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Latest trends in compensation practices at the top U.S. oil and gas E&P companies

Brian Cumberland 25 Jan 2018

Alvarez & Marsal’s Compensation and Benefits Practice recently released its 2018 study on compensation practices in the oil and gas exploration and production (E&P) industry. The study analyses the total value of CEO and CFO compensation packages, annual and long-term incentive pay practices, and the prevalence and value of change in control benefits to which these executives are entitled. Additionally, given the volatility in the commodity markets, Alvarez and Marsal, Taxand USA, addresses compensation arrangements at distressed E&P companies.

Total Direct Compensation

• On average, incentive compensation — including annual and long-term incentives (LTIs) — makes up 85 percent of a CEO’s and 82 percent of a CFO’s total compensation package
• Total compensation for CEOs increased 18 percent over the previous year, while total compensation for CFOs increased 30 percent

Annual and Long-Term Incentive Compensation

• With the volatility in the energy sector, we have seen a notable increase in the use of cost control and safety metrics in annual incentive plans, while the use of growth metrics such as production and reserves has decreased
• The prevalence of long-term incentive awards varies by company size, but time-vesting restricted stock/restricted stock units are the most common form of award granted (used by 86 percent of all companies)

Discover more: Latest trends in compensation practices at the top U.S. oil and gas E&P companies

Taxand's Take

Incentive-based compensation makes up a significant portion of an executive’s total compensation package. Therefore, to remain competitive, it is important for compensation committees to analyse how other companies in the industry are structuring their programs.

Article tags

Compensation Tax | Energy Tax | USA