The Journal Record - Article

Chesapeake sends workers to OKC office
by Marie Price
The Journal Record February 27, 2009

OKLAHOMA CITY – Chesapeake Energy Corp. is reorganizing its Eastern Division, based in Charleston, W. Va., from a regional corporate headquarters to a regional field office, consolidating management of most of its departments into the company’s Oklahoma City headquarters.

Chesapeake said Thursday that about 215 of the 255 Charleston workers will either be moved to Oklahoma City or eliminated. Severance packages and employment outplacement services will be provided to affected workers.Company officials said the main reason for the move is to merge certain functions for Chesapeake’s Marcellus Shale program.

Chesapeake CEO Aubrey McClendon said consolidating key positions in Oklahoma City dedicated to developing the Marcellus Shale “will enable us to more aggressively and efficiently implement our exploration and production program across the region.”

McClendon said a separate factor leading to reduction in the company’s West Virginia presence was its decision last year not to build a $40 million regional headquarters in Charleston after the West Virginia Supreme Court refused to consider Chesapeake’s appeal in a court case.

The jury in Tawney v. Columbia Natural Resources awarded the plaintiffs in the case $404.3 million, including $270 million in punitive damages.

“At that time, we realized that until West Virginia’s judicial system provides fair and unbiased access to its courts for everyone, a prudent company must be very cautious in committing further resources in the state,” McClendon said.

Tawney was a class-action lawsuit regarding royalties. Chesapeake acquired Columbia Natural Resources four years ago for $2.2 billion.

McClendon said the court’s ruling was not the primary reason for the reorganization, but played a significant role in Chesapeake’s decision.

Management of the eastern division’s land, legal, accounting, information technology, geoscience and engineering department will move to Oklahoma City. Corporate development, midstream and some human resources and land functions will remain in Charleston.

Chief Operating Officer Stephen C. Dixon said moving key disciplines to Oklahoma City will provide some cost savings over time, but will mainly help Chesapeake more quickly develop the potential of the Marcellus Shale.

“The management structure utilized in our other major shale plays – the Barnett, the Fayetteville and the Haynesville – has proven to be very successful,” Dixon said. “We believe that the collaboration afforded by having our teams of landmen, geoscientists, engineers and senior management working in close proximity on our Oklahoma City campus will promote quicker and improved decision making and improve execution and responsiveness as we move forward with the nation’s highest-potential drilling program.”

He said that is particularly important and timely due to the need to ramp up activity in the Marcellus Shale under Chesapeake’s $3.375 billion joint venture with StatoillHydro.

Martha A Burger, senior vice president of human and corporate resources, said Chesapeake has been considering the reorganization as tightening credit markets and dropping energy prices have dictated a cut in capital spending and elimination of cost redundancies.

She said Chesapeake will still have more than 400 employees in West Virginia after the change, which the company expects to complete by June 30.