From Bloomberg

U.S. crude supplies remain at the highest seasonal level in at least a decade, but drillers are still rewarding their top brass when they add to the glut.

Boosting production and reserves accounts for nearly a quarter of bonuses awarded to senior executives at North American exploration and production companies, Moody’s Investors Service said in a research report published Thursday. At some companies, executives’ share of bonuses tied to exceeding output targets is 40 percent or more.

That may explain why output has remained stubbornly high despite a global oversupply.

“They’re finding it difficult to change course,” said Christian Plath, a Moody’s vice president and corporate governance specialist. “It’s like a supertanker going full speed. Making a quick course correction is hard to do.”

Production and reserves targets accounted for more than 23 percent of executives’ bonuses in 2015, according to a Moody’s analysis of 15 companies. Credit-enhancing metrics — like cash flow and return on capital — usually make up the smallest portion of energy executives’ bonuses, Moody’s said.


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