After laying off about 800 people last week, Chesapeake Energy Corp. has set its focus on the company's future.
“I see in the future a lot of really great things for the company, and I'm very excited about it. I believe we have all the right elements in place to be a sustainable, strong, growing enterprise,” Chesapeake CEO Doug Lawler told The Oklahoman on Tuesday.
Despite proclaiming an end to the uncertainty over the recent layoffs, Lawler left open the possibility of additional changes.
“I see going forward that, as we've stated publicly, that there could potentially be additional asset sales, and for performance purposes, there might be additional impacts to personnel. But this transformation process and what's associated with it is over,” he said.
In general, however, Lawler stressed that he expects the company to grow in the future.
“When I say there could potentially be other people leave the company, I also want to note that it would just be in the normal course of business,” he said. “Also, we're a growth company. We are not a harvest company. We're a company that is going to be a strong and vibrant part of the community for a long time. I used the word ‘decades' because of my confidence in it.”
Overall Chesapeake has shed about 1,200 jobs nationwide since the first of the year, Lawler said. The number includes layoffs and attrition.
The cuts were widely expected after a shareholder-led revolt last year replaced most of the company's directors, who then ousted co-founder Aubrey McClendon as CEO.
“ ... bigger than I thought.”
The specter of job losses lingered at Chesapeake for months, said one of the employees who was laid off this week. He spoke on condition of anonymity to protect his severance package. After layoffs, companies often include clauses in severance agreements that prevent employees from disparaging the company or discussing company affairs.
He noted Chairman Archie Dunham said the company was too big when he joined the board last summer.
“Everyone knew cuts were coming,” he said. “But the size (of cuts) in my department was vastly bigger than I thought.”
He said he was disappointed to lose his job Tuesday because he liked it and did it well. He has some other job prospects, but he may be forced to leave Oklahoma City to find work.
He is leaning toward going to Colorado, but predicted many of his former colleagues may end up in Houston.
“That's a pretty significant flight of good jobs from the city,” he said.
He said the culture at Chesapeake changed once co-founder Aubrey McClendon left in April, shifting the overall mood from idealism to cynicism.
“We thought we were part of something big before he left,” he said. “After the ouster, everyone knew it was just another energy company.”
Lawler said Tuesday he and the rest of Chesapeake's leadership team are working to improve morale within the company.
“What we need to do is focus on the future, focus on how we can be more profitable and more competitive. With the right strategy in place, which I believe we have, the employees will align around that,” Lawler said. “With the support of the board and the support of the employees, with this strategy, I believe we will be very successful.”
“Now it's time to look forward to the horizon and look forward to becoming and achieving the full potential of Chesapeake,” he said.
Chesapeake's efforts this week have drawn a mixed reaction on Wall Street.
Chesapeake shares closed at $26.47 Friday, up 1.8 percent since Tuesday's layoff announcements on a volatile week for Wall Street. Chesapeake shares are up more than 27 percent since May 20 when Lawler was named CEO.
Amir Arif, an analyst for Stifel Financial Corp, on Friday downgraded the company's stock to hold from buy because of “expectations for no production growth heading into 2014, and a view that ongoing efficiency improvements and additional potential noncore asset sales will not add enough meaningful upside potential to the stock.”
Analyst Fadel Gheit has praised the company's efforts, but said he expects more changes.
“Chesapeake is under new management, with a new mandate and a new business strategy,” said Gheit, an analyst with Oppenheimer and Co. in New York. “Staff reductions reflect these changes and are central to implementing the new strategy. We expect more changes in the next few months.”
Specifically, Gheit said he expects more asset sales, more debt reduction, lower capital spending and further staff reductions.