The collapse in crude prices this year has sent activity among U.S. oil and gas producers tumbling and left more than 100,000 workers out of a job.As their companies approach bankruptcy, executives at failing oil and gas producers have awarded themselves tens of millions of dollars in bonuses. And even in an industry that is no stranger to excess, investors have had enough.
California Resources, also on the brink, tweaked its compensation structure in March so that its chief executive would get a severance package worth double his salary and bonus if he is sacked without cause. He earned US$10.5 million last year.Oil companies are not the only ones paying out hefty bonuses to executives as they approach bankruptcy: JCPenney and Hertz have done likewise.
Chief executives at large independent producers earned 138 per cent of their target bonus pay over the past three years — suggesting they outperformed their agreed goals — according to research by Evercore. Yet over that period total returns to shareholders fell 55 per cent. Brad Holly, chief executive of Denver-based Whiting, received a bonus of US$6.4 million as the company filed for bankruptcy — US$1 million more than he got one year earlier. The company’s share price had collapsed 97 per cent in the intervening period.
The excesses of the industry have waned since the boom days, when former Chesapeake chief Aubrey McClendon took home more than US$100 million in 2008. He was later indicted by the Department of Justice for rigging auctions for land rights. “I think the returns have been so weak for so long that boards are finally looking at this and saying ‘OK, we have to change the way we look at things’,” said Rob Thummel, senior portfolio manager at Tortoise Capital in Kansas City, which manages US$11 billion in energy-related assets.
Shocking absolutely no one.
Kinda like the government dept. in Canada whose in charge of the Phoenix pay system. It doesn’t work but hell everybody gets a bonus and no one is responsible!