After laying off thousands of workers and sidelining equipment, U.S. shale producers are moving to slash executive pay as they deal with a dramatic oil price collapse.
Shale firms this month cut 25% to 50% of planned spending as falling demand from coronavirus and a price war between Saudi Arabia and Russia threw the oil market into a free fall. U.S. oil prices are down more than 60% this year to about $22 a barrel, from $61 a barrel in December.
The shale industry was already under pressure following a decade of dismal investor returns. Now it faces "essentially the atomic bomb equivalent in the oil markets," said Louise Dickson, analyst at Rystad Energy.
"These are unprecedented times," said Matt Gallagher, CEO of Parsley Energy Inc. "It is important to take the first step and a serious, meaningful step as a unified executive management team."
U.S. shale producer Parsley Energy said March 18 it would slash executive pay 50%, the deepest such cut announced so far.
Parsley cut planned spending 40% and has sent a letter to suppliers asking for cost reductions. Gallagher said that suppliers and employees need to know, "That we are in it together."
Liberty Oilfield Services Inc. last week said its executives would take a 20% pay cut. Matador Resources Co. said it would cut CEO and board pay by 25% and other executive pay by 20%.
The hard hit airline industry has also announced executive pay cuts. United Airlines Holdings Inc., one of the three largest U.S. airlines, said that planes could be flying nearly empty into the summer and that it would cut corporate officers’ salaries by 50%. Scandinavian airline SAS said it would temporary lay off up to 90% of its workforce and trim executive pay 20%.
Shale producers EOG Resources Inc., Pioneer Natural Resources Co., Whiting Petroleum Corp. and EQT Corp. are among those that have cut drilling activity and budgets this week, though they have not announced plans to reduce executive pay.
Top U.S. oilfield services provider Halliburton Co. said March 17 it will furlough about 3,500 employees in Houston for 60 days as its customers slash spending. Directional driller Payzone Directional Services this week said it would halt operations.
After the shale boom pushed the U.S. to become the world's top oil producer with output of around 13 million barrels per day (bbl/d), the country's output could fall 1.3 million bbl/d over the next five quarters, Goldman Sachs said.
Russia came in as China's largest crude oil supplier in December, cementing the top spot for all of 2018 for a third year in a row ahead of rival Saudi Arabia, customs data showed on Jan. 25.
Ingenuity and innovation are delivering steady growth in the U.S. Gulf of Mexico oil and gas industry.
Texas oil regulator Ryan Sitton said OPEC Secretary-General Mohammad Barkindo was "kind enough to invite me to the next OPEC meeting in June."