The Ending to Mariner Energys Cliffhanger__»

April 6, 2010

Cliffhangers are always fun, although personally we like them better in the context of thrilling new novels than in SEC filings. Yet that’s what we discovered when we dug into the proxy that Mariner Energy, Inc. (ME) filed late last week.

But first, here’s the set-up—.

We have to go back to October 27, 2009, when the company filed an 8-K to announce that John H. Karnes, Senior Vice President, Chief Financial Officer and Treasurer, had left the company the prior week. The press release that accompanied the filing explained that Karnes —is leaving the company to pursue other interests. Scott Josey, Mariner’s Chairman/President/CEO, said at the time, —We thank John for his contributions to Mariner over the past three years and wish him well in his future endeavors. (The company tapped Jesus Melendrez, its Senior Vice President and Chief Commercial Officer, to assume the additional roles of Acting Chief Financial Officer and Treasurer.)

The 8-K also disclosed that Karnes —…will receive severance as provided in his Employment Agreement with Mariner, dated as of October 16, 2006, and restricted stock grants under Mariner’s Stock Incentive Plan, as amended and restated from time to time.

Thus, since last October you’ve probably been wondering anxiously, —How much did our protagonist get when he left Mariner Energy? You may have even researched his October, 2006 Employment Agreement in a frantic search for clues that would enable you to do the math yourself, although there are so many variables that calculating the final number isn’t possible. (That’s because there’s no way to know whether Karnes would get raises after 2006, whether he’d get bonuses or RSUs, and so forth.)

Well, patient readers, wait no longer. The answer to our cliffhanger was finally revealed in last week’s proxy: After three years at Mariner, Karnes left the company with an extra $3,198,152 in severance-related compensation. That’s a surprisingly high number, given the fact that in 2006 Karnes started with a base salary of $235,000. By 2009, his base salary was $241,288 (although it had been higher in 2007 and 2008).

But we know from the Summary Compensation Table’s footnotes that the approximately $3.2 million that Karnes left with consisted of $1,614,600 in Severance Pay, $1,553,091 from Accelerated Stock Vesting, and another $30,461 for “Health Benefits Continuation” (that was the company’s share; Karnes had to contribute, as well).

That works out to nearly $1.07 million in extra compensation for each year that Karnes worked for Mariner Energy. For him – financially, at least – that seems like a pretty good ending.

Image source: Jaap Steinvoorte via Flickr

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