Alvarez and Marsal

Tax Insights

2021/2022 Oil and Gas Oilfield Services (OFS) Compensation Report

Brian Cumberland, Managing Director

bcumberland@alvarezandmarsal.com

J.D. Ivy, Managing Director

jivy@alvarezandmarsal.com

Allison Hoeinghaus, Managing Director

ahoeinghaus@alvarezandmarsal.com

September 1, 2021 / North America

Alvarez & Marsal’s (A&M’s) Compensation and Benefits Practice is pleased to share the results of our 2021/2022 Oil and Gas Oilfield Services (OFS) Compensation Report. This report analyzes compensation arrangements for executives and boards of directors at the largest U.S. OFS companies. Once again, we partnered with Equilar, who added commentary on their research and observations regarding compensation trends across numerous industries.

Key findings include:

  • 70 percent of the study participants announced COVID-19-related base salary reductions for executives. Of those, 62 percent have announced a return to pre-pandemic levels of base salary.
  • Use of Environmental, Social and Governance (ESG) metrics continues to grow, and the typical weighting for such metrics is 10 percent of the overall annual incentive plan (40 percent of companies that use ESG metrics).
  • Time-vesting restricted stock / restricted stock units and performance-vesting awards are the most common forms of long-term incentive compensation, utilized by 77 and 68 percent of companies, respectively. For performance-vesting awards, relative total shareholder return is the most common performance metric, used by 74 percent of companies. Use of alternative metrics, such as absolute total shareholder return and return on invested capital (ROIC), continue to rise.
  • In the context of a change in control, the most common cash severance multiples are between 2x to 2.99x (applicable to 58 percent of the CEOs and 62 percent of the CFOs in this report).

Effective compensation programs are critical to attract, retain and drive performance of executives. Boards of directors should ensure that their executive compensation programs are aligned with market throughout each potential phase of a company’s lifecycle, including initial public offering, transaction/merger, steady state and bankruptcy. This report includes detailed market information on executive compensation for each of these phases.

We’re most interested in your feedback. If you have any comments or questions, please contact A&M’s Compensation & Benefits Practice.

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North America