Gary Rich, CEO of Parker Drilling, is leaving the company with a large severance package just months after the company emerged from bankruptcy proceedings. He will leave by December 31 at the latest, while the company searches for his successor.
Parker Drilling (market cap $270 million) has its head office in Greenway Plaza. The company is an international provider of contract drilling and drilling-related services. It has operations in 20 countries.
The business entered into pre-packaged bankruptcy proceedings in December 2018 and emerged at the end of March. It reduced its debt from $585 million to $210 million and raised an additional $95 million through an equity rights issue.
As part of his severance, Mr Rich will get;
- payment of $1.5 million representing 1 years’ salary and 2019 target bonus
- if he leaves before Dec 31, he will get a pro-rata portion of his salary ($745,000) for the remainder of the year
- Health care premiums for 12 months
- vesting of one third of his restricted stock units (49,407) and stock options (74,111)
- If there is an agreement to sell Parker Drilling within six months of Mr Rich’s termination date, he will also get a $1.5 million cash payment.
The current stock price is $18.38. That means the stock units are worth $908,000. The exercise price for the options is $23, so they are currently out-of-the-money.
New Employment contract
Here’s what must be galling to the old shareholders. Mr Rich only entered into a new employment contract on March 26, 2019. Mr Rich’s salary was increased from $650,000 to $745,000. The restricted stock units were also granted at that time.
2018 Cash bonuses
To add insult to injury, in July 2018, because of the low share price, the company switched to quarterly cash incentives in lieu of equity awards. Mr Rich received cash payments of $2 million for 2018 bonuses. He also received a cash payment of $532,000 in March 2019 relating to the vesting of a 2016 performance cash unit grant.
Just in case, Mr Rich wasn’t feeling rich enough, he also benefited from the cashing out of the old restricted stock units that were issued in the years prior to bankruptcy. That amounted to another $300,000.
Mr Rich has been the CEO since October 2012. At that time the stock price was around $65 (adjusted for stock splits). The business hasn’t made an operating profit since 2014.