• 6 hours Bidding Action Heats Up In UK’s Continental Shelf
  • 11 hours Keystone Pipeline Restart Still Unknown
  • 15 hours UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 17 hours Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 19 hours Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 20 hours German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 22 hours Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 23 hours Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 2 days Oil Prices Rise After API Reports Major Crude Draw
  • 2 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 2 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 2 days Statoil Looks To Lighter Oil To Boost Profitability
  • 2 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 2 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 2 days Whitefish Energy Suspends Work In Puerto Rico
  • 2 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 2 days Thanksgiving Gas Prices At 3-Year High
  • 3 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 3 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 3 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 3 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 3 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 3 days ConocoPhillips Sets Price Ceiling For New Projects
  • 5 days Shell Oil Trading Head Steps Down After 29 Years
  • 6 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 6 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 6 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 6 days Venezuela Officially In Default
  • 6 days Iran Prepares To Export LNG To Boost Trade Relations
  • 6 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 6 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 6 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 7 days Rosneft Announces Completion Of World’s Longest Well
  • 7 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 7 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 7 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 7 days Santos Admits It Rejected $7.2B Takeover Bid
  • 7 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 7 days Africa’s Richest Woman Fired From Sonangol
  • 8 days Oil And Gas M&A Deal Appetite Highest Since 2013
Short Bets On Oil Spike Ahead Of OPEC Meeting

Short Bets On Oil Spike Ahead Of OPEC Meeting

Short positions in Brent futures…

Moody’s Scolds Oil Executives for Pay Model

Shale Gas Well

Moody’s has slammed the current model used by oil companies to remunerate executives as too dependent on growth and as such, outdated and not in line with the current price environment. According to the ratings agency, the focus should be moved from growth to value preservation, as is more appropriate for the current and midterm future situation in the industry.

Moody’s said the current compensation model that is used by U.S. and Canadian production companies encourages production expansion and target-exceeding, when it should instead focus on capital preservation and debt reduction. The current model, the agency added, is particularly bad for bondholders in light of the current outlook for the growth prospects of the oil industry.

These conclusions and recommendations were based on the study of 15 integrated oil and gas companies. What Moody’s found was that production and reserve growth were the foundations of the companies’ bonus and incentive policies for executives, and that while the control of expenses has become more important for them, not enough attention is being given to credit-enhancing goals.

Moody’s said the growth focus was still apparent in the types of compensation and bonuses. For short-term compensation, companies have increasingly shifted to cash, but for long-term awards, they are still relying on share-price movements in a favorable direction to motivate executives to stay with the company by offering them stock options.

This overreliance on stocks, however, can be dangerous for bondholders, as it can serve as a reason for “aggressive share repurchases”, an unnecessary focus on share performance and a determination to keep on paying dividends instead of cutting costs, Moody’s also said. Still, the agency acknowledged some attempts of E&Ps to preserve shareholder value by introducing changes to their management compensation policies.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News