Struggling driller offers 5 officers bonuses to stay

As oil companies scrap cash bonuses and raises amid a brutal downturn with no end in sight, one offshore drilling company is offering extra pay for some key employees it hopes to keep during difficult times.

Houston-based offshore driller Paragon Offshore has agreed to provide five executive officers one-time cash payments equal to their annual base salaries under a retention program approved by the company’s compensation committee, according to the company’s latest filings with the Securities and Exchange Commission.

“The board and management are focused on retaining the key individuals who are able to deliver what the customer needs,” said Lee Ahlstrom, senior vice president of investor relations.

“Obviously to lose that ability would be a significant problem for the

company. This program is designed to get them to stay while we work on the balance sheet, and stay after that to give continuity.”

Those slated to receive the cash bonuses are Ahlstrom; Randy Stilley, Paragon’s chief executive; Steven Manz, senior vice president and chief financial officer; Andrew Tietz, senior vice president of marketing and contracts; and William Yester, senior vice president of operations.

Others to be rewarded

Other employees considered critical to Paragon’s operations also have been offered retention bonuses, Ahlstrom said, but the company did not reveal how many employees will receive the rewards or how much they will get.

“This reaches down into the organization,” he said.

To receive the full payment, employees have to stay at least a year and remain with the company should it decide to seek bankruptcy protection or some other restructuring agreement, according to the terms of the retention plan agreements.

Greater efficiency

Ahlstrom said those provisions don’t imply that the company plans to seek Chapter 11 protection or any other financial reorganization.

He said that Paragon continues to look at all options to improve its balance sheet and position the company to exit the oil price downturn stronger.

“We are absolutely focused on cutting costs and streamlining operations and becoming more efficient,” he said.

2,600 employees

At the end of last year, more than 2,600 people worked for Paragon, of whom more than threequarters were offshore, according to the company’s year-end filings with the SEC.

Some of its workers have been terminated as Paragon took some rigs out of service amid a lingering downturn that has diminished demand for offshore drilling, but the company has not provided updated employee numbers.

Across the globe, Paragon has stacked 12 rigs out of its fleet of 39. It previously announced plans to scrap another two.

Offshore drillers have been hammered as plunging crude prices struck an industry already struggling with an oversupply of equipment and declining rig rental rates.

Older rigs

Paragon’s stock has fallen from more than $5 per share a year ago to 23 cents on Friday.

Moody’s Investors Services in April singled out Paragon and another Houston offshore driller, Hercules Offshore, as two companies most likely to see the sharpest decline in earnings as contracts expire for their fleet of older-generation jackup rigs.

Paragon is slated to discuss its third-quarter performance with investors on Monday.