Alvarez & Marsal’s Compensation and Benefits Practice recently released its 2020/2021 study on compensation practices in the oil and gas exploration & production (E&P) industry. Our study analyzed the total value of CEO, CFO, and Board of Director compensation packages, annual and long-term incentive pay practices, CEO pay ratios, and the prevalence and value of change in control benefits to which these executives are entitled. We also address compensation arrangements at distressed E&P companies, as well as compensation arrangements during times of recovery. Below are key takeaways from our research. The full report can be downloaded here.
COVID-19 and Russia-Saudi Arabia Oil Price War
- As a result of plummeting oil prices caused by the COVID-19 pandemic and the Russia-Saudi Arabia oil price war, many exploration & production companies have announced changes to their 2020 executive compensation programs.
- Through the first two quarters of 2020, 44% of the companies in the study have announced a reduction in executive compensation. Many of these reductions though are temporary and apply only to base salary.
- In terms of announced base salary reductions, 39% of companies have disclosed an equal reduction across the board for all executives while 61% disclosed a greater percent reduction for the CEO.
Total Direct Compensation
- On average, incentive compensation — including annual and long-term incentives (LTI) — comprises approximately 81% of a CEO’s and 78% of a CFO’s total compensation package.
- While it remains unclear what constitutes a “good” CEO pay ratio, the data indicates that a ratio of 50x–200x is most prevalent…