Time) on Wednesday May 23, 2018, the day before the Annual Meeting.

·                  Telephone.  Vote by telephone by following the instructions on the proxy card.  Easy-to-follow voice prompts allow you to vote your stock and confirm that your vote has been properly recorded.  Telephone voting facilities for stockholders of record will be available 24 hours a day and will close at 7:00 p.m. (Eastern Daylight Time) on Wednesday May 23, 2018, the day before the Annual Meeting.

·                  Mail.  Vote by mail by completing, signing, dating and returning your proxy card in the pre-addressed, postage-paid envelope provided.  If you vote by mail and your proxy card is returned unsigned, then your vote cannot be counted.  If you vote by mail and the returned proxy card is signed without indicating how you want to vote, then your proxy will be voted as recommended by the Board.  If mailed, your completed and signed proxy card must be received by Wednesday May 23, 2018, the day before the Annual Meeting.

·                  Meeting.  You may attend and vote at the Annual Meeting.

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 If I am a beneficial owner of shares held in “street name” how do I vote?

If you are a beneficial owner of shares registered in the name of your brokerage firm, bank, dealer or other similar organization, you should have received a voting instruction card and voting instructions with these Proxy Materials from that organization rather than from us.  Simply complete and mail the voting instruction card to ensure that your vote is counted.  To vote in person at the Annual Meeting, you must obtain a proxy from your brokerage firm, bank, dealer or other similar organization.  Follow the instructions from your brokerage firm, bank, dealer or other similar organization included with these Proxy Materials, or contact your broker, bank or other agent to request a proxy card.

 What am I being asked to vote on?

You are being asked to vote on four proposals:

·                  Proposal 1:  to elect two Class III directors for a term of three years;

·                  Proposal 2: to approve an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock;

·                  Proposal 3:  to approve, on an advisory basis, the compensation of our named executive officers; and

·                  Proposal 4:  to ratify the selection of KPMG as the Company’s independent registered public accountants for 2018.

In addition, you are entitled to vote on any other matters that may properly come before the Annual Meeting.

 What are the recommendations of the Board?

The recommendations of the Board are set forth together with the description of each item in this Proxy Statement.  In summary, the Board recommends a vote as follows:

·                  FOR each of the two Class III director nominees;

·                  FOR approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock;

·                  FOR approval, on an advisory basis, of the compensation of our named executive officers; and

·                  FOR ratification of the selection of KPMG as the Company’s independent registered public accountants for 2018.

 Could other matters be decided at the Annual Meeting?

At the time this Proxy Statement was mailed, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement.  With respect to any other matter that properly comes before the Annual Meeting, the proxyholders will vote the Proxies as recommended by our Board or, if no recommendation is given, in their own discretion.

 What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting.  The presence, in person or by proxy, regardless of whether the proxy has authority to vote on all matters, of the holders of a majority of the outstanding shares entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting.  On the Record Date, there were 84,765,134  shares outstanding and entitled to vote at the Annual Meeting.  Accordingly,

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42,382,568  shares of our stock must be represented in person or by proxy at the Annual Meeting to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid Proxy vote or vote at the Annual Meeting.  Abstentions and broker non-votes will count in determining whether a quorum is present at the Annual Meeting.

If a quorum is not present, the chairman of the Annual Meeting may adjourn the Annual Meeting from time to time to reconvene at the same or some other place.  Notice need not be given of any such adjourned meeting if the date, time and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken.  At any adjourned meeting of stockholders at which a quorum is present, any business may be transacted that might have been transacted at the meeting of stockholders as originally notified.  If the adjournment is for more than 30 days, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  If after the adjournment, a new record date for stockholders entitled to vote is fixed for the adjourned meeting, then the Board shall fix a new record date for notice of such adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

 What are abstentions?

Abstentions occur when stockholders are present in person or by proxy at the Annual Meeting but fail to vote or voluntarily abstain from voting on any of the matters upon which the stockholders are voting.

 What are “broker non-votes”?

Brokers who hold shares in “street name” for customers are required to vote shares in accordance with instructions received from the beneficial owners.  Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the brokerage firm, bank, dealer or nominee holding the shares as to how to vote on matters deemed “non-routine.”  Generally, if shares are held in “street name,” the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares.  If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters.  In the event that a broker, bank, custodian, nominee or other record holder of shares of our common stock indicates on a Proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal.  Accordingly, if you own shares through a nominee, such as a broker or bank, please be sure to instruct your nominee how to vote to ensure that your vote is counted on each of the proposals.

 Which ballot measures are considered “routine” or “non-routine”?

The election of Class III directors and the advisory vote to approve the compensation of our named executive officers are “non-routine” matters that could result in broker non-votes.  The vote to approve an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock and the vote to ratify the selection of KPMG as the Company’s independent registered public accountants for 2018 are “routine” matters.

The Class III directors will be elected by a plurality of the votes casts by the stockholders present in person or by proxy at the Annual Meeting and entitled to vote at the Annual Meeting.  Stockholders may not cumulate their votes for the election of our directors.  The advisory vote to approve our named executive officers’ compensation

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and ratification of the selection of the Company’s auditors will require the vote of a majority of the votes cast by the stockholders present in person or by proxy at the Annual Meeting and entitled to vote at the Annual Meeting.  The approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock will require the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. Broadridge Financial Solutions, Inc. (“Broadridge”) will tabulate the votes.

For purposes of the election of the Class III directors, withheld votes or broker non-votes will not have any effect on the outcome of the director elections.  For purposes of voting on the advisory vote to approve our named executive officers’ compensation, abstentions and broker non-votes will not have any effect on the outcome of voting for the proposal.  For purposes of voting on the ratification of the selection of the Company’s auditors, abstentions will not have any effect on the outcome of voting for the proposal.  For purposes of voting on the approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock, abstentions and brokers non-votes will have the effect of a vote against the proposal.

 How are votes counted?

For purposes of the election of the Class III directors, you may vote “for” or “withhold” authority to vote for each of the nominees for the Board.  For purposes of voting on the advisory vote to approve our named executive officers’ compensation, the approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock and the ratification of the selection of the Company’s auditors, you may vote “for,” “against,” or “abstain.”

If you properly complete and submit a Proxy, but do not indicate any contrary voting instructions, then your shares will be voted as follows:

·                  FOR the election of the Class III directors named in this Proxy Statement as the Board’s nominees for election as directors;

·                  FOR the approval of an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock and common stock;

·                  FOR the advisory vote to approve the compensation of our named executive officers; and

·                  FOR the ratification of the selection of KPMG as the Company’s independent registered public accountants for 2018.

If any other matter properly comes before the stockholders for a vote at the Annual Meeting, your shares will be voted as recommended by our Board or, if no recommendation is made, in the discretion of the proxyholders.  The Board knows of no matters, other than those previously stated, to be presented for consideration at the Annual Meeting.

 Can I change my vote after submitting my Proxy?

If you are a stockholder of record, 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 submitting your vote electronically through the Internet or by telephone after the grant of the Proxy, or by signing and delivering to the Secretary of the Company a Proxy with a later date.  Your attendance at the Annual Meeting will

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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.

If you are a beneficial owner, you should follow the instructions provided by your brokerage firm, bank, dealer or other similar organization.

 Directions to the Annual Meeting.

You may contact us at (713) 783-8000 for directions to the Annual Meeting.

PROPOSAL ONE. ELECTION OF DIRECTORS

The Board has nominated A. R. Sanchez, Jr. and Antonio R. Sanchez, III for election as Class III directors of the Company to serve for a three-year term to expire in 2021 and until either they are re-elected or their respective successors are elected and qualified.  Messrs. Sanchez, Jr. and Sanchez, III are currently serving as directors of the Company, and their biographical information is contained in the “Directors and Executive Officers” section below.

The Board has no reason to believe that Sanchez, Jr. and Sanchez, III will be unable or unwilling to serve if elected.  If either Messrs. Sanchez, Jr. or Sanchez, III becomes unable or unwilling to accept nomination or election, the persons acting under the Proxy will vote for the election of a substitute nominee that the Board recommends.

DIRECTORS AND EXECUTIVE OFFICERS

As of the filing of the Proxy Statement with the Securities and Exchange Commission (the “SEC”), the Board and the executive officers of the Company are:

(1)         Member of the Nominating and Corporate Governance Committee.

(2)         Member of the Audit Committee.

(3)         Member of the Compensation Committee.

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The Board currently consists of eight members.  The directors are divided into three classes serving staggered three-year terms.  Each year, the directors of one class stand for re-election as their terms of office expire.  Messrs. Sanchez, Jr. and Sanchez, III are designated as Class III directors, and their terms of office expire on the date of the Company’s 2018 annual meeting of stockholders.  Messrs. Garcia, Maher and Nelson are designated as a Class I directors, and their terms of office expire on the date of the Company’s 2019 annual meeting of stockholders.  Messrs. Carney, Colvin and Jackson are designated as Class II directors, and their terms of office expire on the date of the Company’s 2020 annual meeting of stockholders.

Set forth below is biographical information about each of the Company’s directors, nominees for director and executive officers as of the filing of the Proxy Statement.

A. R. Sanchez, Jr. has served as our Executive Chairman of the Board since November 2012.  Mr. Sanchez, Jr. is the co-founder, Chief Executive Officer and Chairman of the Board of Directors of Sanchez Oil & Gas Corporation (“SOG”), a private oil and natural gas company founded in 1972 that engages in the exploration and development of oil and natural gas primarily in Texas and the onshore Gulf Coast areas on behalf of its affiliates.  SOG is an affiliate of the Company.  Mr. Sanchez, Jr. received his Bachelor of Arts and Doctor of Jurisprudence degrees from St. Mary’s University in San Antonio, Texas.  Mr. Sanchez, Jr. currently serves as president and director for the A. R. “Tony” and Maria J. Sanchez Family Foundation.  He is also a director and stockholder of International Bancshares Corporation, a member of the Board of Visitors and Membership/Board Development Task Force at the University of Texas MD Anderson Cancer Center, a member of the Board of Advisors at Rice University’s Baker Institute and a member of the Board of Trustees at Baylor College of Medicine.  Because Mr. Sanchez, Jr. has over 45 years of experience in the oil and natural gas industry as well as a comprehensive understanding of oil and gas operations, we believe that Mr. Sanchez, Jr. is qualified to serve as a director of the Company.  Mr. Sanchez, Jr. is the father of Mr. Antonio R. Sanchez, III, our Chief Executive Officer and member of the Board and Mr. Patricio D. Sanchez, our Executive Vice President.

Antonio R. Sanchez, III has served as our Chief Executive Officer since our formation in August 2011 and has been directly involved in the oil and gas industry for over 17 years.  Mr. Sanchez, III served as our Chairman of the Board from August 2011 to November 2012 and continues to be a member of our Board.  Mr. Sanchez, III also served as our President from August 2011 until October 2015.  Mr. Sanchez, III is also the co-president of SOG, which he joined in October 2001.  In his capacity as an officer of SOG, Mr. Sanchez, III manages all aspects of its daily operations, including exploration, production, engineering and land management.  In addition, Mr. Sanchez, III is a member of the board of directors of Sanchez Midstream Partners GP LLC (“SNMP GP”), the general partner of SNMP.  From 1997 to 1999, Mr. Sanchez, III was an investment banker specializing in mergers and acquisitions with J.P. Morgan Securities Inc.  From 1999 to 2001, Mr. Sanchez, III worked in a variety of positions, including sales and marketing, product development and investor relations, at Zix Corporation, a publicly traded encryption technology company listed on the Nasdaq Global Market.  Mr. Sanchez, III was a member of the board of directors of Zix Corporation from May 2003 until June 2014.  He earned a Bachelor of Business Administration degree from Georgetown University with a concentration in accounting and finance and a minor in economics and a Master of Business Administration degree from Harvard Business School.  Mr. Sanchez, III has significant experience managing oil and gas operations and being a member of the board of directors of a publicly traded company as well as extensive knowledge of the energy industry.  For these reasons, we believe that Mr. Sanchez, III is qualified to serve as a director of the Company.  Mr. Sanchez, III is the son of Mr. Sanchez, Jr., our Executive Chairman of the Board, and the brother of Mr. Patricio D. Sanchez, our Executive Vice President.

Gilbert A. Garcia has served as our director since December 2011 and is a Co-Chair of our Audit Committee, Chairman of our Compensation Committee and a member of our Nominating and Corporate Governance Committee.  Mr. Garcia is the Managing Partner of Garcia Hamilton & Associates, L.P., an institutional asset management firm, which he joined in 2002 and where he supervises all facets of the firm’s investment decisions.  Prior to joining Garcia Hamilton & Associates, L.P., Mr. Garcia worked at two other institutional asset management firms, Smith Graham & Company, where Mr. Garcia was most recently the Chief Investment Officer, and Cisneros

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Asset Management, where he was most recently President.  Mr. Garcia started his professional career with Salomon Brothers specializing in mortgage-backed securities.  Mr. Garcia received his Bachelor of Arts degree in Economics from Yale University.  We believe that Mr. Garcia is well-qualified to serve as a member of our Board.  In addition to his professional experience, Mr. Garcia also has extensive experience serving in leadership positions of community organizations, including as the Chairman of the Metropolitan Transit Authority of Harris County, Texas.  We believe that Mr. Garcia’s executive experience, including through his service on community organizations, provides valuable financial and management experience that is critical to his ability to identify, understand and address the challenges and opportunities that we face as a public company.

M. Gregory Colvin has served as our director since March 2012.  Mr. Colvin was the Managing Partner, Chief Operating Officer and Head of Investor Relations of Sankofa Capital, an investment management firm which he co-founded, from December 2011 to December 2016.  From 2007 until he joined Sankofa Capital, Mr. Colvin was a licensed broker affiliated with Bluffview Capital, LP, where he originated and raised capital for private equity and hedge fund clients.  From 1997 to 2006, Mr. Colvin was a Managing Director of the Private Funds Group at Donaldson, Lufkin & Jenrette Securities Corp. and Credit Suisse LLC.  Mr. Colvin started his professional career with Stephens Inc. specializing in placing primary and secondary fixed income products to institutional investors.  From January 1, 2017 through the present, Mr. Colvin has managed his personal investments.  Mr. Colvin received his Bachelor of Science in Business Administration degree from the University of Arkansas.  Mr. Colvin currently serves on the advisory board of the Sam M. Walton College of Business at the University of Arkansas.  We believe that Mr. Colvin is well-qualified to serve as a member of our Board.  In addition to his extensive experience in leadership positions at large financial institutions, Mr. Colvin has a substantive understanding of the upstream oil and gas industry and a financial background that gives him the ability to understand and analyze our business and our opportunities.

Alan G. Jackson has served as our director since November 2012 and is the Chair of our Nominating and Corporate Governance Committee.  Mr. Jackson is the Senior Commercial Producer at IBC Insurance Agency, Ltd. (“IBC”).  Mr. Jackson is the former co-owner of Inscorp, Inc., a leading commercial insurance agent/brokerage in South Texas, which was acquired by IBC in 2009.  Mr. Jackson received his Bachelor of Business Administration degree from Texas A&M University at Kingsville, Texas, and is a graduate of the University of Texas, McCombs School of Business’ Management Development Program.  We believe that Mr. Jackson is well-qualified to serve as a member of our Board because of his experience working with many land and mineral owners and their representative brokers, bankers and attorneys and with many oil and gas operators, non-operators, investors, service companies and logistics carriers in the energy industry throughout South Texas, including the Eagle Ford Shale.

Sean M. Maher has served as our director since November 2014 and is a Co-Chair of our Audit Committee and a member of our Compensation Committee and our Nominating and Corporate Governance Committee.  Mr. Maher is the Senior Portfolio Manager of RCH Energy, an investment management firm, which he joined in June of 2008.  From 2006 until joining RCH Energy, Mr. Maher was an Executive Director at Morgan Stanley and the Head of Master Limited Partnership and Integrated Natural Gas Research.  From 2001 to 2006, Mr. Maher was a member of the Integrated Oils and Independent Refining Equity Research team for Morgan Stanley.  From 1999 to 2001, Mr. Maher was an analyst in the Energy Investment Banking team at Morgan Stanley.  Mr. Maher began his career at Morgan Stanley in 1997 within the Financial Reporting and Controllers Group that covered the Investment Banking business, including Mergers & Acquisitions, Equity Capital Markets, Debt Capital Markets and Private Equity.  Mr. Maher received both his Bachelor of Business Administration in Finance and his Master of Business Administration in Finance and Accounting degrees from Saint Bonaventure University.  We believe that Mr. Maher is well-qualified to serve as a member of our Board due to his extensive financial and energy experience.

T. Brian Carney has served as our director since May 2015 and is a member of our Nominating and Corporate Governance Committee, our Compensation Committee and our Audit Committee.  Mr. Carney is an attorney from Midland, Texas, where he has practiced law at the Law Office of Brian Carney since 1992.  His practice focuses on litigation in both state and federal courts.  Mr. Carney graduated from the University of Oklahoma with a Bachelor of Business Administration in Finance, and he received his Doctor of Jurisprudence from Oklahoma City University

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in 1991.  We believe that Mr. Carney is well-qualified to serve as a member of our Board due to his legal background and experience.

Robert V. Nelson, III has served as our director since August 2016 and is a member of our Compensation Committee, our Nominating and Corporate Governance Committee and our Audit Committee.  Mr. Nelson is the President and Chief Executive Officer of Sprint Energy Services (“Sprint”) and has held this position since July 2017.  Mr. Nelson previously served as the Chief Operating Officer of Sprint from September 2016 to July 2017.  From February 2016 through August 2016, Mr. Nelson managed personal investments.  Prior to joining Sprint, Mr. Nelson worked at C&J Energy Services, Ltd. (“C&J”) from March 2015 to January 2016, where he was Vice President of Corporate Operational Development.  In this capacity he was responsible for joint ventures and strategic partnerships with operators while assisting in the merger of certain operating units of Nabors Industries Ltd. (“Nabors”) with C&J.  Prior to joining C&J, Mr. Nelson served in positions of increasing importance within Nabors and its subsidiaries from 2006 to March 2015.  He began his career at Nabors in Corporate Development followed by successful assignments in Treasury, Nabors Drilling USA, and Nabors Well Services.  He was subsequently named Vice President and General Manager of the South Texas Region for Nabors Completion and Production Services, where he was responsible for directing this unit’s rapidly growing activity in the Eagle Ford Shale.  Mr. Nelson worked for UBS before beginning his career at Nabors.  He holds a Bachelor of Arts degree from the University of Texas at Austin and a Master of Business Administration degree from Rice University’s Jones Graduate School of Business.  We believe that Mr. Nelson is well-qualified to serve as a member of our Board due to his extensive experience that spans all areas of oil and natural gas exploration, drilling and production, including with respect to operations in the Eagle Ford Shale, our core area of focus.  We also believe Mr. Nelson’s unique service sector insight and perspective will greatly benefit the Board and management as we work to continuously improve operations and develop our plans for the future.

Howard J. Thill has served as our Executive Vice President and Chief Financial Officer since October 2016.  Prior to joining the Company, Mr. Thill served as Senior Vice President of Communications and Investor Relations at Devon Energy, where he was responsible for all investor relations activity and development of corporate messaging from May 2014 until October 2016.  Prior to Mr. Thill’s position at Devon Energy, he served as Vice President of Corporate, Government and Investor Relations at Marathon Oil Corp., where he was employed from January 2002 until April 2014.  Mr. Thill began his career with Phillips Petroleum Company in 1982 as a drilling fluids engineer and subsequently held positions of increasing responsibility in natural gas operations, federal and international tax, international finance and business development before moving to investor relations. Mr. Thill serves on the Oklahoma State University Foundation Board of Governors, is a member of the Oklahoma State University Alumni Association’s Leadership Counsel and is active in the National Investor Relations Institute Senior Roundtable.  Mr. Thill holds Bachelor degrees in Accounting and Marketing as well as a Master of Business Administration degree from Oklahoma State University.  In addition, he is a Certified Public Accountant.

Patricio D. Sanchez has served as our Executive Vice President since November 2016.  Mr. Sanchez also serves as President & Chief Operating Officer and a director of SNMP GP, which positions he has held since March 2017 and June 2015, respectively.  Mr. Sanchez served as Chief Operating Officer of Sanchez Production Partners GP, LLC from May 2015 through March 2017 when he was appointed President & Chief Operating Officer.  Mr. Sanchez has served as co-president of SOG since June 2014 and served as Executive Vice President prior to that from April 2010 to June 2014.  Mr. Sanchez has also been the managing member of Santerra Holdings, LLC, an oil and gas production company, since February 2012.  Mr. Patricio D. Sanchez is the brother of Mr. Sanchez, III, the Company’s Chief Executive Officer and member of the Board, and the son of A. R. Sanchez, Jr., the Executive Chairman of the Board.  Mr. Sanchez holds a B.A. from Bentley College and a Masters in Energy and Mineral Resources from the University of Texas at Austin.

Christopher D. Heinson has served as our Senior Vice President and Chief Operating Officer since March 2014.  Mr. Heinson served as the Company’s interim Chief Operating Officer from January 2014 to March 2014.  He joined the Company in March 2013 as the Senior Manager of Reservoir Engineering.  Prior to joining the Company, Mr. Heinson served as a Senior Development Planning Engineer for Occidental Petroleum Corporation’s Williston Basin division from May 2011 to March 2013, where he coordinated the development of hundreds of horizontal

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wells drilled in the Bakken Shale as well as overseeing forecasting and planning for Occidental Petroleum Corporation’s Williston Business Unit, and a Staff Reservoir Engineer for their Permian basin division from May 2007 to May 2011, where he was responsible for direct technical oversight of multiple fields in the Permian Basin.  Mr. Heinson received his Bachelor of Science in Petroleum Engineering degree from the University of Texas at Austin.

Kirsten A. Hink has served as our Senior Vice President and Chief Accounting Officer since January 1, 2015, and previously served as our Vice President and Principal Accounting Officer since March 2012.  Prior to joining us, Ms. Hink served as the Controller of Vanguard Natural Resources, LLC from January 2011 to February 2012, where she oversaw the company’s financial reporting and accounting.  From January 2010 to December 2010, she served as Assistant Controller of Mariner Energy, Inc. (“Mariner”), where she managed the revenue and production reporting as well as assisted with financial and bankruptcy reporting for the Edge Petroleum Corporation (“Edge”) properties that were acquired by Mariner.  She served as the Chief Accounting Officer for Edge from July 2008 through December 2009 and the Vice President and Controller for Edge from October 2003 through July 2008, where she oversaw the preparation of Edge’s financial statements.  Prior to that time she served as Controller of Edge from December 31, 2000 to October 2003 and Assistant Controller of Edge from June 2000 to December 2000.  Edge filed for Chapter 11 bankruptcy protection in October 2009.  Before joining Edge, she served as Controller of Benz Energy Inc., an oil and gas exploration company, from June 1998 to June 2000.  Ms. Hink received a Bachelor of Science in Accounting degree from Trinity University.  Ms. Hink is a Certified Public Accountant in the State of Texas.

Gregory B. Kopel has served as our Senior Vice President and General Counsel since December 2015.  Prior to joining the Company, Mr. Kopel focused on energy transactions, with an emphasis on mergers and acquisitions and joint ventures as Vice President and Associate General Counsel at Breitburn Energy Partners LP from April 2013 to December 2015 and in corporate legal positions at Linn Energy LLC from June 2010 to April 2013 and Occidental Petroleum Corporation from December 2005 to June 2010.  Mr. Kopel began his legal career working at two international law firms.  Mr. Kopel earned a B.A. in Government at the University of Texas at Austin, and a J.D. at the University of Houston.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion & Analysis (“CD&A”) explains our executive compensation program for our named executive officers listed below.  This CD&A also describes the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to fiscal 2017, and certain decisions made with respect to 2018 compensation matters.

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(1)  Mr. Eduardo A. Sanchez was no longer with the Company effective as of November 15, 2017.

Before reviewing our CD&A, it is important to understand our organizational structure and how it impacts our executive compensation program.  Initially we note that management and the Board have the added benefit of Mr. Sanchez, Jr., the Company’s full time Executive Chairman, who has a deep understanding of the cycles and challenges of the oil and gas industry from his over 45 years of experience in the industry.  The close working relationship between the Executive Chairman and the Chief Executive Officer gives the Board and the Company’s stockholders a strong leadership team that can address issues quickly and seamlessly.  Second, all of our executive officers are employed by SOG and provide services both to us and other affiliates of SOG (SOG together with its affiliates (other than the Company), the “Sanchez Group”) in their capacity as employees of SOG.  Our Compensation Committee determines and approves base salary and annual bonus amounts for the services our named executive officers provide to us as well as equity awards under the Third Amended and Restated 2011 Long Term Incentive Plan (the “Plan”).  SOG pays all base salary and annual bonus amounts to our named executive officers and, pursuant to the services agreement between us and SOG, we reimburse SOG for the portion of compensation expenses (including base salary, benefits, and annual bonuses) attributable to services provided to our business.  We estimate that during 2017, our named executive officers other than Patricio D. Sanchez dedicated approximately 100% of their professional time to providing services to us.  We estimate that during 2017, Patricio D. Sanchez dedicated approximately 50% of his professional time to providing services to us.

At our annual meeting of stockholders held on May 24, 2017, our stockholders had the opportunity to cast an advisory vote on executive compensation.  At that meeting, approximately 47.3% of the votes cast by our stockholders (excluding broker non-votes) voted in support of our executive pay program.  The Compensation Committee considered the outcome of the vote and is taking decisive measures to adjust our executive compensation program to be responsive to the stockholder feedback we received and to be more consistent with favorable say-on-pay practices, such as structuring more of our named executive officers’ compensation to be performance based.  We increased the focus and intensity of our stockholder engagement as a result of the 2017 say-on-pay vote. Over the last year and continuing into 2018, members of the Board and of management have spoken to each of our largest active stockholders.  This was accomplished through a series of meetings and one-on-one discussions.  Through these exchanges, we gained greater appreciation for our stockholders’ views on compensation philosophies, annual incentives, long-term incentive targets, performance metrics and incentive designs.  Many of our investors’ concerns were and continue to be related to conditions our industry currently faces and our plans to successfully navigate these challenges.  Based upon this continuing dialogue with our investors, we are re-formulating the foundations of our long-term incentive program to address those concerns and better link desired performance outcomes, our reward practices and industry conditions.

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In November 2017, Pearl Meyer, LLC (“Pearl Meyer”), a leading independent compensation consulting firm, was engaged as the Compensation Committee’s independent compensation consultant to assist the Compensation Committee in re-assessing the Company’s executive compensation programs and in guiding the Compensation Committee in its actions impacting 2018 executive compensation.  The Compensation Committee retained Pearl Meyer as its compensation consultant pursuant to its charter, which grants the Compensation Committee the authority to retain a compensation consultant.  The Compensation Committee has determined that no conflicts of interest exist with respect to Pearl Meyer’s consulting services for 2017 and 2018.  Pearl Meyer’s tasks in 2017 and 2018 were to:

·                  Assess the current and proposed peer group by management;

·                  Review the Company’s current compensation levels and proposals for 2018;

·                  Develop a properly sized new peer group and assess the bonus outcomes for 2017;

·                  Review the annual calendar and governance process in administering executive compensation; and

·                  Provide guidance and recommendations for assessing 2018 and ongoing compensation practices.

The current status and proposed actions for this improved process that will flow into full year 2018 and beyond are discussed in more detail below.  The Compensation Committee did not direct Pearl Meyer to perform its services in any particular manner or under any particular method.

Beginning in November 2017, Pearl Meyer provided the Compensation Committee with further insight on current pay practices to ensure that our compensation approach on a go-forward basis effectively balances competitive market practices, stockholder expectations, best-practice governance standards and more effectively links our business strategy, from a compensation practice standpoint, to financial and operational performance outcomes.  Pearl Meyer reports directly to the Compensation Committee, although its representatives may meet with management from time-to-time.

In late 2017, the Compensation Committee, working with Pearl Meyer and our management, established a new peer group that was used to assess compensation norms for the annual review of salaries, the annual cash bonus payout and the formulation of the 2018 grants under the Plan.

The Benchmarking Process

Based upon (1) industry surveys SOG participates in each year, (2) Pearl Meyer’s database, (3) survey data from 2017 proxy filings of comparably-sized companies and (4) a market review conducted by Pearl Meyer in late 2017, the Compensation Committee established the following peer group, which the Compensation Committee believes more closely matches the Company’s revenue and revenue projections than the peer group previously used by the Company.

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Work on a New Long-Term Incentive Plan

As part of Pearl Meyer’s initial review of the types of plans in place in the competitive market with management and the Compensation Committee, it was determined that the use of operational and financial measures reflecting the Company’s long-term performance would provide more line-of-sight criteria for compensation and, therefore, a more direct link between these performance outcomes, equity performance and compensation opportunities.

Following working sessions, strategy discussions and reviews of other programs in the industry, the Compensation Committee decided to modify the Company’s executive compensation program starting in 2018.  Working with the Compensation Committee and Pearl Meyer, management has identified and is reviewing, modeling, assessing and formalizing the measures with formal long-term performance goals that are both operational and financial.

The 2018 compensation program that is currently under development is expected to involve:  (1) increasing the amount or percentage of the total Plan grants that are represented by performance-based awards (“PSUs”); (2) reviewing and compiling potential financial and operating performance measures that directly or indirectly impact the balance sheet and net value of the Company; and (3) identifying other metrics that are within the control or line-of-sight of our management.

Under the new 2018 compensation program, at least 50 percent of our named executive officers’ long-term equity awards is expected to be directly linked to the achievement of specific performance goals.  The awards linked to specific performance goals are expected to be in the form of PSUs, whose value will be based upon the achievement of defined goals measured for each calendar year for a three-year performance period (2018-2020).  These goals may depend only upon our performance or our performance relative to our peers or a different industry group.

We anticipate completing this process in time to adopt a new compensation program for the 2018 Plan grants.  Management, the Compensation Committee and the Board are all committed to formalizing the measures, the specific goals within these measures and the actual award opportunities as soon as possible during 2018.

The Compensation Committee believes that a more structured and measurable performance-based equity program will better align management with shareholder interests.  After careful consideration, the Compensation Committee expects to establish operating and financial metrics it believes will drive greater returns and value for our stockholders.

Listed below are a number of key metrics that we believe will drive our 2018 long-term compensation program, including when determining the final value of PSUs  – our leverage ratio, our reserve replacement ratio, operating costs and safety.  Each of these metrics will be measured against a pre-established range of outcomes.

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Leverage Ratio

With the volatility surrounding oil prices investors are very keen on companies being able to deleverage, which made this metric a top priority, together with its planned management and reduction over time.  We believe that improving the leverage ratio will demonstrate our progress in strengthening the balance sheet.

Reserve Replacement Ratio

As an unconventional shale company operating in a constantly depleting asset base or region, it is crucial for the Company to continue to organically replace its production with proved future reserves.

Operating Cost

Minimizing operating costs is crucial to improving the Company’s margins and driving cash flows.  Lifting costs per barrel and other measures reflect directly on our production efficiency and profitability.  We expect to identify the most applicable measure and set goals intended to maintain or increase these margins by lowering our costs to deliver hydrocarbons.

Safety

To ensure management does what it can to create a safe work environment with limited incidents given our large operated position and multiple partners, specific long-term goals will be established that may include total incident rate, position in the industry regarding total recordable incident rates and related measures.

Compensation Mix and Realized Pay

Compensation Mix

The chart below shows the mix of compensation provided in 2017 to our Chief Executive Officer.  As our Chief Executive Officer (and other named executive officers) have a smaller percentage of fixed compensation than most of the Company’s competitors, the compensation mix is highly variable.  References to “LTI” below refer to long-term incentive awards under the Plan.

Realized Pay Charts

We believe realized pay charts are helpful in assessing what an executive actually receives when their awards mature versus the awards’ value at grant.  The charts below show the difference between the total compensation

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disclosed in the section titled “Summary Compensation Table” of this Proxy Statement, which includes the value of unvested awards, and “realized” pay resulting from the value of vested equity awards for our Chief Executive Officer.  The difference in the grant date fair value of Plan awards versus the value of vested Plan awards for our named executive officers is similar to that of our Chief Executive Officer shown below.

(1) Represents the percentage realized of the reported equity value in the section titled “Summary Compensation Table” of this Proxy Statement.

The “Realized” compensation shown in the charts above reflects the base salary received in the applicable year, annual incentives paid in the subsequent year for performance during the applicable year, and long-term incentive awards that vested during the applicable year valued at year end of the applicable year.  The “SCT” compensation shown in the charts above reflects the compensation disclosed in the section titled “Summary Compensation Table” of this Proxy Statement.  The high variability or tie-back to stock price performance is exemplified in these charts.  “TSR” in the chart above stands for total shareholder return which shows and is calculated by share price at the beginning versus the end of the year.  The TSR line demonstrates how tightly the Plan and the compensation associated with maturing value of Plan awards are tied to stock price performance.

The discussion below reflects our philosophy, practices, programs and policies in 2017 (and recent prior years).  For changes to our philosophy, practices, programs and policies in late 2017 and 2018 please see “Say on Pay, Stockholder Engagement and Changes for 2018” and “Late 2017 and 2018 Activities and New Executive Compensation Program.”

We are committed to paying-for-performance and our executive compensation philosophy seeks to (i) motivate Sanchez Group employees to perform at the highest level consistent with our core values, (ii) reward those high performing employees, and (iii) retain and attract top talent.  More particularly, the cash and benefit portions of our executive compensation program are designed to attract and retain individuals with the background and skills necessary to successfully execute our business model in a demanding environment, to properly motivate management in a way that aligns their interests with those of our stockholders, and to reward success in reaching

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performance goals. Our equity award program ensures that a substantial portion of each named executive officer’s compensation is directly tied to our share price performance, which further aligns the interests of our named executive officers with those of our stockholders.

The following practices and policies in our program promote sound compensation governance and are in the best interests of our stockholders and executives:

There are three primary elements of compensation that are used in our executive compensation program—base salary, annual cash bonuses and long-term equity incentive awards. Annual cash bonuses and equity incentive awards represent the at-risk elements of compensation intended to drive performance.  They are also flexible in application and can be tailored to meet our objectives for the applicable year.  Prior to 2018 and except as described under “Say on Pay, Stockholder Engagement and Changes for 2018” and “Late 2017 and 2018 Activities and New Executive Compensation Program,” we did not have any specific policies regarding the allocation of compensation between either long- or short-term compensation, or cash and non-cash compensation.  The determination of each named executive officer’s cash bonus reflects their relative contribution to achieving or exceeding annual Company goals, while the long-term incentive award determination is based on their expected contribution in respect of longer term performance objectives.

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The Compensation Committee oversees the executive compensation program for our named executive officers. The Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee works very closely with its independent consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which is available on the Company’s website at http://investor.sanchezenergycorp.com/phoenix.zhtml?c=248475&p=irol-govHighlights.

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The Role of the Compensation Committee.

The Compensation Committee reviews, assesses and monitors the performance, and regularly reviews the design and function, of the Company’s incentive compensation arrangements to ensure that any risk-taking incentives are consistent with regulatory guidance and the safety and soundness of the organization.  The Compensation Committee is responsible for assessing and approving the total compensation paid to the CEO and other named executive officers. The Compensation Committee is responsible for determining whether the compensation paid to each of these executives is fair, reasonable and competitive, and whether the compensation program serves the interests of the Company’s stockholders.

Role of Executive Officers in Setting Executive Compensation.

The Executive Chairman and CEO make recommendations to the Compensation Committee for each of the named executive officers based on the Executive Chairman’s and CEO’s assessment of each executive’s personal performance, as well as the achievement of the overall Company goals for the fiscal year.  The Compensation Committee reviews the recommendations, makes adjustments as it determines appropriate, and approves compensation at its sole discretion.

Role of Compensation Consultants.

For 2017, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant.  Meridian reported directly to the Compensation Committee, although its representatives may also meet with management from time to time.  The Compensation Committee did not direct Meridian to perform its services in any particular manner or under any particular method.  During 2017, Meridian assisted the Compensation Committee with the following:

·                  Developing a peer group for reviewing executive and outside director market compensation practices;

·                  Conducting a competitive market analysis of executive compensation for our named executive officers;

·                  Conducting a competitive market analysis of compensation for our outside directors;

·                  Providing an update on executive compensation trends and developments; and

·                  Providing consulting on other matters pertaining to executive compensation as requested by the Compensation Committee during the year.

The Compensation Committee evaluates its compensation consultant annually to determine its independence.  The Compensation Committee has determined that no conflicts of interest exist with respect to Meridian’s consulting services for 2017.  The factors considered by the Compensation Committee in conducting this analysis are as follows:

·                                          The provision of other services to us by Meridian, if any;

·                                          The amount of fees received from us by Meridian as a percentage of Meridian’s total revenue;

·                                          The policies and procedures of Meridian that are designed to prevent conflicts of interest;

·                                          Any business or personal relationship of Meridian or its consultants with a member of the Compensation Committee;

·                                          Any stock of the Company owned by Meridian’s consultants; and

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·                                          Any business or personal relationship of Meridian or its consultants with any of our executive officers.

As part of the compensation setting process for 2017, the Compensation Committee (i) examined the compensation practices of our peer companies; (ii) reviewed compensation information from the oil and gas industry; and (iii) reviewed relevant compensation surveys, including data provided by Meridian.

Each year the Compensation Committee reviews and revises as it determines appropriate the peer group companies with which we compete for executive talent so that we could use compensation types and levels paid across the peer group as a reference point for assessing the allocated portion of executive compensation set by the Compensation Committee as well as the type, volume and terms of our equity compensation grants for the year. Meridian assisted the Compensation Committee with the development of the peer group of companies for 2017. The criteria used by the Compensation Committee for inclusion in our peer group included U.S.-based public companies focused on oil and gas exploration and production with similarly sized assets, market value and enterprise value, with the Company falling within a reasonable range of the median of the group. The peer group used by the Compensation Committee in analyzing 2017 named executive officers’ compensation was as follows:

The Compensation Committee reviewed data regarding both total compensation and each element of compensation paid to similarly situated executives at the peer group companies and data from an E&P compensation survey prepared by Meridian and other market data when evaluating compensation paid to our named executive officers and our equity grant types and amounts.  Our Compensation Committee believes that providing compensation opportunities within a competitive range of our peer group will ensure we can attract and retain talented executive officers with the expertise and dedication required for our Company to excel.

Provided below is a review of the Compensation Committee’s determinations of base salary, annual cash bonuses, and long-term equity incentive stock awards for our named executive officers for 2017 and 2018 as of the date of our proxy materials.

Base Salary.

Our Compensation Committee establishes base salary levels for each of our named executive officers.  The Compensation Committee reviews the named executive officers’ base salaries on an annual basis and makes adjustments as necessary to maintain a competitive executive compensation structure.  Our Compensation Committee also reviews and adjusts, as appropriate, base salaries in connection with a promotion or other change in responsibility of our named executive officers.

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For 2017, the Compensation Committee elected to leave base salary levels for the named executive officers unchanged from 2016, except Mr. Heinson, who received a slight base salary increase from $400,000 to $412,000.  The Compensation Committee determined that this increase in base salary was appropriate to compensate Mr. Heinson for acquiring additional responsibility over the last several years and for attaining cost-reductions for the Company and to ensure pay equity among our named executive officers.  Mr. Patricio D. Sanchez’ base salary remained unchanged from 2016 to 2017 but that portion of his base salary allocated to us increased in 2017 due to his expanded role at the Company, including his assistance on closing the Comanche Transaction and management of SN EF UnSub, LP (“SN UnSub”), as well as his first full year of service to the Company in 2017.

For 2018, the Compensation Committee elected to leave base salary levels for our Executive Chairman and Chief Executive Officer unchanged from 2017.  The Compensation Committee elected to increase the base salaries of our Chief Financial Officer and Chief Operating Officer from $450,000 to $475,000 and $412,000 to $450,000, respectively, to better align these executives’ compensation with those in similar roles at our peers.  In addition, Mr. Patricio D. Sanchez’ base salary was increased by the Compensation Committee from $250,000 to $300,000 from 2017 to 2018 due to his expanding involvement at the Company, including his assistance on closing the Comanche Transaction and management of SN EF UnSub, and the increased percentage of his time spent on our matters.

(1)         Mr. Eduardo A. Sanchez was no longer with the Company effective as of November 15, 2017.  During 2017 Mr. Eduardo A. Sanchez’ base salary was set at $650,000 per year.  The salary reported above for 2017 reflects the base salary he was actually paid for services provided to us during his partial year as our President in 2017.

(2)         Mr. Thill was appointed as our Executive Vice President and Chief Financial Officer on October 10, 2016, and his fiscal year 2016 base salary rate was set at $450,000 per year.  The salary reported above for 2016 reflects the base salary he was actually paid for services provided to us during his partial year as our Executive Vice President and Chief Financial Officer in 2016.

(3)         Mr. Patricio D. Sanchez was appointed as an Executive Vice President of the Company effective November 3, 2016.  Mr. Patricio D. Sanchez became a named executive officer in 2017.  During 2017 and 2018, slightly less than half of his base salary was or will be allocated to us.  The amounts reported above for 2017 and 2018 reflect only that portion of his base salary attributable to us.

Annual Cash Bonus Awards.

Annual cash bonus awards are determined based on qualitative assessment of financial and individual performance achievements. The Compensation Committee and SOG review bonus awards for our named executive officers annually to determine award payments for the current fiscal year.

With regard to the annual cash bonus awards made for 2017, the Compensation Committee and SOG took a number of factors into account in making its award decisions:

·                  2017 production of ~70,320 Boe/d, representing an ~31% increase over the prior year;

·                  Proved reserves of ~363 MMBoe at year end 2017, an ~88% increase over the prior year;

·                  Increase in the projected Comanche drilling inventory by ~800 gross (~200 net) locations from March 1, 2017 to year-end 2017;

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·                  Full year 2017 revenues of ~$740 million;

·                  ~2,165 gross producing wells at year end 2017;

·                  Strong safety record of ~0.88 TRIR for 2017;

·                  Over ~$2.5 billion in total assets at year-end 2017, an ~85% increase over the prior year;

·                  Closing of the ~$2.1 billion Comanche Transaction during 2017;

·                  Successful early integration of the Comanche asset with 147 Comanche wells brought on line during 2017;

·                  Disposition of three non-core properties during 2017;

·                  2017 cash flows from operating activities of approximately ~$292 million, an ~60% increase from the prior year;

·                  The materially larger asset base and production profile than many of our peers due to the Company’s operation of the entire Comanche asset;

·                  Bonus opportunities and actual bonuses paid by the Company’s peer group and competitors, including competitive bonus plans’ payout opportunity ranges; and

·                  Performance of each of the named executive officers.

This effort and the outcomes above were reviewed and validated as superior performance consistent with maximum bonus awards to our named executive officers.  The Compensation Committee, in reviewing and determining the actual bonuses to be paid, with the input of Pearl Meyer, took into account the current base pay levels of our most senior executives in determining these awards as comparable to the third quartile of target bonus plus base salaries paid to comparable positions in the new peer group.

On February 11, 2018, our Compensation Committee awarded Messrs. Thill and Heinson a cash bonus of $650,000 each for their work and efforts during 2017 and, on February 12, 2018, our Compensation Committee awarded Messrs. Sanchez, Jr. and Sanchez III a cash bonus of $2,200,000 each and, Mr. P. Sanchez a cash bonus of $1,250,000 for their work and efforts during 2017.

Long-Term Incentive Compensation.

We adopted the Plan in order to have the flexibility to grant equity and equity-based awards to employees (including Sanchez Group employees), officers, consultants and directors who perform services for us.  Each of our named executive officers is eligible to receive awards under the Plan, which is administered by the Compensation Committee.

Our Plan allows for the grant of restricted shares, phantom shares, share options, share appreciation rights and other share-based awards.  The purpose of awards under our Plan is to provide additional incentive compensation to individuals providing services to us and to align the economic interests of such individuals with the interests of our stockholders.  Our Plan limits the number of shares that may be delivered under the Plan to 17,239,790 shares of our common stock plus, upon the issuance of additional shares of common stock after April 15, 2016, an additional number of shares equal to 15% of such issuance or such lesser number determined by the Compensation Committee.

Our Compensation Committee determines any awards granted under our Plan.  With regard to the awards granted during 2017, the Compensation Committee took a number of factors into account, including:

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·                  The operational metrics for 2017 that are set forth in the discussion of “Annual Cash Bonus Awards” above;

·                  Closing of the ~$2.1 billion Comanche Transaction during 2017;

·                  The magnitude of the efforts associated with the integration of the Comanche asset and the key role our named executive officers play in such integration efforts, including, but not limited to:

o                ~ 1,000 net additional drilling opportunities;

o                An additional net ~33,500 Boe/d of acquired production;

o                An increase in net acres of ~77,500; and

o                An additional net ~150 MMBoe of proved reserves;

·                  The overall materially larger asset base and production profile of the Company following the Comanche Transaction; and

·                  Performance of each of the named executive officers.

In making its determination on awards granted during 2017, the Compensation Committee gave special consideration to the transformative and accretive nature of the Comanche Transaction, which was the largest transaction in the Company’s history.  The Compensation Committee focused not only on the benefits of the transaction to the Company, but the many obstacles, such as the amount of financing secured relative to the Company’s market capitalization, that the named executive officers were able to overcome to complete this transformative transaction.

The table below shows the values approved by the Compensation Committee in 2017.

In 2017, we granted Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez, Thill and Heinson 245,234, 245,234, 245,234, 86,655, 100,000 and 81,745, respectively, shares of both restricted and phantom stock, which vest in equal installments over five years for each of Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez and Heinson and in equal installments over three years for Mr. Thill, in each case subject to continuous service with us through each vesting date.

In addition, in 2017, we granted Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez and Heinson 245,234, 245,234, 245,234, 86,655 and 81,745 target phantom shares of performance phantom stock units, respectively.  These PSU awards are payable in shares of our common stock.  The PSUs will vest (if any) in equal annual increments over a five-year period ranging from 0% to 200% of the target phantom shares granted based on our share price appreciation relative to the share price appreciation of the S&P Oil & Gas Exploration & Production Select Industry Index for each year in the five-year performance period beginning on January 1, 2017 and ending

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on December 31, 2021 (the “Performance Conditions”), subject to the officer’s continuous service with us through each vesting date.  With respect to the period performance period beginning on January 1, 2017 and ending on December 31, 2017, which is the first measurement period, in February 2018 the Compensation Committee determined that the threshold level of the Performance Conditions was not met and as a result no payments were made under the PSUs for that measurement period.

The chart below shows the median weighted percentage of the target grant value for our named executive officers:

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During the year ended December 31, 2017, our named executive officers were granted shares of restricted, phantom and performance phantom stock as indicated in the following table:

(1)      Includes 245,234 shares of restricted and 245,234 shares of phantom stock granted on March 1, 2017 vesting in equal annual increments over a five-year period and 245,234 shares of performance phantom stock granted on March 1, 2017 vesting in five annual installments subject to satisfaction of the Performance Conditions.

(2)      Includes 245,234 shares of restricted and 245,234 shares of phantom stock granted on March 1, 2017 vesting in equal annual increments over a five-year period and 245,234 shares of performance phantom stock granted on March 1, 2017 vesting in five annual installments subject to satisfaction of the Performance Conditions.

(3)      Includes 245,234 shares of restricted and 245,234 shares of phantom stock granted on March 1, 2017 vesting in equal annual increments over a five-year period and 245,234 shares of performance phantom stock granted on March 1, 2017 vesting in five annual installments subject to satisfaction of the Performance Conditions. In connection with Mr. E. Sanchez’s departure from the Company, the vesting of all 245,234 shares of restricted and 245,234 shares of phantom stock granted to him on March 1, 2017 were accelerated to November 15, 2017.  In addition, Mr. E. Sanchez retained his 245,234 target shares of performance phantom stock granted on March 1, 2017 and is eligible for pro-rata vesting in accordance with the terms unrelated to employment set forth therein, as described under “Potential Payments Upon Termination or Change in Control.”

(4)         Includes 100,000 shares of restricted and 100,000 shares of phantom stock granted on March 1, 2017 vesting in equal annual increments over a three-year period.

(5)         Includes 81,745 shares of restricted and 81,745 shares of phantom stock granted on March 1, 2017 vesting in equal annual increments over a five-year period and 81,745 shares of performance phantom stock granted on March 1, 2017 vesting in five annual installments subject to satisfaction of the Performance Conditions.

(6)         Includes 86,655 shares of restricted and 86,655 shares of phantom stock granted on March 1, 2017 vesting in equal annual increments over a five-year period and 86,655 shares of performance phantom stock granted on March 1, 2017 vesting in five annual installments subject to satisfaction of the Performance Conditions.

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Stock Ownership and Retention Policy

In April 2016, our Board adopted a formal written stock ownership and retention policy applicable to our non-executive directors and certain of our executive officers.  The policy requires our non-executive directors and certain of our executive officers to acquire and retain a minimum level of stock ownership within five years of the effective date of the guidelines or their appointment as executive officers or directors, whichever is later.  Our Executive Chairman and Chief Executive Officer must acquire and retain shares of our common stock equal to at least five times their annual base salary; our Chief Financial Officer and Chief Operating Officer must acquire and retain shares of our common stock equal to at least three times their annual base salary; and our directors who are not also executive officers must acquire and retain shares of our common stock equal to at least five times their annual retainer.  Until the applicable minimum level of stock ownership is achieved, the executive officers or directors must retain all net shares obtained through the Plan (after payment of taxes and exercise price, if applicable).  The stock ownership and retention policy provides that any failure to comply with the policy may be taken into account by the Company and the Compensation Committee in connection with compensation decisions, promotion opportunities and other related events to the extent that the Company and the Compensation Committee determine appropriate.

Clawback Policy

Our Board has adopted a clawback policy under which our Board has the right to cause the reimbursement by a current or former executive officer of the Company of certain incentive compensation if the compensation was predicated upon the achievement of certain financial results that were subsequently the subject of a required restatement of the Company’s financial statements.  Incentive compensation subject to the policy includes all cash, equity or equity-based awards made pursuant to the Plan or any other formal or informal plan, adopted currently or in the future.  Our Board may exercise this right regardless of the occurrence or absence of any fraud or responsibility on the part of any current or former executive officer.

Severance and Change in Control Benefits

Other than the severance and Change in Control benefits provided under the Plan and our award agreements discussed in “Potential Payments Upon Termination or Change in Control,” we do not provide any severance or change of control benefits to our executive officers.  We view the limited benefits that we do provide as necessary to attract and retain executive talent in a highly competitive market and provide continuity of management in the event of an actual or contemplated change of control.

Other Benefits

SOG does not maintain a defined benefit pension plan for its executive officers because it believes such plans primarily reward longevity rather than performance.  SOG provides a basic benefits package generally to all employees, which includes a 401(k) plan and health, disability and life insurance.  SOG employees who provide services to us under the service agreement remain entitled to these benefits from SOG.

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Neither SOG nor the Company has entered into any employment agreements with any of our named executive officers.

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally limits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to certain “covered employees” unless certain exceptions are met, such as the exception for qualified performance-based compensation. Pursuant to the Tax Cuts and Jobs Act of 2017, as of January 1, 2018 the $1 million annual deduction limitation under Section 162(m) applies to compensation paid to any individual who serves as the Chief Executive Officer, Chief Financial Officer or qualifies as one of the other three most highly compensated executive officers in 2017 or any later calendar year and the exception under Code Section 162(m) for qualified performance-based compensation was eliminated.  Although we did not award performance-based compensation (within the meaning of Section 162(m) of the Code), Compensation Committee takes the potential tax deductibility of compensation into consideration under Section 162(m) of the Code into consideration, along with many other factors, when making compensation decisions.

SOG’s and our compensation policies and practices are designed to provide rewards for short-term and long-term performance, both on an individual basis and at the entity level.  In general, optimal financial and operational performance, particularly in a competitive business, requires some degree of risk-taking.  Accordingly, the use of compensation as an incentive for performance can foster the potential for management and others to take unnecessary or excessive risks to reach performance thresholds that qualify them for additional compensation.

From a risk management perspective, our policy is to conduct our commercial activities within pre-defined risk parameters that are closely monitored and are structured in a manner intended to control and minimize the potential for unwarranted risk-taking.  We also routinely monitor and measure the execution and performance of our projects and acquisitions relative to expectations.

SOG’s and our compensation arrangements and our Plan contain a number of design elements that serve to minimize the incentive for taking unwarranted risk to achieve short-term, unsustainable results.  Those elements include delaying the rewards and subjecting such rewards to forfeiture for terminations related to violations of its risk management policies and practices or of our Code of Business Conduct and Ethics.

In combination with our risk-management practices, we do not believe that risks arising from our or SOG’s compensation policies and practices for individuals providing services to us are reasonably likely to have a material adverse effect on us.

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The Compensation Committee of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis set forth above with management.  Based on this review and discussion, the Compensation Committee of our Board of Directors has approved the Compensation Discussion and Analysis for inclusion in this Proxy Statement.

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The following table shows information concerning the annual compensation for services provided to us by our named executive officers during the fiscal years ended December 31, 2017, 2016, and 2015.  All amounts included in the table below were determined by our Compensation Committee and paid by SOG, except awards of restricted, phantom, performance accelerated restricted and performance accelerated phantom stock granted under our Plan, which were granted by our Compensation Committee alone.  The amounts reported in the table below represent only amounts paid for services provided to us and do not include amounts paid by SOG to our named executive officers for services provided to other entities, including SOG.

(1)         Mr. Eduardo A. Sanchez was appointed as our President on October 1, 2015 and was no longer with the Company effective as of November 15, 2017.  The salary reported for 2015 and 2017 above reflects the base salary he was paid for services provided to us during his partial year as our President in 2015 and 2017, respectively.  Mr. Thill was appointed as our Executive Vice President and Chief Financial Officer on October 10, 2016.  The salary reported above for 2016 reflects the base salary he was actually paid for services provided to us during his partial year as our Executive Vice President and Chief Financial Officer in 2016. Mr. Patrico D. Sanchez was appointed as an Executive Vice President of the Company effective November 3, 2016 and became a named executive officer in 2017.

(2)         On February 16, 2018, our Compensation Committee awarded each of Messrs. Sanchez, Jr. and Sanchez III a cash bonus of $2,200,000, Mr. P. Sanchez a cash bonus of $1,250,000 and each of Messrs. Thill and Heinson a cash bonus of $650,000 for their work and efforts during 2017, which are reported as 2017 compensation in the table above in accordance with SEC rules.  In 2017, Mr. Thill also received one-half of a $300,000, or $150,000, sign-on bonus, which was paid in January 2017, and is included in his 2017 compensation in the table above.  The Compensation Committee did not award Mr. E. Sanchez a cash bonus for 2017.  Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez, Thill and Heinson received cash bonuses of $2,000,000, $2,000,000, $2,000,000, $1,000,000, $100,000 and $200,000, respectively, in January 2017 based on 2016 performance, which is reported at 2016 compensation in the table above in accordance with SEC rules.  Mr. Heinson also

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received a $400,000 cash bonus in December 2016 based on 2016 performance, which is also reflected in the 2016 compensation in the table above, and Mr. Thill received one-half of a $300,000, or $150,000, sign-on bonus in 2016, which is included in his 2016 compensation in the table above.  Messrs. Sanchez, Jr., Sanchez, III, and E. Sanchez received cash bonuses of $2,000,000, $1,750,000 and $500,000, respectively, in January 2016 based on 2015 performance, which are reported as 2015 compensation in the table above in accordance with SEC rules.  Mr. Heinson received a cash bonus of $300,000 in December 2015 for based upon 2015 performance.

(3)         The amounts reported in this column reflect the aggregate grant date fair value of awards granted, if any, under our Plan for fiscal years 2017, 2016, and 2015, computed in accordance with FASB ASC Topic 718, excluding estimated forfeitures.  See Note 8, “Stock-Based Compensation,” to the Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” in the Company’s 2017 10-K for additional detail regarding assumptions used to calculate these figures.  The grant date values of the performance phantom stock awards granted in 2017, assuming that the highest level of performance conditions will be achieved, were as follows: A.R. Sanchez, Jr.—$9,326,740; Antonio R. Sanchez, III—$9,326,740; Eduardo A. Sanchez—$9,326,740; Christopher D. Heinson—$3,108,926; and Patricio D. Sanchez—$3,295,663.

(4)         In fiscal 2017, “All Other Compensation” for Messrs. Sanchez, Jr., Sanchez, III and Thill consisted of the parking costs allocated to us by SOG, the aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group, 401(k) matching contribution costs and group term life insurance costs, for Messrs. E. Sanchez and P. Sanchez consisted of parking costs allocated to us by SOG, the aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group and group term life insurance costs, and for Mr. Heinson consisted of the parking costs allocated to us by SOG, 401(k) matching contribution costs and group term life insurance costs.  In fiscal 2016, “All Other Compensation” for Mr. Sanchez, III and E. Sanchez consisted of the parking costs allocated to us by SOG, the aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group and group term life insurance costs, for Mr. Sanchez, Jr. consisted of the parking costs allocated to us by SOG, the aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group, 401(k) matching contribution costs and group term life insurance, for Mr. Heinson, consisted of the parking costs allocated to us by SOG, 401(k) matching contribution costs and group term life insurance and for Mr. Thill, consisted of the parking costs allocated to us by SOG and group term life insurance.  In fiscal 2015, “All Other Compensation” for Mr. Sanchez, III consisted of the parking costs allocated to us by SOG and the aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group, for Mr. Sanchez, Jr. consisted of the 401(k) matching contribution costs, aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group, and the parking costs allocated to us by SOG, for Mr. Heinson, consisted of the 401(k) matching contribution costs and the parking costs allocated to us by SOG and for Mr. E. Sanchez, consisted of the parking costs allocated to us by SOG.  For additional information regarding the aggregate incremental cost of the personal use of aircraft owned or provided by the Company or a member of the Sanchez Group, see footnote 6 below.

(5)         Pursuant to the Company’s aircraft policy, our named executive officers and directors are permitted to use aircraft owned or provided by the Company or a member of the Sanchez Group for uses deemed by SEC rules to constitute personal usage of such aircraft.  We calculate the aggregate incremental cost of such personal usage as set forth below.

·                  For aircraft owned by the Company or a member of the Sanchez Group, we calculate the aggregate incremental cost of personal usage by multiplying the number of hours of such personal usage by the average variable operating cost per hour of the aircraft, which we derive based on the costs of fuel, maintenance, landing, parking and catering costs, certain taxes and certain other miscellaneous fees and costs.  Because our corporate aircraft are used primarily for business travel, we do not include in this figure fixed costs for such aircraft that generally do not change with use.

·                  For aircraft provided (but not owned) by the Company or a member of the Sanchez Group, we calculate the aggregate incremental cost of personal usage by calculating the percentage of the total hours the aircraft was used by Company personnel that were for personal purposes, and multiplying this ratio against the total cost of such aircraft to the Company or such member of the Sanchez Group.

·                  For trips that involve mixed personal and business usage, we determine the aggregate incremental cost attributable to personal use by subtracting the aggregate incremental cost of a “business-only” trip from the total aggregate incremental cost of the whole trip (both personal and business).

In 2017, we incurred aggregate incremental costs of $27,020, $185,963, $77,490, $20,300 and $79,366 for personal use of aircraft owned or provided by the Company or a member of the Sanchez Group by Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez and Thill, respectively.

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The following table sets forth certain information with respect to stock awards granted under our Plan to our named executive officers in 2017.

(1)         Represents the number of restricted, phantom stock and performance phantom stock awards granted to our named executive officers under the Plan during 2017.  With respect to the performance phantom stock awards, at the conclusion of the five-year period commencing January 1, 2017 and ending December 31, 2021, payouts can range from 0% to 200% of the target number of performance phantom shares based on the Performance Conditions, subject to the officer’s continuous service with us through each vesting date. With respect to the performance period beginning on January 1, 2017 and ending on December 31, 2017, which is the first measurement period, in February 2018, the Compensation Committee determined that the threshold level of the Performance Conditions was not met and as a result no payments were made under the performance phantom stock awards for that measurement period.

(2)         Reflects the aggregate grant date fair value of the restricted, phantom stock and performance phantom stock awards granted under the Plan, calculated in accordance with FASB ASC Topic 718.  For the performance phantom stock awards which are subject to performance-based conditions as described in the footnote below, the amounts shown in the “Target” column reflect satisfaction of the Performance Conditions such that 100% of the target shares are awarded, the amounts shown in the “Threshold” column represent the minimum amount, if any, payable for a certain level of performance under the Performance Conditions, and the amounts shown in the “Maximum” column refers to the maximum payout possible for a certain level of performance under the Performance Conditions.  For additional information about assumptions made in the valuation of these awards, see Note 8, “Stock-Based Compensation,” of the Notes to Consolidated Financial Statements included under “Item 8. Financial Statements and Supplementary Data” in the 2017 10-K.

(3)         Represents the number of restricted stock awards vesting in equal annual increments over a three-year period.

(4)         Represents the number of restricted stock awards vesting in equal annual increments over a five-year period.

(5)         Represents the number of phantom stock awards vesting in equal annual increments over a three-year period.

(6)         Represents the number of phantom stock awards vesting in equal annual increments over a five-year period.

(7)         Represents the number of performance phantom stock awards payable in common stock with vesting in equal increments over a five-year period, subject to satisfaction of specified Performance Conditions (as defined below).

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(8)         In connection with Mr. E. Sanchez’s departure from the Company, the vesting of all 245,234 shares of restricted and 245,234 shares of phantom stock granted to him March 1, 2017 were accelerated to November 15, 2017.  In addition, Mr. E. Sanchez retained his 245,234 target shares of performance phantom stock granted on March 1, 2017 and is eligible for pro-rata vesting in accordance with the terms unrelated to employment set forth therein and described below under “Potential Payments Upon Termination or a Change in Control.”

2017 Grants

In 2017, we granted Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez, Thill and Heinson 245,234, 245,234, 245,234, 86,655, 100,000 and 81,745, respectively, shares of both restricted and phantom stock, which vest in equal installments over five years for each of Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez and Heinson and in equal installments over three years for Mr. Thill.

In addition, in 2017, we granted Messrs. Sanchez, Jr., Sanchez, III, E. Sanchez, P. Sanchez and Heinson 245,234, 245,234, 245,234, 86,655 and 81,745 shares of performance phantom stock, respectively.  These performance phantom awards are payable in shares of our common stock.  The performance phantom shares will vest (if any) in equal annual increments over a five-year period ranging from 0% to 200% of the target phantom shares granted based on the Performance Conditions, subject to the officer’s continuous service with us through each vesting date.

Recipients of shares of restricted stock have all the rights of a stockholder in us, including the right to receive dividends thereon if and when distributions are made by us to our stockholders.  Recipients of our other awards do not have voting rights.

Pursuant to our award agreements, during the vesting period, our awards are subject to restrictions on transferability and forfeiture.  Our awards subject to vesting generally vest on a pro-rata basis on each remaining vesting date subject to acceleration upon the occurrence of any of the following events: a Qualifying Termination, Constructive Termination, or the officer’s death or Disability (each as defined below), provided that upon the occurrence of any of such events, performance phantom stock awards will vest on a pro-rata basis on each remaining vesting date, subject to the satisfaction of the Performance Conditions.  Except as described in the preceding sentence, upon any termination for any or no reason, including but not limited to voluntary resignation or termination by the Company with or without cause, before all of the awarded shares become vested, all unvested awarded shares will be forfeited.

With respect to any named executive officer, other than with respect to the performance accelerated restricted stock and phantom stock awards described under “— 2016 Grants,” shares of restricted and phantom stock vest in substantially equal installments and the forfeiture restrictions will lapse on the first, second and third anniversaries of the date of grant or the first, second, third, fourth and fifth anniversaries of the date of grant, depending upon the terms of the applicable award, so long as the award recipient remains in our continuous service (subject, in the case of the performance phantom stock, to satisfaction of the Performance Conditions).  For the 2017 performance period applicable to our phantom performance awards granted in March 2017, 0% of the target shares will be awarded in 2018.

Please see the section titled “Potential Payments Upon Termination or Change in Control” for a more detailed description of the events that could result in a modification to the regular vesting schedules for our Plan awards, as well as a summary of the treatment of Mr. E Sanchez’s Plan awards in connection with his departure from the Company effective November 15, 2017.

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2016 Grants

In January 2016, we granted Mr. Heinson 100,000 shares of restricted stock.  In February 2016, we granted Messrs. Sanchez, III, Sanchez, Jr. and E. Sanchez 403,095, 537,460 and 376,222 shares of restricted and 403,095, 537,460 and 376,221 of phantom stock, respectively.  In April 2016, we granted Mr. P. Sanchez 100,000 shares of restricted and 100,000 shares of phantom stock, and Mr. Heinson an additional 100,000 shares of restricted and 200,000 shares of phantom stock.  In connection with Mr. Thill’s appointment as Executive Vice President and Chief Financial Officer in October 2016, we granted him 175,000 shares of restricted and 175,000 shares of phantom stock.

The restricted and phantom shares vest with respect to 33.33% of the number of restricted and phantom shares granted on each of the first three anniversaries of the date of grant (in each case, subject to certain forfeiture conditions and the vesting conditions described above).

Additionally, in February 2016, we granted Messrs. Sanchez, III, Sanchez, Jr. and E. Sanchez 207,654, 276,872 and 193,811 shares of performance accelerated restricted and 207,654, 276,872 and 193,811 shares of performance accelerated phantom stock, respectively.  In April 2016, we granted Messrs. Heinson and P. Sanchez 100,000 and 100,000 shares of performance accelerated restricted and 100,000 and 100,000 shares of performance accelerated phantom stock, respectively.

The performance accelerated restricted and performance accelerated phantom stock are payable in cash, which cliff vest in five years or earlier if the common stock closing price equals or exceeds certain benchmarks.

Because the adjusted closing price of our common stock for each day in a fifteen-day trading period equaled or exceeded an amount equal to 200% of the adjusted closing price of our stock on February 18, 2016, the performance accelerated restricted and performance accelerated phantom stock awards granted to Messrs. Sanchez, Jr., Sanchez, III and E. Sanchez vested on February 18, 2017.  Because the adjusted closing price of our common stock for each day in a fifteen-day trading period equal or exceed an amount equal to 150% of the adjusted closing price of our common stock on April 15, 2016, 50% of the performance accelerated phantom stock awards granted to Messrs. Heinson and P. Sanchez vested on the first anniversary of the grant date, April 15, 2017.  If the adjusted closing price of our common stock for each day in a fifteen-day trading period equals or exceeds an amount equal to 200% of the adjusted closing price of our common stock on April 15, 2016, the remainder of the performance accelerated phantom stock awards granted to Messrs. Heinson and P. Sanchez will vest on such date, to the extent unvested as of such date.

Please see the section titled “Potential Payments Upon Termination or Change in Control” for a more detailed description of the events that could result in a modification to the regular vesting schedules for our Plan awards, as well as a summary of the treatment of Mr. E Sanchez’s Plan awards in connection with his departure from the Company effective November 15, 2017.

The following table sets forth information concerning outstanding equity awards held by each of our named executive officers as of December 31, 2017.

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