Energy-focused private equity firm Kimmeridge Energy Management Co. LLC on July 20 released a white paper that criticized high executive compensations by U.S. oil producers in a year that marked one of the industry’s worst downturns.

The COVID-19 pandemic and a price war between oil giants Saudi Arabia and Russia last year pushed crude prices to historic lows, worsening a more than six-year downturn that has left investors frustrated with low returns.

Total compensation for CEOs of 27 U.S. oil producers declined 14% last year from 2019, but that represented only a 1% decline from 2018 levels, the paper said. Share prices were 60% lower in 2020 versus 2018.

Short-term incentive payout as a percentage of target exceeded 100% for 7 of the 27 companies reviewed, with CNX Resources Corp., Range Resources Corp., EQT Corp. and APA Corp., formerly Apache, at the top of the list.

Kimmeridge’s paper said while annual bonuses in 2020 were paid below target, the median payout of 95% still seemed “unjustifiably” high for a year when the median share price return was a negative 36%.

APA spokesperson Phil West said the company received a 95% approval on its say-on-pay proposal from shareholders who voted in 2021.

The other three companies did not respond to requests for comment.

Commodity prices should no longer serve as a key factor for rewarding executives, the paper said, and Kimmeridge believes that long-term incentives for the CEO should be completely performance-based.

“Higher commodity prices may temporarily alleviate some of the investor pressure on reforming governance, but it is important to remember that this is a highly cyclical industry destined to repeat the mistakes of the past if the underlying issues around alignment and accountability are not properly addressed.”

Kimmeridge earlier this year launched a proxy battle at Ovintiv Inc., formerly Encana, settling the fight for a seat in the board of the oil and gas producer.

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