Callon Petroleum Co. implemented updates to its executive compensation program which the Houston-based independent oil and gas company said March 30 will better align it with investor priorities such as new greenhouse gas (GHG) emissions reduction targets.
According to a statement by Callon President and CEO Joe Gatto, Callon is “committed to sustainable and responsible development of our resources by mitigating the risks of climate change.”
Callon, which operates in the Permian Basin and Eagle Ford Shale in West and South Texas, aims to reduce GHG emissions 40%-50% by 2025 versus pro forma 2019 results. The company also plans to reduce flared gas to less than 2% of gas produced and eliminate all routine field gas flaring, which Gatto said builds on momentum Callon created in 2020.
Oil and gas companies around the world have come under increasing pressure from shareholders, governments and activists to show how they are addressing climate change. This has led several independent oil producers, like Marathon Oil Corp. and more recently Occidental Petroleum Corp., to set emissions reduction goals as well as tie those ambitions to executive pay.
In addition to the new GHG emissions targets announced by Callon on March 30, the updates to the company’s executive compensation program will also align executive pay with “sustained delivery of free cash flow, returns, reduced leverage and ESG performance” as part of the adoption of new ESG initiatives by Callon.
Additionally, the program includes annual bonus framework that prioritizes financial performance and ESG initiatives, eliminates traditional operational and growth metrics, and caps payouts at target in the event of negative total shareholder return, the company release said.
In a statement commenting on the new executive compensation program, Richard Flury, chairman of the Callon board of directors, said the board and leadership team at Callon have been focused on implementing changes to better align the business, functionally and strategically, with investor priorities not only for Callon but for the entire oil and gas industry as well.
“Our corporate goals of meaningful free cash flow generation, absolute debt reduction and returns on capital are reflected in the compensation criteria and provide a direct link between pay and financial performance that will contribute to improving investor returns,” Flury noted in his statement.