Energy Insights

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Relative TSR Still Delivers Real Pay-for-Performance Alignment in the Oil & Gas Industry

Among the ten largest Oil & Gas production companies that have reported 2017-2018 compensation actions, each has either implemented or enhanced a financial returns metric for 2018 incentive compensation.

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The menu of industry annual incentive metrics (and some long-term incentive metrics) now includes several instances of ROCE, Cash ROCE, ROIC, estimated wellhead returns, and other non-GAAP measures of investment returns. Investors may welcome the incentive accountability to financial returns,…

Measuring E&P Capital Decisions in an Annual Incentive Plan is Complicated

Are E&P companies using the right metrics in their annual incentive programs?

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There has been a lot of attention (both from the media and investors) focused on whether E&P companies are using the right metrics in their annual incentive programs. E&P companies have been criticized for a heavy focus on production and…

Effective Use of Discretion in Annual Incentives

Analyzing bonus payout outcomes of publicly traded E&P companies.

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Going into 2015, annual incentive goal-setting was challenging for oil & gas companies, to say the least. E&P companies were wrestling with lowering production, where production growth is traditionally a cornerstone E&P bonus metric. Services and drilling companies were experiencing…

Compensation When Oil is in the $40’s

With oil prices in the $40 per-barrel range, this creates an entirely new environment for oil and gas compensation decisions. Meridian analyzes the themes and realities for 2015.

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Oil prices in the $40s create an entirely new environment for oil and gas compensation decisions this year. From our vantage point across the industry we’ve noted several important themes and realities: Situations differ. Low prices impact everyone, but some…

Setting Annual Incentive Targets When Commodity Price Drops

One of the hardest challenges for a Compensation Committee is to set annual incentive performance targets at levels that are lower than the prior year’s actual performance.

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One of the hardest challenges for a Compensation Committee is to set annual incentive performance targets at levels that are lower than the prior year’s actual performance. It is difficult to explain to shareholders when share price is dropping, how…

The Line Between Ownership and Compensation

Cheniere Energy’s recent challenges offer interesting lessons in understanding the differences between “ownership” and “compensation”.

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Cheniere Energy’s recent challenges offer interesting lessons in understanding the differences between “ownership” and “compensation”. Cheniere has faced notable public challenges to its executive compensation program, including the withdrawal of an incentive plan proposal to shareholders and failed Say on…

The End of Deferred Compensation?

Proposed Legislation Could Render the Tax Saving Effectiveness of Deferred Compensation Inert

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Our last post introduced some thoughts around proposed legislation by the Republican Chair of the House Ways and Means Committee that would effectively end tax deductibility of compensation under IRC Section 162(m). I’d like to explore the other aspect of…

Exercise of Discretion in Incentive Plans: Good, Bad or Ugly

The Question of How to Appropriately Exercise Discretion is Becoming More and More Difficult for Firms

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As shareholders and proxy advisors increase their focus on pay for performance, the questions of whether and how to exercise discretion in compensation programs have become more important and much more difficult to answer. For energy companies in particular the…

Assessing Long-Term Performance

Combining Absolute and Relative Measures in the Energy Industry

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Measuring long-term performance for companies in the energy industry is challenging because macro-economic factors, such as commodity prices, and company specific factors, such as particular asset portfolios, make it difficult to assess performance. A mix of absolute and relative measures…