Is UK Oil & Gas PLC's (LON:UKOG) CEO Being Overpaid?

By
Simply Wall St
Published
June 17, 2020

Stephen Sanderson became the CEO of UK Oil & Gas PLC (LON:UKOG) in 2015. First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for UK Oil & Gas

How Does Stephen Sanderson's Compensation Compare With Similar Sized Companies?

According to our data, UK Oil & Gas PLC has a market capitalization of UK£22m, and paid its CEO total annual compensation worth UK£767k over the year to September 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£314k. We took a group of companies with market capitalizations below UK£159m, and calculated the median CEO total compensation to be UK£267k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where UK Oil & Gas stands. Speaking on an industry level, we can see that nearly 65% of total compensation represents salary, while the remainder of 35% is other remuneration. UK Oil & Gas sets aside a smaller share of compensation for salary, in comparison to the overall industry.

As you can see, Stephen Sanderson is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean UK Oil & Gas PLC is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous. The graphic below shows how CEO compensation at UK Oil & Gas has changed from year to year.

AIM:UKOG CEO Compensation June 17th 2020

Is UK Oil & Gas PLC Growing?

UK Oil & Gas PLC has reduced its earnings per share by an average of 39% a year, over the last three years (measured with a line of best fit). Its revenue is down 5.3% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has UK Oil & Gas PLC Been A Good Investment?

Since shareholders would have lost about 82% over three years, some UK Oil & Gas PLC shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We compared the total CEO remuneration paid by UK Oil & Gas PLC, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

We think many shareholders would be underwhelmed with the business growth over the last three years. Arguably worse, investors are without a positive return for the last three years. In our opinion the CEO might be paid too generously! On another note, UK Oil & Gas has 5 warning signs (and 3 which shouldn't be ignored) we think you should know about.

If you want to buy a stock that is better than UK Oil & Gas, this free list of high return, low debt companies is a great place to look.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.

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