Chesapeake Energy, a leading natural gas producer in the U.S., started laying off employees this week, not because of its pending multibillion-dollar merger with Southwestern Energy but because of its divestment of Eagle Ford assets, as announced by the company on Monday.
The natural gas giant laid off 80 employees, about 10% of its workforce, after selling its crude oil holdings last year as part of the previously announced divestment plan.
Chesapeake Exiting The Eagle Ford in Texas
Chesapeake announced its exit from the Eagle Ford shale field in South Texas in 2022 to become a pure-play natural gas producer, sold some assets to INEOS Energy for $1.4 billion in 2023, and completed the divestiture by selling the remaining assets to SilverBow Resources for $700 million later that year.
Natural Gas Producers Challenges Over Pricing
Trade publication Offshore Technology reported that natural gas producers, including Chesapeake Energy, have faced challenges this year due to low prices as another possible reason for the layoffs, where Chesapeake Energy had a 20% price drop in the first quarter due to high inventories and weaker-than-expected demand, missing Wall Street's profit estimates, and, like many in the industry, has scaled back production.
According to a regulatory filing on May 7, as part of the merger, current general counsel Benjamin Russ will be replaced with Southwestern general counsel Chris Lacy.
Chesapeake Energy Merger with Southwestern Energy
The Oklahoma City-based company is finalizing a $7.4 billion merger with Southwestern Energy, which is expected to close in the second half of the year after being delayed when the U.S. Federal Trade Commission requested additional information.
Chesapeake's multi-billion deal with Southwestern Energy will form the biggest natural gas producer in the U.S. As announced earlier this year, the company will adopt a new name once the deal is finalized.
Nick Dell'Osso, Chesapeake's current president and CEO, will continue in that role with the merged Oklahoma-based company. The company will also keep its offices in suburban Houston.
Neither Chesapeake nor Southwestern indicated how merging resources would impact staffing, but Chesapeake emphasized that the new company would refocus on its roots in natural gas. In a news release, Dell'Osso stated that the merger would significantly transform the natural gas industry, establishing the first U.S.-based independent company capable of competing globally. The merger will provide access to a substantial inventory of strategic assets near high-demand markets, enabling the implementation of proven operational strategies and leveraging an investment-grade balance sheet to generate substantial synergies that will benefit both energy consumers and shareholders.
Dell'Osso also emphasizes the increasing demand for domestic and international energy products and highlights the company's ability to provide natural gas at a lower cost, thereby advancing America's energy goals and promoting a more affordable, reliable, and environmentally friendly future. Dell'Osso expresses anticipation for leading the combined organization's skilled workforce to enhance long-term value for shareholders, employees, and stakeholders.
