In oil rout, some US en­ergy bosses spared pain

The Pak Banker - - MARKETS/SPORTS -

More cash, lower tar­gets and big­ger share awards - not all U.S. en­ergy bosses are feel­ing the full im­pact of tum­bling oil prices in their pay­checks. Some oil and gas com­pa­nies are mak­ing it eas­ier for their top man­agers to meet per­for­mance goals or are of­fer­ing more cash as a pro­longed oil slump keeps share prices at lows not seen in five years, fil­ings show.

Among the ben­e­fi­cia­ries are bosses of both solid per­form­ers and strug­gling com­pa­nies, and the changes may ran­kle in­vestors fac­ing losses.

Oil­field ser­vices com­pany Sch­lum­berger NV, for ex­am­ple, used lower earn­ings tar­gets for the se­cond half of 2015, which helped its CEO Paal Kib­s­gaard re­ceive to­tal pay of $18.3 mil­lion, only slightly below the 2014 level. The com­pany's shares fell 18 per­cent last year, about half the de­cline of its in­dex and have since re­cov­ered about 7 per­cent.

Linn En­ergy , mean­while, whose shares nose­dived 87 per­cent last year un­der the weight of its swelling debt and dwin­dling fi­nanc­ing op­tions, an­nounced a new in­cen­tive plan last month for its top ex­ec­u­tives that fo­cuses more on cash rather than stock. Dal­las-based oil and gas ex­plo­ration com­pany Exco Re­sources Inc will of­fer its di­rec­tors re­stricted stock worth $140,000 a year - about 10 times the value of shares awarded in 2014, ac­cord­ing to se­cu­ri­ties fil­ings, even though its shares fell 43 per­cent last year. In an­other ex­am­ple, Hal­con Re­sources Corp - built by its CEO Floyd Wil­son, who has made a for­tune launch­ing and sell­ing off oil com­pa­nies - dis­closed in a se­cu­ri­ties fil­ing last week that Wil­son re­ceived $3 mil­lion and three other top ex­ec­u­tives $800,000 each in ex­change for an agree­ment to stay for at least an­other year.

A rep­re­sen­ta­tive for Hal­con, which has hired fi­nan­cial and le­gal ad­vi­sors to nav­i­gate the down­turn, did not re­turn mes­sages.

Sch­lum­berger de­clined to com­ment be­yond its re­cent proxy state­ment. An Exco rep­re­sen­ta­tive said the new plan makes its di­rec­tor pay more com­pet­i­tive and aligns their com­pen­sa­tion with per­for­mance of the com­pany.

A rep­re­sen­ta­tive for Linn En­ergy told Reuters in Fe­bru­ary the com­pen­sa­tion changes were de­signed to en­sure man­age­ment stayed on to se­cure the com­pany's fu­ture. The com­pany did not re­spond to re­quests for fur­ther com­ment. Of­fer­ing ex­ec­u­tives fi­nan­cial in­cen­tives to stay through up­heaval, be it a merger or re­struc­tur­ing, is a com­mon prac­tice.

But what­ever the mer­its, fre­quent changes in in­cen­tives "can ab­so­lutely un­der­cut the re­la­tion­ship be­tween pay and per­for­mance," said Ken Bertsch, head of the Coun­cil of In­sti­tu­tional In­vestors, whose mem­bers in­clude big pen­sion funds and as­set man­agers. Anne Simp­son, who over­sees cor­po­rate gov­er­nance at the $279.5 bil­lion Cal­i­for­nia Pub­lic Em­ploy­ees' Re­tire­ment Sys­tem, told Reuters that it planned to take a hard look at pay ad­just­ments in com­ing months when proxy votes are due.

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