Chesapeake Energy Plans to Cut 15% of Jobs--2nd Update

By Erin Ailworth And Tess Stynes 

Chesapeake Energy Corp. said it is reducing its workforce by 15% to reduce costs amid low prices for crude and natural gas.

In a regulatory filing Tuesday, the U.S. shale driller said it expects to post third-quarter charges of roughly $55.5 million related to the move.

Because of the swoon in oil prices, Chesapeake has reduced rig operations and cut capital expenditures after failing to offset the plunge with higher production.

Chesapeake, based in Oklahoma City, had about 5,000 employees. Today, 740 of them will be laid off, with about 560 of those positions coming from the home office in Oklahoma, the company said.

"As you are fully aware, the current commodity price environment continues to be a challenge for our industry and for Chesapeake," Chief Executive Doug Lawler wrote in an email to employees. "While this was extremely difficult, we are acting decisively and prudently to enhance the long-term competitiveness and strength of Chesapeake."

Shares of Chesapeake Energy, down 71% over the past year, fell 0.3% to $6.77 in after-hours trading.

Chesapeake is among the U.S. large energy companies that have written down the value of their oil fields this year as a rout in commodities prices has made properties across the country not worth drilling.

In August, Chesapeake posted a deep loss for the second quarter, hurt by a write-down of $4.02 billion on some properties.

Mr. Lawler has been trying to reshape the company since he took the helm in the summer of 2013.

For many years before the global financial crisis, Chesapeake co-founder and then-chief executive Aubrey McClendon borrowed heavily to snap up oil and gas prospects around the U.S. and drill more wells than his rivals. Under his direction, the company's debt load ballooned to more than $16 billion, and shareholders began to fret about his appetite for risk and enthusiasm for spending on borrowed money.

Mr. McClendon left Chesapeake two years ago. Mr. Lawler stepped in and almost immediately began to sell off energy properties from West Virginia to Pennsylvania that weren't core to Chesapeake's business in order to raise money and pay down debt. The boldest deal of this sort came a year ago in October 2014 when Chesapeake struck a $5.38 billion deal to sell a significant piece of itself to rival driller Southwestern Energy Corp.

Mr. Lawler has reined in spending, but plummeting oil and gas prices continued to take a toll on the company, along with many other American energy producers. Today the entire company is valued at less than $5 billion as measured by market capitalization.

Write to Erin Ailworth at [e-mail] and Tess Stynes at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

September 29, 2015 17:37 ET (21:37 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.