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Some US energy chiefs make more cash amid oil turmoil

March 24
8:21 AM 2016

Not everyone in the oil industry is suffering from price drop. But, there are few bosses at energy companies benefiting from the ongoing turbulent phase. Top performers at struggling energy companies are receiving more cash and bigger share awards. 

Some energy companies are setting performance targets for their top managers and awarding them with cash incentives. Prolonged oil price slump is keeping stocks of several energy companies at lowest levels in five years. Drop in share price, oil prices and oversupply situation are eroding paychecks for many as well.

Reuters reports that lowering targets by some energy companies has become easier for top managers to achieve the goals. For instance, oilfield services company Schlumberger NV has lowered target for second half of 2015. This helped CEO Paal Kibsgaard to get total pay of $18.3 million. This is marginally lower than paycheck of 2014 for him. During 2015, share price fell 18 percent. 

Another energy company that suffered severely from share price drop was Linn Energy. Its stock price tumbled 87 percent in 2015 as the company's debt is increasing. Linn Energy is suffering from lack of financing options. The company has announced cash incentives to its top managers instead of stock options.  

Energy analysts feel that frequent changes in incentives can undercut the correlation between pay and performance. Anne Simpson said that it planned to take a hard look at pay adjustments. Anne Simpson manages corporate governance at $279.5-billion California Public Employees' Retirement System. She believes that performance is not a one way bet. Several energy companies are changing their payout plans for top managers, while laying off workers and slashing costs, as reported by Yahoo Finance

Several oil and gas companies prefer to offer a new incentive plan with more cash rather than shares. Dallas-based Exco Resources Inc, an oil and energy company, has decided to offer restricted stock worth $140,000 per annum to its directors. This is 10 times of the value of shares awarded in 2014. Exco's stock fell 43 percent in 2015. 

Schlumberger has alone laid-off 34,000 people since November 2014. This is equal to one-fourth of total headcount at Schlumberger. However, majority of energy companies paid less in 2015 owing to oil price drop, sluggish demand and pressure on share price. Crude oil price fell over 60 percent since Mid-2014. However, some senior executives at few energy companies received hefty paychecks during the past 18 months, according to Fortune.

Another company Halcon Resources Corp said in its filing to exchange that its CEO Floyd Wilson got $3 million and three other top executives received $800,000 each in exchange for an agreement to stick for at least one year. Floyd Wilson has been successful in launching and selling off oil companies. Halcon has appointed financial and legal advisors to get through the downturn phase.

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