Chesapeake Energy Corp. on Friday offered buyouts to 275 employees based on a combination of age and years of Chesapeake service.
Eligible employees will have 45 days to consider the offer, the company said.
“This program is designed to give our longer-term employees the chance to benefit from their years of service to Chesapeake while furthering our efforts to maximize corporate performance and maintain our leadership role in this competitive and constantly evolving industry,” said Martha A. Burger, Chesapeake's senior vice president of human and corporate relations.
Chesapeake has been under intense scrutiny from investors and analysts throughout much of the year because of high debt levels and reduced cash flow from lower natural gas prices.
Chesapeake employs about 13,200 people nationwide and more than 4,800 in Oklahoma City.
Industry analyst Fadel Gheit said the reduction makes sense now that the company has moved into what CEO Aubrey McClendon has called “harvest mode” instead of its previous expansion mode.
“I'd expect Chesapeake to become a smaller, leaner company because they are shedding a lot of assets,” said Gheit, an analyst with Oppenheimer in New York. “You have to have the head count be reflective of the activity level. If activity drops, the head count will have to drop, too.”
Chesapeake previously announced $11.1 billion in asset sales to close this year and another $425 million to close in the first quarter of 2013. The company has said it plans to sell $14 billion in 2012 and a total of $17 billion to $19 billion by the end of 2013.
“Definitely they don't need as many people as you thought they would need given that they are selling substantial activities,” Gheit said.
Friday's announcement comes after Chesapeake announced earlier this year that it planned to eliminate thousands of contract landmen. McClendon said in July that the company's use of contracted landmen would drop to 650 by the end of the year, down 80 percent from a peak of 3,400.
Chesapeake in June said it would cut 70 positions, or about 8 percent of its North Texas workforce, as drilling in the natural gas-rich Barnett Shale slowed.
Gheit and analyst Phillip Weiss both said the cutbacks make sense, but that they had expected Chesapeake's directors first to release their long-awaited internal investigation of McClendon's personal finances.
Archie Dunham, who in June was named Chesapeake's chairman, said at the time that he expected the findings from the investigation to be released within 90 days. That self-imposed deadline passed more than two months ago.
“We have a new chairman and new guys on the board, but we've heard nothing,” Weiss, an analyst with Argus in New York, said Friday.
Weiss said more cuts could follow.
“It wouldn't surprise me, but it's hard to know because the company hasn't said much,” he said. “We have no formal guidance. Several companies I follow have put out 2013 budgets, but we haven't heard from Chesapeake.”
Dunham in June said the board's review will include comparing Chesapeake's spending and staffing levels with competitors like Anadarko Petroleum Corp. or Devon Energy Corp.
The market capitalization for both of those companies is more than twice that of Chesapeake's, which employs more people than Anadarko and Devon combined.
“Unlike the federal government, which never reduces staff, public companies have to reduce staff, have to cut costs, have to sell assets during different times in the history of the company in order to remain viable,” he said in a June interview with The Oklahoman. “I think the experience of all the board members in doing that at various times in their careers will help us make the right decisions on the assets that need to be sold and the right decisions around the cost structure of the company.”