Chesapeake latest oil price casualty

30 Sep 2015 | Author: | No comments yet »

Chesapeake Energy Cuts 15% of Jobs.

Chesapeake Energy Corp. is letting go of about one in six employees, the latest blow to a workforce that enjoyed boom years under shale wildcatter Aubrey McClendon and shrank since his departure as the natural gas producer grapples with a downturn. Because of the swoon in oil prices, Chesapeake has reduced rig operations and cut capital expenditures after failing to offset the plunge with higher production.

Once the second-biggest private employer in its hometown of Oklahoma City, the company co-founded by McClendon will eliminate 740 jobs, leaving it with about 4,000 workers scattered around the U.S. The loss of jobs amounts to 15% of its total workforce, according to The Oklahoman. “The commodity price environment is extremely challenging for our entire industry,” CEO Doug Lawler in an interview with The Oklahoman. “Chesapeake today has had to take some steps towards improving our financial position to meet these challenging times. It may be the Oklahoma oil producer’s first round of mass layoffs since the plunge in crude prices began last year, according to a tally of industry job cuts kept by consultancy Graves & Co.

A $55.5 million, one-time charge will be booked for the third quarter, Chesapeake said in a filing Tuesday. “While this was extremely difficult, we are acting decisively and prudently to enhance the long-term competitiveness and strength of Chesapeake,” Chief Executive Officer Doug Lawler said Tuesday in an internal memo sent to Bloomberg News. “Over the past year, we have taken significant actions in response to the low commodity prices by reducing our costs and decreasing our capital spending.” Since taking over in 2013, Lawler has reduced the headcount by more than half through spin offs and asset sales, slashed spending on drilling rigs and oil leases and halted a 14-year run of dividend payouts to investors. Chesapeake, which held the crown as largest U.S. gas producer until 2010, confronts prices for the heating and power plant fuel that have slumped nearly 60 percent since February of last year.

Under his direction, the company’s debt load ballooned to more than $16 billion, and shareholders began to fret about his appetite for risk and enthusiasm for spending on borrowed money. Energy consultant John Graves estimates oil producers have contributed about 15 percent to the oil industry’s job cuts since the slump began, but that portion is set to increase as drillers begin to plan their annual investment budgets for 2016 as the oil market shows no signs of an immediate recovery. At one point in 2012, four construction cranes overlooked eight new buildings on a 120-acre (49-hectare) Georgian architecture campus as earth-moving equipment readied the land for more. Now Chesapeake’s hometown will feel the biggest impact from Tuesday’s eliminations, seeing 19 percent of the company’s Oklahoma City workforce eliminated, Gordon Pennoyer, a spokesman, said in an e-mail. Lawler stepped in and almost immediately began to sell off energy properties from West Virginia to Pennsylvania that weren’t core to Chesapeake’s business, to raise money and pay down debt.

Lawler has reined in spending, but plummeting oil and gas prices continued to take a toll on the company, along with many other American energy producers.

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