CEOs at some of the state’s largest energy producers saw big bumps in compensation last year, despite industry opposition to a 5 percent gross production tax increase to give Oklahoma teachers a pay raise.
Harold Hamm, Chairman and CEO of Continental Resources Inc., saw his overall compensation increase by about 38 percent over the previous year to $12.2 million in 2017, according to regulatory filings.
Devon Energy Corp. CEO Dave Hager’s overall compensation grew by about 53 percent over the previous year to $13.4 million in 2017.
Both Continental Resources and Devon Energy supported a failed legislative plan known as Step Up Oklahoma that included a 4 percent tax increase on oil and gas production. However, Oklahoma energy producers balked at the 5 percent tax increase the state later adopted to give teachers an average $6,000 pay increase this spring.
Cody Bannister, a spokesman for the Oklahoma Independent Petroleum Association said the group does not comment on the actions of specific companies, but said OIPA and many in the industry oppose the 5 percent tax increase because it places too much of the tax burden on oil and gas while ignoring other industries.
“The final legislation did not include all industries from the Step Up plan, and of the industries included in the final legislation, the tax burden on the oil and natural gas industry was increased from the Step Up plan while the tax burden on the remaining industries was decreased,” Bannister said.
OIPA and another trade group, the Oklahoma Oil & Gas Association also filed a court challenge earlier this year to a now-defunct initiative petition effort to raise the gross production tax to 7 percent on new wells in order to raise teacher pay.
Hamm’s base salary at Continental Resources grew by 46 percent in 2017 to $1.2 million. He also earned a $3.4 million cash bonus, stock valued at $7.59 million and about $60,000 in other compensation that included use of the company’s airplane. It’s important to note that the value of Hamm’s stock award is only a projection. The large stock awards that make up the bulk of most executive pay packages typically don’t vest for at least a few years and the value of the stock is subject to swings in the market.
Continental Resources did not respond to a request for comment about Hamm’s pay. In regulatory filings, the company said Hamm’s compensation was “commensurate with his role in the founding and development of the company as well as leading the future success of the company.”
In November 2015, Continental Resources reduced Hamm’s base salary at his request, due to low oil prices, according to corporate filings. His pay was restored in April 2016 when market conditions improved.
Hamm’s annual take-home pay is nominal compared to his overall wealth. Forbes estimated his net worth to be $19.6 billion in May, mostly in the form of Continental Resources stock.
In March, Hamm watched with clasped hands from the gallery as the Oklahoma House of Representatives voted to approve a 5 percent gross production tax increase in hopes of staving off the April teacher walkout.
— Tres Savage (@ThriceSavage) March 27, 2018
Continental Resources has fared better than most Oklahoma oil and gas drillers in the face of low commodities prices over the past three years, avoiding any layoffs and posting a $233.9 million profit in the first quarter of 2018.
At Devon, Hager’s 2017 pay included a $1.2 million salary; a $1.9 million performance cash bonus; a stock award valued at $9 million and another $1.1 million in other compensation.
Devon spokesman John Porretto said executive pay at Devon is weighted in favor of long-term incentives focused on the the company’s performance.
As with Hamm’s compensation package, Most of Hager’s 2017 compensation is made up of company stock that won’t vest for a few years. The value of the stock when it vests is contingent on how well the company performs over the long haul.
In January 2016, Devon’s board of directors decided to reduce the value of stock awards to company executives by a third “because of the historically low stock prices at the time,” Porretto said. One year later, the board decided to restore the stock awards, after Devon’s stock price rebounded.
“That restoration in value is the primary component for the increase in total compensation last year,” Porretto said.
The number of shares granted to Mr. Hager in stock-based compensation actually declined by 107,000, or 36 percent, from 2016 to 2017. Hager’s performance cash bonus also declined by $258,000, or 11.5 percent, from 2016 to 2017.
In April, Devon announced it would layoff about 9 percent of its workforce, cutting 300 jobs in order to streamline operations as it continues to recover from the prolonged depression in oil prices.
“The decisions that impacted 2017 compensation for Mr. Hager and other executives were made over the past two years and were unrelated to the very difficult job reductions at Devon this year,” Porretto said.
Earlier this month, Hager told The Oklahoman that although the Devon supported the StepUp Oklahoma plan, he was “disappointed” in the 5 percent gross production tax increase that was eventually enacted in order to restore some funding to common education and give teachers a pay raise.
“From our perspective, it makes us consider whether we should step up again,” Hager said. “We stepped up to be a good citizen in the state of Oklahoma. It doesn’t appear we were rewarded for doing so.”
Not all Oklahoma energy CEOs got a pay raise last year. Executive compensation decreased at Chesapeake Energy Corp. and SandRidge Energy Inc. in 2017. Both companies have struggled over the past several years after the prolonged depression in oil and gas prices.
Chesapeake Energy CEO Doug Lawler’s overall compensation decreased 2.4 percent from 2016 to 2017 to $14.9 million last year according to regulatory filings.
Lawler’s 2017 compensation package included a $1.3 million salary; a stock award valued at $7.5 million; a $3.1 million option award; a $2.2 million performance bonus and $628,948 in other compensation.
The company did not respond to a request for comment on Lawler’s pay package.
Chesapeake announced it would layoff 400 people in January, about 13 percent of its workforce.
Former SandRidge Energy CEO James Bennett saw his total compensation decrease by 61 percent in 2017 to $7.2 million, but still reaped a lucrative severance package after being fired earlier this year.
SandRidge emerged from Chapter 11 bankruptcy in October 2016 and is currently entrenched in a boardroom battle with activist investor Carl Icahn. The company laid off 80 employees in February, representing about 30 percent of its workforce.
Part of Bennett’s $18.8 million compensation package in 2016 was a hefty $8.2 million performance bonus, which drew criticism from Icahn.
In February, SandRidge disclosed that Bennett would receive a $26.6 million severance package — sometimes referred to as a golden parachute —after he was terminated without cause.