The Ugly is the Management Compensation PlanThe market reaction to OBE is pretty obviously about the Management compensation plan. I've heard from so many shareholders how disgusted they are that Management took "20% of the cash flow" for the quarter, and are erroneously extrapolating that forward.
The management incentive plan, while gross, is right near the very top of its payout band, and given the way it reversed OBE SP outperformance, will actually be declining for the next quarter.
OBE doubled in Q1. It was the perfect storm for this particular "SP performance relative to peers" plan to max out with a truly staggering amount.
It will not be this way in other quarters.
Production is up, cash flow (before eggregious Management Comp) is fantastic, hedge position (lack thereof) is among the best in the industry...PROP is working out gangbusters.
But the Management Comp plan gives a buying opportunity that may last until Q2 results are released, or may end sooner when management explains the plans boundaries sooner.