CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS We did not hold an annual meeting in 2017 as we were not listed on a public exchange upon emergence from the Chapter 11 Proceeding. However, our 2016 executive compensation program was subject to significant scrutiny in the Chapter 11 Proceeding and approved by the interested parties. Additionally, substantially all of the Company’s stockholders upon emergence, as well as other interested parties (including former stockholders and the unsecured creditors committee) and the bankruptcy court, approved the executive compensation arrangements and employment agreements in effect for our Named Executive Officers at emergence as part of the Restructuring Plan. Notably, the executive compensation arrangements and employment agreements were directly negotiated with, and supported by, approximately 44% of our stockholders immediately prior to emergence, then representing the steering committee of lenders in the Chapter 11 Proceeding. Although the Compensation Committee interpreted this level of support as an endorsement of the executive compensation program by our stockholders, the Compensation Committee ultimately determined that modifications were warranted to ensure that our executive compensation program achieved desired goals, aligned our executives’ interest with that of our stockholders and reflected current market practices and prevailing governance standards. Under the terms of the Restructuring Plan, 10% of the equity of our reorganized company was reserved for an omnibus management incentive plan to provide for the issuance of equity to our employees at the discretion of the Board. On January 12, 2017, the Board adopted the C&J Energy Services, Inc. 2017 Management Incentive Plan (the “MIP”), effective as of January 6, 2017, which provided that a maximum of 8,046,021 shares of our common stock may be issued or transferred pursuant to multiple types of equity awards. Persons eligible to receive awards under the MIP include our non-employee directors and our employees. Upon emergence from the Chapter 11 Proceeding, due to the terms of the Restructuring Plan, none of our employees owned any shares of the Company’s common stock. It is against this backdrop, that the Compensation Committee made decisions and designed our 2017 executive compensation program. In this effort, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) to act as its independent, third-party compensation consultant, to ensure that our 2017 executive compensation program was in line with industry practices and a relevant peer group, incorporated prevailing governance standards, and provided a balanced mix of performance-based compensation to maintain alignment with short- and long- term objectives. Among other consulting services and information provided, Pearl Meyer advised the Compensation Committee on designing a special, one-time long-term incentive equity award (the “Emergence Grant”) associated with C&J’s successful emergence from the Chapter 11 Proceeding, as well as a special, one-time short-term incentive cash bonus award (“IPO Incentive Award”) associated with C&J’s successful, timely completion of an underwritten public offering of common stock and re-listing on the NYSE (the “re-IPO”): • In February 2017, the Emergence Grants were approved and granted to key team members. The Compensation Committee concluded that the Emergence Grants were critical to building stock ownership and aligning the interests of our people with the long-term interests of our stockholders, as well as for retention purposes. See “—Components of our 2017 Executive Compensation Program—Special Long-Term Incentive Award—Successful Emergence from Chapter 11 Proceeding” for more information. • In May 2017, certain key contributors earned the IPO Incentive Award for timely and successfully completing our re-IPO, which established capital markets access and created additional financial flexibility for the Company. See “—Components of our 2017 Executive Compensation Program—Special Short-Term Incentive Award—Successful Execution of Re-IPO” for more information. In 2017, we accomplished a number of strategic and corporate objectives, while managing the business to respond to rapidly improving market conditions. Among other initiatives, we sharpened our focus and concentrated our resources on businesses that complement our core competencies and represent our most profitable opportunities. For example, we accelerated the growth of our cementing business with the acquisition of O-Tex Pumping, in the fourth quarter of 2017. This transaction immediately transformed C&J into one of the leading cementing service providers in the United States and significantly strengthened our well construction & intervention services platform. Working with Pearl Meyer as well as with the executive team, the Compensation Committee focused on establishing the link between pay and performance. We designed and implemented C&J’s first performance-based short-term incentive plan, or “STIP”, for annual cash bonuses as part of our 2017 compensation program (See “—Components of our 2017 Executive Compensation Program—Annual Short-Term Incentive Award-Cash Bonus” for more information). The performance goals set by the Compensation Committee incentivized our senior management team and other participating employees to drive solid financial and operational results for 2017: • We delivered four consecutive quarters of double-digit revenue growth, achieving full year 2017 revenue of $1.6 billion, an increase of approximately 69% compared to full year 2016. • We improved profitability throughout the year, with full year 2017 net income of $22.5 million increasing by approximately $966.7 million over full year 2016. • We ended the year with a cash balance of $113.9 million and no borrowings drawn on our credit facility, which had borrowing capacity of $178.4 million, resulting in approximately $292.3 million of total liquidity. 28 C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT