Chesapeake Energy Corporation (NYSE:CHK) announced that approximately 13% of its workforce would be shed as part of the company’s efforts to push back on stock decline and a quarterly decline in its most recent financial report. Chesapeake Energy’s debt continues to balloon, putting the company in a tough position as its value falls on the stock market. The energy sector in general was tough for most companies in 2017, with petroleum industry layoffs being rather widespread due to the falling price of oil, but Chesapeake has suffered more than most in the current economic climate, prompting these Chesapeake Energy layoffs.
The Chesapeake Energy job cuts are going to affect workers primarily in Oklahoma City. Of the 400 Chesapeake Energy layoffs, 330 of those cuts will come out of the Oklahoma City workforce.
“Over the last couple years, we have divested approximately 25% of our wells, primarily from non-core areas, as a key part of our strategy to reduce debt, enhance margins, and work within our cash flow. While those divestitures resulted in headcount reductions in the field, transition services agreements with buyers of certain assets caused us to not make corresponding staffing changes in Oklahoma City,” said Chesapeake CEO Doug Lawler in an e-mail to employees. “As those transition arrangements have now come to an end, and we continue to see increased efficiencies across the company, we needed to respond accordingly.”
“Chesapeake has proven its resilience and strength and we must continue to structure and position the company for greater success. As you have heard me say repeatedly, transforming a company requires discipline, tough decisions, great talent, and a shared vision and culture,” he continued. “I will be hosting a Town Hall in the coming weeks to discuss our progress and share my confidence in what we are accomplishing – working together as One Chesapeake. Thank you for your commitment and dedication to our company.”
The Chesapeake Energy Oklahoma layoffs follow what has otherwise been a tough year for the company. Chesapeake Energy shares fell dramatically in 2017, and the cuts being made are part of the company’s efforts to reduce its debt and help find a way to recover some of its lost value on the stock market.
When the Chesapeake Energy layoffs were first announced, the company’s value plummeted over five percent by trading day’s end.
Chesapeake Energy Stock Fell Nearly 44%, Debt Rises to $9.9 Billion in 3Q17
While the Chesapeake Energy layoffs may be hard to bear for employees, it’s not exactly as if stockholders have been particularly happy with the company’s performance either.
The recent quarterly result for the third quarter of 2017 showed a company that is taking on an increasing amount of debt, with the total amount having jumped to $9.9 billion in the quarter, compared to $9.7 billion the year before.
The debt continues to grow despite the company making $755.0 million worth of divestitures last year.
Even with the price of oil falling about seven percent over 2017, Chesapeake had an especially bad year; the company was the second-worst performing energy stock on the Energy Select Sector Index. Alongside its recent earnings report, the company also dropped by about 44% on the stock market in 2017.
“Officials: Chesapeake Energy laying off about 400 workers, most in Oklahoma City,” Oklahoma’s News 4, January 30, 2018.
“Chesapeake Energy is dropping after laying off 13% of its workforce,” Business Insider India, January 31, 2018.
“Chesapeake Energy’s Poor Performance in 2017: What’s to Blame?,” Market Realist, January 25, 2018.
“Chesapeake Energy: Great Assets, Too Bad About the Debt,” Barron’s, September 19, 2017.