The relative underperformance of E&P stocks against the S&P 500 has brought renewed focus to executive compensation, according to a recent report by the equity research team at Cowen & Co.

In the July 9 report, Cowen analysts noted that “E&P management compensation is under the magnifying glass more than ever.” However, overall E&P general and administrative expenses (G&A) and executive compensation are not out of line when compared with other industries, contrary to what investors might think, the analysts said.

Cowen research found that on average the CEOs of E&Ps the firm covers were compensated $8.6 million for a median stock return of -40%, or -12% vs. the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). For instance, Encana Corp. screens poorly “given a -28% relative return to the XOP in ’18 vs. CEO compensation that screens more than 40% higher vs. the median E&P in our coverage,” the Cowen analysts wrote in the report.

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