It’s been just nine months since he took the helm at Chesapeake Energy Corp., but CEO Doug Lawler joked Tuesday it feels more like five years.
The speed at which the company and its employees moved impressed Lawler when he got to the Oklahoma City energy company in June. That speed also helped Lawler institute a new strategy of financial discipline at the company.
“When I came in, I was absolutely astounded at the speed and the energy that resided within Chesapeake,” Lawler said Tuesday at the Rotary Club of Oklahoma City. “The ability to do things quickly and the inherent trait of speed is something you can’t coach.”
Lawler touted Chesapeake’s speed when he embarked on a cost-cutting strategy last year, an effort that included layoffs in Oklahoma City and in several other states. The company reduced its capital expenditures and sold assets in an effort to clean up its balance sheet, Lawler said.
“Our strategy now is driven on financial discipline and profitable and efficient growth from our captured resources,” he said.
Lawler’s presentation came hours before he was scheduled to have dinner with investor Carl Icahn, one of the large shareholders who pressed the company to make major changes two years ago. Lawler declined to comment on what the pair would talk about. Chesapeake representatives downplayed the significance of the Icahn meeting, saying Lawler continuously briefs all types of investors about the company’s performance.
Chesapeake employs 11,000 people and operates more than 45,000 wells across the country. Lawler said the shale gas revolution led by independent oil and gas companies like Chesapeake has entered a new phase after the rapid growth of the last decade.
“Oil and gas is shifting in the United States to more of a manufacturing process, where we’re trying to capture greater margins, reduce our costs and capture greater value for our shareholders,” Lawler said.
Lawler said Chesapeake’s oil and gas assets in the United States continue to attract interest from others around the globe.
“We have a world-class inventory here in the United States,” he said. “How do I know it’s a world-class inventory? Because everyone in the world wants our assets: the Europeans, the Asians and various Middle Eastern countries have expressed interest in our assets.”
Despite those outside interests, Lawler said Chesapeake is committed to Oklahoma. The company has slashed its capital expenditures but still plans to spend between $5.2 billion and $5.6 billion this year, including $1 billion in Oklahoma, he said.
“The strength and continued investment in Oklahoma is very important to Chesapeake,” Lawler said. “We see a lot of value not only today but in the future.”
However, Lawler said discussions at the Oklahoma Legislature about the gross production tax for horizontal drillers could affect future investments in the state. With Chesapeake’s renewed financial discipline, Oklahoma’s oil and gas plays have to compete for internal capital, he said.
“Those investments have to continue to compete with the domestic portfolio that also has better opportunities,” Lawler said. “Oklahoma does not have the best rock. It has some very good rock, but it doesn’t have the best rock. It’s very important for the state of Oklahoma — and the continued tax revenues and the continued investments in the state — that we have competitive taxation and competitive economics to continue to draw investments to the state.”
While it’s focused on domestic oil and gas drilling, Lawler hinted Chesapeake could seek opportunities further afield. He said the company’s “high-quality geoscience team” has studied rocks and core samples from major basins around the world. Lawler started his career at Oklahoma City-based Kerr-McGee Corp., which had significant international holdings. He also ran international operations for Anadarko Petroleum Corp. before coming to Chesapeake.
“As we continue to focus on our captured resources in the United States, we have the technical capability, the leadership and operational expertise to extend that in an overseas area,” Lawler said. “I wouldn’t be surprised that in Oklahoma City that you had a company returning to the international area in a few years.”