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posted: 7/8/2018 1:00 AM

Forget Tech, Big Oil is Doling Out America's Fattest Paychecks

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  • A recruiter in the shale gas industry, left, speaks with an attendee of a job fair in Cheswick, Pa. Employers in the United States are thought to have kept up their brisk pace of hiring in June 2018, reflecting the durability of the second-longest U.S. economic expansion on record even in the face of a trade war with China. Economists have estimated that 195,000 jobs were added last month and that the unemployment rate remained at an 18-year low of 3.8 percent, according to data provider FactSet.

    A recruiter in the shale gas industry, left, speaks with an attendee of a job fair in Cheswick, Pa. Employers in the United States are thought to have kept up their brisk pace of hiring in June 2018, reflecting the durability of the second-longest U.S. economic expansion on record even in the face of a trade war with China. Economists have estimated that 195,000 jobs were added last month and that the unemployment rate remained at an 18-year low of 3.8 percent, according to data provider FactSet.
    Associated Press/November 2017

 
 

Move over Wall Street titans and Silicon Valley giants. When it comes to paychecks, Big Oil now looks like the best bet for U.S. workers.

Spurred partly by the shale boom, the median pay for energy workers last year was $123,000, according to data newly mandated by the U.S. That topped all sectors, including utilities, tech and health care. While energy chief executives made an eye-popping 120 times more, the gap with their employees was still the second-smallest among all industries.

What's fueling this paycheck potency? First, a reliance on geologists, petroleum engineers and other highly skilled, well compensated professionals. Add to that the efforts needed to retain expertise -- and lure young talent -- after the recent oil price rout led to hundreds of thousands of job losses.

"They had to retain critical employees at almost any cost," said Bill Arnold, a former Royal Dutch Shell executive who now teaches energy management at Houston's Rice University. "Companies had little managerial flexibility."

Businesses across the country are dealing with labor shortages, and in the red-hot Permian shale basin in Texas and New Mexico, "you see it even more dramatically," said Bob Sullivan of AlixPartners, a New York-based consultant to energy companies. "At some point, the wage pressure starts to get pretty high."

Oil and gas companies are essentially paying out now for two epic hiring slumps that followed price crashes in the the mid-1980s, and again in the middle of this decade. They've forced the business to play catchup, even as crude prices recover and drilling surges to new records.

The 2010 Dodd-Frank financial reforms required public companies to disclose their CEO-to-worker pay ratio starting this year. The figure is calculated by dividing a CEO's compensation package by the pay of the median employee, one who makes more than half of the company's workers and less than the other half.

Within energy, a pecking order is clear: Producers and refiners staffed with highly trained, highly credentialed scientists, engineers and other professions had the most generous median pay. Offshore oil explorer Kosmos Energy led the pack at more than $230,000. Refiner Valero Energy Corp., was second highest and Cheniere Energy Inc., the liquefied natural gas exporter, was third.

"The roles and responsibilities that make up the sector tend to be highly skilled," said Brian Blackwood, an executive compensation consultant with Willis Towers Watson in Minneapolis. "That's what you need to play in this space."

Oilfield service companies that employ the worker bees of the shale field -- the roughnecks, mechanics, truck drivers and other blue-collar staff -- dominated the bottom.

Energy's widest boss-to-employee gap was at Marathon Petroleum Corp., the fuel refiner and marketer, where CEO Gary Heminger's $19.7 million pay package was 935 times the median. The company said that figure was skewed by the 32,000 employees, many of them part-timers, at its Speedway chain of service stations. Excluding them, the ratio would fall to 156-to-1, according to Marathon's proxy statement.

Comparing ratios among companies is an inexact science, at best.

CEO pay reported in regulatory filings is based on stock estimates and accounting values, and the figures don't always reflect what executives end up putting in the bank. Companies also have leeway in how they measure median pay; the rules allow them to exclude contractors and a share of non-U.S. workers, for example.

In the U.S., Big Oil's best paid CEO last year was John Watson of Chevron Corp., who earned almost $25 million in his last year before retirement. At the other end of the spectrum was Kinder Morgan Inc.'s Stephen Kean, who received a $1 salary and $377,000 in dividends from the pipeline company.

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Bloomberg's Jenn Zhao and Anders Melin contributed.

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