By Michael Kern
The coronavirus pandemic has shaken Big Oil to its core. Many companies have lost over a quarter of their value since the crisis began, and with little hope for recovery in the near term, their share prices are unlikely to bounce bank anytime soon. Despite the market madness, however, energy CEOs are still eyeing massive paydays.
Low returns and a general pushback against fossil fuels has left many major investors with little choice but to bail on Big Oil. And now as this global crisis wreaks havoc on financial markets worldwide, things are beginning to look even worse for investors that have held on.
Dividends are being cut, production is falling and the price of oil itself looks like it will be sitting in the $30 range for longer than anyone hoped – or expected.
Despite the doom and gloom, however, the executives of these entrenched energy giants are still living large, collecting massive checks for their lousy performance.
Take Chesapeake for example. The U.S. shale behemoth saw the price of its stock fall from $852 per share to just $13.81 per share. And now it is currently struggling to deal with its some-$9 billion in debt. Chesapeake even announced that it is considering Chapter 11 bankruptcy. But just before their announcement, the company paid out $25 million in bonuses to 21 employees.
Devon Energy is another U.S. oil and gas producer that has managed to hand out a $1.3 million stock bonus to its CEO, while shareholders lost 40 percent of their investments.
But this trend may not last.
Investors are starting to push back, demanding that compensation for executives be capped when the company posts negative returns.
Shawn Reynolds, a natural resources portfolio manager at asset manager VanEck noted, “Executive compensation has to reflect the experience of the long-term shareholder,” adding “You can’t expect to lose 20 percent of your stock price and get paid just because the industry loses 30 percent.”
By Michael Kern for Oilprice.com