# Dear Shareholder

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/LSE_GKP.L_2019/LSE_GKP.L_2019.mmd` · pages 85-91_

---

Dear Shareholder

On behalf of the Remuneration Committee, I am pleased to present the Directors' remuneration report for the year ended 31 December 2019 following my appointment as Chair in October 2019. The report summarises our Remuneration Policy, explains how it has been implemented during the reporting period and clearly demonstrates our continued focus on aligning reward with GKP's corporate strategy, values and stakeholder expectations.

The work of the Remuneration Committee during 2019 was conducted against a backdrop of organisational and operational changes in the business. It was a pivotal year for GKP as we saw a material upsurge in operational activity, with considerable investment to ensure delivery on our strategy and the achievement of 55,000 bopd in 2020. However, the COVID-19 pandemic along with macro-economic uncertainties have had a significant impact on our expansion plans, which have now been suspended until conditions improve. We are closely monitoring the situation and have taken steps to ensure the long-term viability and financial strength of our business. We have secured ongoing production operations and are actively reducing the cost structure of the business. During 2019, the Remuneration Committee supported the Company's objectives by setting challenging targets for the annual bonus scheme. This was balanced against the need to ensure the right policies and practices were in place to attract, retain and motivate all employees.

For the last five years, no salary increases have been awarded to the Executive Directors and their maximum bonus potential was reduced by a significant amount in 2017. In light of the current business context, the Remuneration Committee decided to cancel a planned increase to the salary of the CEO for 2020.

The Remuneration Committee also reviewed the pension contributions offered to Executive Directors and other executives, recognising the need to reduce their pension contributions to that of the UK workforce. With this in mind, the Remuneration Committee has decided to reduce pension contributions for the CEO and other executives from 15% of salary to 10% of salary (the opportunity offered to its UK workforce) over the next two years. This means, effective from 2021, the pension contribution for the CEO will be 12.5% of salary and will reduce to 10% of salary in 2022. The pension contribution for any executives hired from June 2019 will also be 10% of salary (as is the case for our new CFO, Ian Weatherdon).
At the June 2019 AGM, we submitted a new Remuneration Policy for approval, where it was updated to reflect evolving practice. We are pleased that over 98% of our shareholders approved the new Remuneration Policy and over 95% approved the Directors' remuneration report. Since the implementation of the approved Remuneration Policy, we have identified a number of updates in the Remuneration Policy to more closely align it with market practice, which are as follows:

• include the ability to deliver additional shares or equivalents to cover dividends declared during the vesting period for deferred bonus and LTIP awards in line with market practice. We would like to apply this for any awards made from 2020. Please note that no change is being proposed to the existing Value Creation Plan ("VCP") awards (where special dividends are already payable upon exercise). Additional commentary has also been provided on the Committee's disclosures allowed within the LTIP to provide further clarity to shareholders;

• increase the maximum bonus opportunity for Executive Directors other than the CEO to 125% of salary from 100% of salary. This is to align the opportunity of the CFO to the CEO and to competitive practice; and

• align pension contributions of Executive Directors with the wider UK workforce by 2022.

The Remuneration Committee notes the emerging best practice for the inclusion of a post-exit shareholding requirement for Executive Directors and we will review this next year.

We will be submitting these updates to the Remuneration Policy for shareholder approval at the upcoming AGM.

<--- Page Split --->

# Remuneration Committee report continued

## Part one:
Annual Statement from
the Chair of the Committee
continued

## 2019 Board changes

In November 2019, we were pleased to announce the appointment of Ian Weatherdon as the new CFO of GKP. Mr Weatherdon formally joined the Board on 13 January 2020. He joined on a salary of £364,000 with a pension contribution of 10% of salary, which is aligned to GKP's UK workforce. He will receive a 2020 bonus (pro-rated for time in role during 2020) and a grant under the 2014 LTIP in line with the Remuneration Policy. Further details of his package can be found on pages 88 to 93 of the Directors' remuneration report.

Sami Zouari, the former CFO, left the Company in December 2019. As announced at the time, due to contractual requirements, Sami will continue to participate in the VCP, subject to performance, as if he remained an employee. He did not receive any additional compensation apart from his 2019 bonus, pro-rated to his leaving date.

## Performance and implementation of the Remuneration Policy in 2019
Annual bonus

Based on the Remuneration Committee's assessment of GKP and individual performance in 2019, the bonus awarded to the CEO was 62.5% of base salary out of a maximum potential of 125% and the former CFO was awarded 50% of his pro-rated base salary out of a maximum potential of 100%. This includes discretion being applied by the Remuneration Committee to allow 2.48% of the total bonus opportunity under the commercial element. The Remuneration Committee concluded this was appropriate due to the major changes to scope which resulted in a number of the targets becoming unattainable. Additionally, the discretionary benefit included recognition for the introduction of the dividend, special dividend and the buyback schemes during 2019, which were all milestone events for GKP. 30% of the bonus award for the CEO will be deferred for three years and will be awarded as nil-cost options. Further details of the way in which these awards were determined are set out on page 97 of the Directors' remuneration report.

## Long-term incentives

The CEO and former CFO both participate in the VCP, for which they received an award in December 2016. Following the first two measurement dates in May 2018 and April 2019, a total of 3,769,595 and 3,247,656 nil-cost options were granted respectively (2,087,756 and 1,565,817 respectively due to the total shareholder return ("TSR") outcome of 117% on the second April 2019 measurement date from December 2016). No further nil-cost options can be accrued under the VCP as the cap was met at the second measurement date. The first vesting date for these nil-cost options will be 30 days after the release of the 2019 financial results, in May 2020, with vesting dependent on TSR performance. The CEO is not entitled to receive an award under another LTIP until the VCP has ended in 2022. The new CFO is not entitled to participate in the VCP.

## Instances of the exercise of discretion by the Remuneration Committee

Other than the small adjustment to bonus outcomes described above, no other discretion was exercised by the Remuneration Committee outside the normal Remuneration Policy guidelines.

## Remuneration across the workforce

GKP places great importance on, and fosters, an inclusive culture that is reflected in our Remuneration Policy across the workforce. Base salaries are benchmarked on a regular basis and targeted at median. All eligible employees participate in the annual bonus plan which is linked to both corporate and individual targets, with corporate targets the same for all who participate. In addition, all permanent employees received an award in 2019 under the 2014 LTIP which aligns their interests with the long-term success of GKP and to the rewards available to Executive Directors. There is no formal workforce engagement scheme in place. However, the Board will keep this under review taking into account GKP's size and legal and regulatory requirements in our locations.

## Summary of remuneration for Executive Directors in 2020

In light of the current business context, the Remuneration Committee decided to cancel a planned increase to the salary of the CEO for 2020. The salary review budget for all other employees, including senior managers, was 5% of payroll for 2020.
Under normal circumstances, both the CEO and CFO would be eligible for a 2020 bonus. However, the unprecedented impact of COVID-19 combined with recent oil price uncertainty means that the Company will need to review the KPIs and performance targets during the year and take account of how business priorities evolve before awarding a bonus. Full details will be published in the 2020 Directors' remuneration report. It is unlikely that a bonus will be paid for Executive Directors in 2020 based on the current climate; however, this will be reviewed later in the year based on the performance actually delivered, the treatment of the wider workforce and the business outlook at that time. The 2020 bonus measures would normally incorporate targets on value creation, licence to operate (including ESG measures), commercial, financial and operational achievements. Further information is set out on page 97 of the Directors' remuneration report.

The new CFO is entitled to participate in the LTIP where performance-based shares are granted up to a maximum of 150% of salary. The 2020 LTIP award for the CFO will vest based on absolute and relative TSR performance conditions, further information of which is set out on page 96 of the Directors' remuneration report. Given the volatility of the Company's share price, the Committee has the discretion to review vesting outcomes to ensure a fair reflection of performance.

## Basis of preparation of the report

As GKP is not incorporated in the UK, it is not subject to UK company law or the UK Corporate Governance Code. However, the Company's Byelaws require it to comply with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the "2013 Regulations"). The Directors' remuneration report has been prepared in accordance with such 2013 Regulations.

As a responsible corporate citizen, GKP is committed to following best practice, maintaining high corporate governance standards and the principles enshrined in the UK Corporate Governance Code (the "Code") which are taken into account to the extent they are considered appropriate for the Company. As GKP only has 24 employees in the UK, not all elements of the Code or certain 2018 changes to the 2013 Regulations, including the CEO pay ratio, are applicable.

<--- Page Split --->

## Shareholder consultation and 2020 AGM

Three remuneration-related resolutions will be proposed at the 2020 AGM. As I have referred to, our revised Remuneration Policy, described on pages 82 to 100, will be the subject of a binding vote. In addition, our Directors' remuneration report (pages 94 to 100) will be the subject of an advisory vote, in accordance with the 2013 Regulations.

The Remuneration Committee ensures that, in carrying out its obligations, it takes account of the views and opinions of all its stakeholders. Earlier this year, I wrote to our largest shareholders, advising them of the upcoming proposed amendments to the Remuneration Policy and inviting them to discuss their views more generally with respect to remuneration. The Committee believes that the Remuneration Policy has been appropriately set to attract, motivate and retain exemplary employees across the Company. I would like to take this opportunity to commend and thank Jón for his leadership, dedication and stewardship of the Company during these challenging times and all other employees at GKP for their hard work and commitment, all of which continue to contribute to the success of GKP.
Finally, on the behalf of the Remuneration Committee, I would like to thank shareholders for their continued support and very much hope that you will vote in favour of the resolutions contained within the report at the AGM on 19 June 2020.

Yours sincerely

## Kimberley Wood

Chair of the Remuneration Committee

22 April 2020