Denver-based Cimarex Energy Co., a firm with exploration operations in western Oklahoma is linking executive pay to the reduction of natural gas flaring and of air emissions.
The board of directors of Cimarex Energy also set 2020 targets for such reductions saying the industry needs more environmental credibility. The targets include an increase in water recycling at its oil and gas well operations. The board also stated it was to electrify its operations with the goal of operating more cleanly, according to the Denver Business Journal.
“Our performance on these goals will directly impact executive team compensation,” Tom Jorden, president, CEO and board chairman told industry analysts. “We willingly embrace this challenge.”
Cimarex did not disclose what its emissions and flaring reduction targets are for the year.
The 950-employee company, one of the largest independent shale oil producers, is among the top 20 oil producing companies in the United States.
Publicly setting reduction goals is an unusual move for Cimarex. It primarily operates in the Permian Basin region of West Texas and New Mexico, and in the Mid-Continent region of Oklahoma.
Those are areas where oil wells and pipelines don’t receive as much pushback from local environmentalists as they do in Colorado. But the broader resistance to oil and gas development includes Democratic presidential candidates Bernie Sanders and Elizabeth Warren pledging to end hydraulic fracturing nationally over concerns about how much industry emissions contribute to climate change.
The fast-evolving discussion around climate changes requires Cimarex and other oil companies to operate better, Jorden said.
“Although the rhetoric can be a bit extreme, our industry must demonstrate real commitment to a cleaner future if we are to be taken seriously in energy policy discussions,” he said, noting demand for oil and gas continues grow and predicting demand will remain for decades.
“The world needs the products our industry produces — this is obvious to all of us,” Jorden said. “Underinvestment in our sector would lead to long-term bad consequences for our country, and for our world. But we should never underestimate the ability to create terrible public policy. In order for our industry to participate in setting public policy, we need to earn a seat at the table through our actions on reducing emissions.”
The emissions and flaring pledge came out during the companies’ discussion of fourth-quarter and 2019 results.
The year included a $1.7 billion deal buying Denver-based Resolute Energy to consolidate oil and gas acreage in parts of the Permian Basin.
The company, which didn’t disclose final revenue numbers for 2019, recorded a net loss of $124.6 million, or $1.33 per share for the full year. In 2018, it posted profits of $791.9 million , or $8.32 per share, on revenue of $2.3 billion.
A non-cash charge related to the impairment of Cimarex’s oil and gas properties — largely to due to lingering low natural gas and liquids prices — pushed the company to a loss in 2019, the company said.
But the company expanded its production by 92 wells and increased its average oil and gas liquids production 26% to 278,500 barrels daily, Cimarex said.
It generated $1.5 billion in cash flow from operations, and it predicted being able to continue generating cash flow, increasing its shareholder dividends and increasing oil production by 10% or more annually without spending more.
Asked about the new kind of language from the company about emissions and climate change concerns, Jorden said the goals have been talked about at length inside the company and were sparked by difficult times facing the industry.
“Although I find myself really optimistic about this company, we have really tough headwinds,” he said.
But Cimarex doesn’t consider itself “a shipwreck victim” waiting for someone else to rescue the business, he said.
“We are going to control our own destiny,” he said. “We are going to use this climate to reform ourselves and get fundamentally better at our business.”
Source: Denver Business Journal