Oil and gas producer Chesapeake Energy Corp. (NYSE: CHK) has fired about 400 employees Tuesday, according to reports. That number represented approximately 13% of the company’s total. Most of the people who were let go worked at Chesapeake’s Oklahoma City headquarters.
Shares, which normally trade at around a daily average of 27 million, had traded over 44 million by mid-afternoon. The share price fell by about 6.7% to a low of $3.62.
In a letter to employees cited at MarketWatch, CEO Doug Lawler said:
The decision to reduce head count did not come easily for the leadership team. Dedicated, value-driven, hardworking people have been affected. You have my personal assurance that we are treating these employees fairly, respectfully, and with considerable effort to assist them with their personal and career transition.
Chesapeake has been struggling for years with a long-term debt pile that totaled $9.9 billion at the end of the third quarter of 2017, down from $9.94 billion at the end of 2016. But that rate of decline is not fast enough to lower the company’s debt service, and persistently low prices for natural gas have not helped the company out either.
In 2008, Chesapeake stock traded as high as $70 a share, and even five years later when its former CEO was the late Aubrey McClendon, shares traded at near $20. But low prices and crushing debt simply won’t turn Chesapeake loose.
There aren’t that many more ways for the company to cut costs and still maintain some cash flow from its oil and gas production. After today’s purge, Chesapeake has about 2,900 employees.
Shares traded at around $3.66 Tuesday afternoon, in a 52-week range of $3.41 to $6.65. The stock’s 12-month price target is $4.49.