In the midst of layoffs, Chesapeake Energy Corp. Chairman Archie Dunham on Thursday praised CEO Doug Lawler for his efforts to streamline the company.
“I think it's very positive he's reaching out and talking to all the leaders in the organization to determine who our best leaders are, our most capable leaders, people with the highest potential in the company,” Dunham said. “I have all the confidence in the world and the board is totally confident in his leadership and what's taking place.”
Dunham was in Oklahoma City on Thursday for a Chesapeake board meeting and to speak at the Oilfield Prayer Breakfast.
“It's really hard when you're going through a tunnel of change to see the light at the end of the tunnel,” he said. “I think Doug has acted very aggressively to move forward to try to get the company through the tunnel as quickly as possible.”
“It's clearly the situation where we have way too many people, we have way too many members of management, we have too many layers of management and too narrow spans of control,” Dunham said.
A Chesapeake spokesman Thursday confirmed that there have been some layoffs, but details were not provided.
In an internal email, Lawler said Tuesday that “future staffing adjustments will likely be necessary to properly align resources and improve our overall operating and competitive performance.”
He said the company is conducting an internal review, which is expected to be complete by Nov. 1.
More layoffs expected
Chesapeake executives have not indicated how many people are likely to lose their jobs.
The company confirmed Thursday that some laid-off employees have received Worker Adjustment and Retraining Notification Act (WARN) notices.
The notices are required when a company eliminates either one-third of its employee base in a community or at least 500 people. Chesapeake had more than 4,700 employees in Oklahoma City as of Jan. 31, according to a report it provided to the city in March.
Chesapeake has not yet filed a WARN notice with the Oklahoma Department of Commerce, indicating it has not yet reached the trigger amount.
Don Hackler, an attorney at the state Commerce Department, said he is not familiar with Chesapeake's situation, but that companies sometimes issue WARN notices to employees if they think the total number of layoffs in a 90-day period could reach the required amount.
“If they have phased layoffs and if the phased layoffs total 500, that would trigger the act,” Hackler said.
Chesapeake executives tightened their focus on reducing costs and increasing profits last year after a shareholder revolt forced the company to replace most of its directors. Dunham took over the company's board in June 2012.
Chesapeake executives repeatedly have said in recent months that the company is moving to a focus on developing existing assets instead of the previous focus on acquiring land.
Dunham on Thursday reiterated the company's focus, but said it wants to build on the company's success under co-founder Aubrey McClendon, who left Chesapeake in April.
“Aubrey did a great job,” Dunham said. “History is going to say he was a pioneer in the shale business. They were able to capture the 15 to 17 million acres of the core of the core before the CEOs of the major oil companies woke up and had breakfast. That's an attribute we want to keep — that speed, being there first, getting the sweet spot in all those plays.”
When the changes are complete, Chesapeake will operate much more efficiently, Dunham said.
“I'm absolutely convinced we're going to have a world-class, low-cost, highly efficient company,” Dunham said.
Industry analyst Fadel Gheit said Wall Street is paying attention to the changes.
“It's a new man and a new strategy,” said Gheit, an analyst with Oppenheimer and Co. in New York. “We expect sweeping changes and extreme makeover. The goal is to simplify the balance sheet, emphasize returns and profitable growth, with focus on profit more than growth. We expect a leaner and more efficient company with a much simpler structure. Investors have cheered the change and boosted the stock performance as they expect more changes.”
Chesapeake shares slipped 40 cents, or 1.4 percent, Thursday to close at $26.90 on the New York Stock Exchange. The stock price is up 29 percent since Lawler became CEO on June 17.
By the numbers
Chesapeake has rapidly increased employment in recent years, reaching a peak last year of about 13,000 workers, up from about 4,900 in 2006, according to regulatory filings.
About 1,250 Chesapeake employees last year became Access Midstream Partners employees following the company spin off. Chesapeake still reported 12,000 employees this spring.
Like many large Oklahoma employers, Chesapeake has received millions of dollars in incentives for creating jobs.
Since 2007, Chesapeake has received more than $28.8 million from the state Quality Jobs program. With $8.27 million in the most recent fiscal year, Chesapeake received more Quality Jobs money than any other company in the state.
The company also has received more than $1.9 million over the past two years from Oklahoma City's General Obligation Limited Tax (GOLT) bond program. Chesapeake is due to receive up to another $1.5 million.
If Chesapeake's annual average Oklahoma City employment drops below 3,984, the company would forgo the remaining GOLT money, said Brent Bryant, Oklahoma City's economic development program manager.
CONTRIBUTING: Paul Monies, Business Writer