Survey Reveals Midstream Companies Focusing on Retention Efforts
Despite the industry’s downturn, U.S. midstream companies are still able to offer salary increases and focus efforts on retaining their employees, according to data compiled from Houston-based consulting firm Longnecker & Associates.
Longnecker’s third annual Midstream Industry Compensation Survey delved into employee compensation trends across core midstream competencies.
One thing that stood out was that two-thirds of respondents (67 percent) use discretionary judgement of performance to determine executives’ bonus pay, Josh Whittaker, senior consultant for Longnecker, told Rigzone.
“The ability for companies to do a subjective assessment of performance of executives is important, rather than just simply relying on a formula 100 percent of the time,” said Whittaker. “Whether you’re looking at performance from a formula perspective or using your own discretion, it’s still performance at the end of the day … probably more than 75 percent of companies are using some sort of performance criteria to determine what the actual bonus payout will be.”
The survey also found that while most E&P (exploration and production) and service companies are holding base salaries flat, many midstream companies are using their cash availability to help with employee retention.
“We’re still seeing a lot of companies projecting salary increases for executives and other employees,” Kevin Kuschel, managing partner for Longnecker, told Rigzone. “Midstream companies have a little more cash availability, so they’re trying to make sure they’re retaining their people, keeping them motivated and keeping them in the industry. To do that right now, they’re really making a distinction compared to the rest of the industry by making base salary increases.”
Kuschel did note that retention award prevalence in the midstream space dropped from last year. However, in today’s market, the survey shows that 74 percent of companies are now paying out distributions on unvested equity, which gives a bit more liquidity to recipients – another good retention tool.
“We’re seeing equity pool constraints to some degree at some of these companies, meaning they may not have enough shares in their pool right now to deliver the same equity award as they have in the past,” Kuschel said. “There’s been a little bit of grant value at most of these companies. While they’re attempting to conserve their share pool, they understand that the equity they do deliver has greater upside potential because they’re delivering these at a lower stock price than what it usually is in a normalized market.”
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