Chesapeake Energy (CHK) stock has been crushed the last few days. The same goes for Range Resources (RRC) and Southwestern Energy (SWN), one of our top picks right now.
This all comes despite natural gas fundamentals recovering. We suspect SWN and RRC may follow suit, but for now Chesapeake says it will lay off ~13% of its workforce, or ~400 workers, primarily at its Oklahoma City headquarters.
Noting that the company’s two-year selloff of 25% of its wells resulted in headcount reductions in the field, “transition services agreements with buyers of certain assets caused us to not make corresponding staffing changes in Oklahoma City,” CEO Doug Lawler said in a memo to employees.
“As those transition arrangements have now come to an end, and we continue to see increased efficiencies across the company, we needed to respond accordingly.”
This is not the first wave of expense slashing on the labor side either:
CHK cut 740 employees, including ~19% of its Oklahoma City employees, in 2015.
Quad 7 Capital is taking a contrarian view on this sector and recommends accumulation.