Chesapeake Energy Corp. said Friday it will offer buyouts to 275 employees, the third round of staff cuts the company has made in six months as it struggles to keep costs in line amid low natural gas prices.
The buyouts come as Chesapeake and other natural gas producers struggle with stubbornly low prices. A technology-driven drilling boom has ballooned natural gas supply while recent mild winter temperatures have curbed demand.
Natural-gas futures were lower for the seventh day Friday as lingering warm weather in the Midwest and the eastern U.S. continues to shrink demand for gas-fueled home heating and swells inventories. Natural gas was selling for $3.29 a million British thermal units, a 9.5% slide over the prior six days and the longest drop since January.
Chesapeake, the second-largest natural gas producer after Exxon Mobil Corp., has been particularly hard hit by low natural gas prices as the company makes an expensive move to produce more oil, which is more profitable than natural gas. The company has sold nearly $11 billion in assets in 2012 but continues to hold $10.8 billion in debt after years of acquiring acreage.
The buyouts further "our efforts to maximize corporate performance and maintain our leadership role in this competitive and constantly evolving industry," said Martha Burger, Chesapeake's senior vice president of human and corporate resources said in a statement.
The move could also have been prompted by Chesapeake not meeting its desired price for the pipeline and midstream assets it recently sold, said Phil Weiss, analyst at Argus Research. Chesapeake reported asset sales to Access Midstream Partners LP and Plains All American Pipeline LP earlier this week for about $2.3 billion, slightly below some analysts' expectations.
"It could be a combination of things," Mr. Weiss said. "But if buyers are striking harder bargains--if you get less proceeds from your sales--you have to cut someplace else."
Employees taking the buyout would leave Chesapeake in February, the company said. The buyouts would remove about 2% of Chesapeake's staff of nearly 12,500 people.
In June, the company in June laid off 70 workers in Fort Worth, Texas, the first cuts since 2009. In August, it confirmed that it plans to sell the glass-and-granite high-rise that has served as its Barnett shale headquarters.
In November, Chesapeake laid off 115 workers at a subsidiary in West Virginia as it relocated operations to Ohio, where its drilling is more profitable; it hired back 43 of those workers.
Daniel Gilbert contributed to this article.
Copyright (c) 2012 Dow Jones & Company, Inc.
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