Bumper pay day for Cairn directors as shares rocket

DIRECTORS at Edinburgh-based oil and gas explorer Cairn Energy saw their total remuneration packages soar by around 50 per cent last year with chief executive Sir Bill Gammell's pay increasing to £2.8 million, from £2.3m.

The rise for Sir Bill, a former Scotland rugby international, put him within a whisker of the £2.89m earned by Sir Fred Goodwin, chief executive at Royal Bank of Scotland - Scotland's biggest company.

Much of the executive pay rewards at FTSE-listed Cairn stemmed from incentive plans linked to its share price which has risen dramatically from under 400p in January 2004 - just before it announced a series of transformational oil finds in India which increased its estimated oil in place to around 3.5 billion barrels - to around 2175p at present.

Overall, Cairn's executives saw their combined rewards, including pay and share-related payments, over the past year rise by around half to £11m, according to its 2005 annual report.

And the rewards could rise further in the current year if the company's success on the sub-continent, where most of its exploration activities are focused, continues.

Earlier this month, the group reported an annual after-tax profit of £45.6m, compared with a loss of £9.05m the year before.

Cairn's elevation to Britain's elite share index - making it one of Britain's top 100 companies - as well as its stunning discoveries in the Indian desert region of Rajasthan, helped trigger conditions under which directors qualified for rewards under its long-term incentive plan (LTIP).

According to Cairn's annual report, Sir Bill's basic pay and benefits jumped by 32 per cent to £720,000 in 2005, while his performance-related bonus increased by 81 per cent to £269,000.

But that only amounted to just under half the £2.03m gains made under the vesting of shares under Cairn's LTIP plan. The year before, he also pulled in £1.78m from the share scheme.

Cairn's exploration director, Mike Watts, actually saw his basic pay go down to £443,000, from £622,000, although his overall remuneration increased by 33 per cent to £2.3m.

The fall reflected a one-off bonus of £248,000 paid to the director in 2004 after Cairn announced its initial big find at its Mangala field.

His benefits from shares vested under the LTIP last year, however, amounted to £1.8m. That compared with £1.1m the plan paid to him the year before.

Cairn's three other executive directors - engineering director Phil Tracy, finance director Kevin Hart and general manager Malcolm Thoms - saw their collective return from the share plan rise to £4.54m, from £2.19m previously. Their basic benefits and pay jumped to £1.2m, from £959,049 in 2004.

Further share rewards for the group's five executive directors depend on previous years' successes continuing in 2006.

Last year's performance earned Sir Bill - who holds 800,000 Cairn shares worth around £17m - the right to benefit from up to 124,900 shares under the LTIP in future years, if it performs to plan. That brought his overall possible entitlement to 497,900 shares. Cairn's other four executive directors earned the right to benefit from a further 1.27 million shares.

According to a spokesman for the company the benefits paid to executives reflected the overall growth in shareholder value on the back of its India strikes.