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Chesapeake Lays Off 70 Barnett Employees; 700 Remain

Chesapeake Energy Corp. on Tuesday announced that it would lay off 70 employees from its Barnett Shale workforce and transfer other staff members, leaving about 700 in its North Texas offices.

The transferred employees will go to the company's Oklahoma City headquarters or "more prolific" shale plays. The layoffs should not come as a "surprise given historic low natural gas prices and our company's ongoing strategy to redeploy assets to more economically promising fields," said Chesapeake's Julie H. Wilson, vice president of Urban Development. "It was of course a disappointment."

Chesapeake currently has two rigs drilling in the Barnett and plans to have only one or two "for the foreseeable future," she said. "This compares to 44 rigs drilling at our peak level of activity in 2008. As a result, we are trimming staff in our Fort Worth and Cleburne offices by about 70 employees, or roughly 8% -- substantially less than some recent rumors have indicated, although still painful for those affected."

The support staff positions being eliminated are employees in public affairs, marketing communications, community relations, legal, land, land administration, administrative services and information technology.

"These are the departments most directly impacted by reduced leasing and drilling activity," said Wilson. In addition to a 60-day notice, the fired employees are to receive "generous severance packages along with outplacement assistance." An untold number of employees are being transferred to "more prolific shale plays or to our headquarters in Oklahoma City where we have centralized certain support functions."

With the layoffs and transfers, Chesapeake still would have about 700 people employed in the North Texas area, according to Wilson.

"This is still a significant number of jobs in our local economy and of course, our activities will continue to support many hundreds more indirect jobs. So clearly, Chesapeake will continue to have a significant presence in the Barnett Shale, even though our rig count is lower and our pipeline activities are nearing completion." The employees who remain "will focus their attention on the continued safe and responsible completion and production of almost 2,700 natural gas wells in the area."

Since 2004, Chesapeake's capital expenditures have totaled around $13 billion in the region, she said. The producer also has paid more than $1.5 billion in royalties to area mineral owners and more than $4.3 billion in leasehold acquisition bonuses. Around 60 new Barnett wells are expected to be in production by year's end.

"Earlier this month, we announced the intended sale of our interest in Chesapeake Midstream Partners to Global Infrastructure Partners," noted Wilson (see Shale Daily, June 11). "The employees of Chesapeake's midstream affiliates will become employees of the new owner when that transaction is completed later this year and our companies will be completely separated."

Wilson said she didn't want to "trivialize" the staff reductions but said she felt "compelled to note that our company remains in a strong growth mode. We continue to add staff at our headquarters in Oklahoma City and in many of our field offices as the company continues to drill approximately 1,650 new wells this year to develop our enormous reserves of domestic oil, natural gas and liquids...

"Despite the current downturn in the price of natural gas, Chesapeake remains committed to a long and mutually rewarding future in the Dallas/Fort Worth metroplex. I hope we have your support in encouraging fleet conversions to compressed natural gas and power generation to natural gas-fired plants so we can look forward to a time when our drilling rigs -- and employees -- are back to the Barnett Shale in full force."

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