Natural Gas Giant Chesapeake Begins Layoffs

By Irina Slav - May 21, 2024  oilprice.com

Chesapeake Energy this week started laying off employees following the divestment of its assets in the Eagle Ford play, Reuters reported, citing the company.

Also according to the company, the layoffs had nothing to do with its $7.4-billion merger with Southwestern Energy.

Chesapeake Energy, which went through bankruptcy in 2020 when oil and gas prices crashed, has been solidifying in the past year its strategic focus on its gas assets in the Marcellus shale in Appalachia and in the Haynesville shale play in Louisiana while reducing its Eagle Ford position where it held oil assets.

Reports of a Chesapeake-Southwestern merger first surfaced in the autumn of 2023 as the U.S. shale patch began a new major consolidation phase that saw U.S. supermajors Exxon and Chevron each announce large acquisitions valued at over $50 billion.

The merger between Chesapeake and Southwestern will create the largest natural gas production company in the United States in terms of both output and market value. Ahead of the deal, Chesapeake sold $1.4 billion worth of Eagle Ford assets to Ineos Energy and another $700 million worth of assets in the shale play to SilverBow Resources.

Chesapeake reported robust financial figures for 2023, with the net result at a respectable $2.4 billion, down from $3.5 billion in 2022. This year, however, has been weaker because of the slump in U.S. natural gas prices. As a result, Chesapeake missed analyst expectations for its first-quarter results—hardly a surprise when natural gas prices shed 20% during that same quarter.

In response to the slump in prices, Chesapeake was among natural gas producers that said they would reduce production.

“Given current market dynamics, the company plans to defer placing wells on production while reducing rig and completion activity,” Chesapeake said in February.

“The company will drop a rig in the Haynesville and Marcellus in March and around mid-year, respectively, and a frac crew in each basin in March. These activity levels will be maintained through year end,” Chesapeake also said at the time.

By Irina Slav for Oilprice.com