Chesapeake Energy slashes 15% of workforce
Chesapeake Energy Corp., the natural gas explorer selling assets to raise cash, plans to cut 15 percent of its workforce to cope with a drop in commodity prices.
The Oklahoma City company will lay off 740 people and take a $55.5 million one-time charge in the third quarter related to employer payroll taxes, according to a filing Tuesday.
“While this was extremely difficult, we are acting decisively and prudently to enhance the long-term competitiveness and strength of Chesapeake,” CEO 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.”
From the combination of spinoffs, asset sales and other cuts, the company’s workforce fell by almost half last year to 5,500, according to data compiled by Bloomberg.
The biggest effect from Tuesday’s eliminations will be seen in Oklahoma City, where 19 percent of the head count will be let go, spokesman Gordon Pennoyer said in an email.
Energy companies worldwide have eliminated more than 150,000 jobs after oil prices fell by more than half from their June 2014 peaks. Natural gas prices in the U.S. have tumbled 42 percent since November.
The filing was made after the close of regular trading in New York, where the stock (ticker: CHK) settled 1.2 percent higher at $6.79.
The nation’s second-largest producer of natural gas, Chesapeake reported a huge second-quarter loss in August, partly because of a write-down of its oil and natural gas assets.
The company’s $4.1 billion loss included a $3.7 billion write-down of its assets. Its adjusted net loss, excluding charges, was $83 million, compared with a $281 million profit in the same quarter last year. The company still had $2 billion in cash and $4 billion in available credit.
In July, Chesapeake also announced that it would stop paying a quarterly dividend for the first time in 14 years because of low commodity prices. The company said eliminating the payout would save $240 million a year.
Chesapeake, once the face of the Barnett Shale natural gas revolution, has been lowering its profile in North Texas. In 2014, it sold its namesake 20-story office tower near downtown Fort Worth, where it once had about 400 employees in the top half of the building.
Chesapeake also faces hundreds of lawsuits by mineral-rights owners in the Barnett claiming that the company cheated them out of millions in royalties. A state district judge in Tarrant County has scheduled the first 10 cases for trial starting next year.
This month, Chesapeake also reached an out-of-court settlement with Fort Worth investor Ed Bass and 20 other landowners on the eve of a trial over millions of dollars in unpaid royalties from natural gas drilling. While the settlement was confidential, documents indicated that landowners would get at least $8.6 million, and there was speculation that a jury could double that amount.
Staff writer Max B. Baker contributed to this report.
This story was originally published September 29, 2015 at 5:39 PM with the headline "Chesapeake Energy slashes 15% of workforce."