Chesapeake Energy (NYSE: CHK) is cutting its presence in North Texas’ Barnett shale.
After a $22 billion cash shortfall due largely in part to natural gas prices arriving at a 10-year low, and amid investigations into CEO Aubrey McClendon’s use of company loans for personal business, Chesapeake is struggling to fix its problems.
The company announced on Tuesday a plan to lay off 70 employees in the Barnett shale play, cutting 8% of its North Texas jobs, Bloomberg Businessweek reported.
After the cuts, Chesapeake will have 700 employees in the region. It also plans to sell its pipeline subsidiary, Chesapeake Midstream Partners, to Global Infrastructure Partners, which would include relocating 60 employees from the Chesapeake Plaza building outside of Fort Worth to the DR Horton Tower in the city.
In 2008, when natural gas prices had peaked, Chesapeake bought its Chesapeake Plaza office for roughly $100 million. Then, the company had 1,200 employees and 44 wells located in the Barnett region.
Now, the 12 wells from the start of this year will be pared down to just 2.
And while Julie Wilson, the vice president of urban development in the Barnett shale at Chesapeake, said in a statement that the company plans to hold on to the Chesapeake Plaza facility, it will still “remain open-minded to any offer that may come in.”
Chesapeake has indicated an intention to return its focus to crude oil. The record low natural gas prices have been a result of the natural gas glut in the U.S. since technology improvements led to efficient and economical shale gas development. Though drilling large amounts of natural gas is still possible, it is not currently profitable for Chesapeake.
The company also has stakes in the Bossier shale and Haynesville shale in Texas and Louisiana and the Marcellus shale in New York, Pennsylvania, West Virginia, and Ohio.
In addition, the company’s CEO is under scrutiny by Ohio’s Attorney General Mike DeWine, the circumstances of which were detailed in a letter to Ohio Citizen Action, an environmental company.
From the Coshocton Tribune:
DeWine’s letter said if Chesapeake is shown to have manipulated core corporate activities to benefit McClendon’s personal interests, shareholders in the company, including Ohio’s retirement systems, might have suffered losses. His office is reviewing retirement system trading data to identify any losses attributable to Chesapeake.
Carl Icahn and other investors have removed McClendon as chairman and will replace a portion of the board following these activities. Company shares have fallen 29.7% in 2012.
Chesapeake shares were up 1.71% on Wednesday afternoon to $19.03.