Chesapeake Business Practices

[chssooner]

I read that as CHK is wanting to acquire companies. Whether it be SW or some other company.

[Pete]

I read that as CHK is wanting to acquire companies. Whether it be SW or some other company.

They are still downsizing.

Down to 688 OKC employees and dropping.

They were once over 5,000.

[PhiAlpha]

They are still downsizing.

Down to 688 OKC employees and dropping.

They were once over 5,000.

Not sure if that’s commentary their ability/potential plans to make an acquisition or just commentary on the current state of the company locally but downsizing staff doesn’t necessarily indicate that they aren’t looking to acquire another company. CHK is in about as good of financial position as it’s been in since 2008 and are extremely bullish longterm on natural gas (especially in the NE and with good reason). Southwestern’s Appalachia and Haynesville assets seem to complement CHK’s pretty well. If it comes to pass, they would likely reclaim the title of largest gas producer in the US from EQT (at least in market cap, not sure of how much the three companies are producing right now). Hope it happens, would be a great deal for OKC, if anything in that it ensures CHK won’t be going anywhere for a while.

[Pete]

Not sure if that’s commentary their ability/potential plans to make an acquisition or just commentary on the current state of the company locally but downsizing staff doesn’t necessarily indicate that they aren’t looking to acquire another company. CHK is in about as good of financial position as it’s been in since 2008 and are extremely bullish longterm on natural gas (especially in the NE and with good reason). Southwestern’s Appalachia and Haynesville assets seem to complement CHK’s pretty well. If it comes to pass, they would likely reclaim the title of largest gas producer in the US from EQT (at least in market cap, not sure of how much the three companies are producing right now). Hope it happens, would be a great deal for OKC.

I know someone who works there and talked to him today; that employee total continues to go down month by month, year by year.

Two people from his department were fired today and they are expecting more later in the year. They have moved out of all the buildings east of Classen.

Not the actions of a company expecting growth.

[PhiAlpha]

I know someone who works there and talked to him today; that employee total continues to go down month by month, year by year.

Two people from his department were fired today and they are expecting more later in the year. They have moved out of all the buildings east of Classen.

Not the actions of a company expecting growth.

I know several people there in the land department. Though I haven’t asked them directly about SWN, they have been actively evaluating acquisition targets. All the news stories today didn’t appear for no reason.

They could just as easily be acquired but you don’t need to staff up to make an acquisition like that (just look at Devon who was also shrinking and laying people off then essentially acquired WPX). Most of the heavy M&A lifting is done by outside consultanting firms and contractors (I’ve been involved in a ton of these on the consultant side for tiny companies, headcount wise, buying out larger ones). If they’re planning to acquire SWN, which is a fairly good size company, they will have a bunch of overlapping employees that work the same assets as well as administrative employees that they would most likely absorb in that type of deal. Could very easily be reducing staff that they don’t need in their current state and assume that if a large scale acquisition like that goes through, they’ll have their pick of employees from the other company who, as a bonus, are familiar with that company’s history with its asset base. They also may have been letting any remaining personnel related to their Eagleford assets go since they finalized their exit from that play back in August after multiple sales this year.

This could easily go either way but given that they just banked $3.5 billion in cash from their Eagleford exit this year (which is about half the market cap of SWN), I wouldn’t be at all surprised to see them make a big splash. I guarantee any debt that remained after the bankruptcy in 2020/2021 was refinanced at near 0 interest rates so that debt is cheap and not really a liability anymore (ie they wouldn’t be in a huge hurry to pay it down with the asset sale proceeds). Their plan since last year has been to reduce their oil production in favor of more natural gas, so selling out of the Eagleford and purchasing a large complementary gas producer like SWN would fit that plan.

I’ll ask around my circles and see what I can find out.