WV Gazette
26 February 2009
By Eric Eyre, Staff writer
CHARLESTON, W.Va. -- Chesapeake Energy Corp. is eliminating 215 jobs in Charleston, the company announced today.
Chesapeake blamed the decision on a sharp decline in natural gas prices and last year's multimillion-dollar jury verdict against the company in a Roane County royalties' case.
Some Chesapeake employees are moving to the company's corporate headquarters in Oklahoma City. Others will be laid off, but will receive severance packages.
Chesapeake officials notified employees about the natural gas company's reorganization and downsizing earlier this morning.
"It's a tough business in a tough economic environment," said Chesapeake's West Virginia spokesman Scott Rotruck, who plans to move to Oklahoma City. "This is all driven by operational efficiency."
Chesapeake employees losing their jobs or being transferred to Oklahoma City include those who work in the Charleston regional office's land, legal, accounting, information technology, geoscience and engineering departments.
Rotruck said he was unsure how many Charleston employees would move to Oklahoma City and how many would lose their jobs outright.
About 40 Chesapeake workers - mostly in the company's corporate development and human resource divisions -- are expected to stay in Charleston at City Center West, an office tower near the Interstate 64/Interstate 77 split.
The office had served as Chesapeake's eastern division headquarters. It will be known now as a company regional field office.
The reorganization is expected to be completed by June 30.
"It's a broken promise to the people of West Virginia," said Kanawha County Commission President Kent Carper. "We need to start making those who make a fortune off our natural resources pay for it and stay here."
Chesapeake, the largest producer of natural gas in the U.S., has slashed spending and reduced its capital budget for 2009, the result of a string of negative economic news concerning the company.
"While this move will provide some cost savings over time, the most significant driver of the decision announced today is to optimize our perational performance," said Steven Dixon, Chesapeake's chief operating officer.
Martha Burger, Chesapeake's vice president of human resources, said declining energy prices and tightening credit markets have forced the company to reduce capital spending and lower costs.
Chesapeake will continue to employ about 400 workers in West Virginia after the transfers and layoffs, Burger said. Field operations -- drilling and the like -- will not be affected by the reorganization, the company said.
"We expect to remain a major economic player in the state and region for years to come," Burger said. "We are keenly aware, however, this decision will create hardship for some of our Charleston-based employees. And we will work closely with them to make the transition as smooth as possible."
Last year's multimillion-dollar jury verdict against Chesapeake in a natural gas royalties' case -- and the state Supreme Court's refusal to hear the company's appeal -- has dogged the Charleston-based eastern division's clout with Chesapeake's corporate offices in Oklahoma City.
Last spring, Chesapeake nixed plans to build a $40 million regional headquarters at the NorthGate Business Park in Charleston.
At the time, the company cited the state Supreme Court ruling for its decision.
"Had the Supreme Court heard our appeal, we probably would have built the building," Rotruck said Thursday. "And had we built that building, we'd likely still be here. You wouldn't walk away from a $40 million building."
In May, the state Supreme Court voted 5-0 to deny a request for an appeal from Chesapeake and NiSource, upholding a Roane County jury verdict that required the gas companies to pay $405 million in royalties and punitive damages to landowners who were allegedly cheated.
Chesapeake Energy Chief Executive Officer Aubrey McClendon fumed at the time, saying West Virginia deserved its reputation as a "judicial hellhole." McClendon also threatened to move the eastern division office to Pittsburgh, according to an e-mail sent to the governor's office.
Chesapeake became a defendant in the class-action case after buying Columbia Natural Resources in 2005..
In October, Chesapeake and NiSource agreed to pay $380 million to the landowners and drop their appeals as part of the settlement.
On Thursday, McClendon reiterated his displeasure with the state Supreme Court and Roane County verdict -- known as the Tawney case.
"The reduction in our employee base in West Virginia became inevitable when we decided last year not to build our $40 million regional headquarters office complex in Charleston following the West Virginia Supreme Court's refusal to consider our appeal in the Tawney case," McClendon said. "Even though the state Supreme Court's decision was not the primary reason for the reorganization, it did play a significant role in our decision."
Chesapeake's Appalachian Basin operations stretch from the Finger Lakes region of southern New York to central Alabama.
Chesapeake's stock plunged from a high of $74 last summer to a five-year low of $9.84 in early December. The company's shares were trading at $16.32 today.
In a statement, Gov. Joe Manchin called Chesapeake's decision "heartbreaking for those who will lose their jobs and for our entire state."
"West Virginia is still a great location for business," Manchin said. "However, all companies, large and small, are doing everything they can to sustain themselves through this national recession, and this cutback by Chesapeake is that type of decision. I understand they want to maximize their efficiencies by moving some of these jobs back to their Oklahoma headquarters."