Oil CEOs Still Paid for Growth Despite Crude Glut, Moody's Says



Oil CEOs Still Paid for Growth Despite Crude Glut, Moody's Says
US crude supplies remain at the highest seasonal level in at least a decade, but drillers are still rewarding their top brass when they add to the glut.

(Bloomberg) - U.S. crude supplies remain at the highest seasonal level in at least a decade, but drillers are still rewarding their top brass when they add to the glut.

Boosting production and reserves accounts for nearly a quarter of bonuses awarded to senior executives at North American exploration and production companies, Moody’s Investors Service said in a research report published Thursday. At some companies, executives’ share of bonuses tied to exceeding output targets is 40 percent or more.

That may explain why output has remained stubbornly high despite a global oversupply.

"They’re finding it difficult to change course," said Christian Plath, a Moody’s vice president and corporate governance specialist. "It’s like a supertanker going full speed. Making a quick course correction is hard to do."

Production and reserves targets accounted for more than 23 percent of executives’ bonuses in 2015, according to a Moody’s analysis of 15 companies. Credit-enhancing metrics - like cash flow and return on capital - usually make up the smallest portion of energy executives’ bonuses, Moody’s said.

To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Anne Riley, Carlos Caminada



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.