(Calgary) Oil and gas CEO compensation has soared with the post-pandemic recovery, a new report shows — and it will likely rise even more when the Trans Mountain pipeline expansion is completed this year.
The consulting firm Bedford examined the salaries, bonuses and other forms of compensation of executives at 143 North American oil and gas companies, 68 of which were headquartered in Canada.
The study found that in 2022, the most recent year for which data is available, executive compensation in this sector increased sharply.
That year, total executive compensation ranged from a median of $425,255 for companies with total assets under $100 million, to $16.6 million for companies with total assets over $30 billion.
Five of the seven major corporate asset tranches featured in the report saw median CEO compensation increase by at least 20% in 2022 compared to the previous year. In some cases, the increase was as high as 75%, according to the report.
The increases come as the oil and gas sector recovers from years of recession and low commodity prices. Russia’s invasion of Ukraine in early 2022 sparked global fears over energy security, leading to a surge in oil prices.
Frank Galati, managing partner at the Bedford firm, attributes this increase in executive compensation in 2022 to the “strong position” of this industry, as energy demand has rebounded, alongside a slew of new export terminals on the coast of the Gulf of Mexico.
In Canada, soaring oil prices have led a number of energy companies to report record profits in 2022.
Some companies have also been criticized by environmentalists and politicians for redirecting significant profits to shareholders, in the form of dividends and share buybacks, rather than prioritizing investments in the decarbonization of their activities.
Although data on executive compensation for 2023 is not yet publicly available, the Bedford firm already predicts that CEO compensation will increase in 2024.
The Trans Mountain pipeline expansion project, now 98% complete, is expected to add more than half a million barrels per day to Canadian oil export capacity.
Improved market access should help reduce the Western Canada Select heavy crude oil differential — the discount Canadian oil companies typically give on their products, in part due to a lack of export capacity.
The Bedford firm therefore expects further increases in the compensation of executives in the Canadian oil and gas sector in the years to come.