Chesapeake Business Practices

[CCOKC]

I get an email every Friday advertising accounting jobs across the country. Chesapeake is on that list a lot including yesterday.

[PhiAlpha]

That's just it though. A friend of mine who used to work there said they went from running 160 rigs a year to about 68 now. That's a lot of Land people that you don't need anymore.

True but that's also a lot of engineers and geologists that you don't need anymore either. If they plan to keep that small of drilling program there will be layoffs across the board.

[PWitty]

True but that's also a lot of engineers and geologists that you don't need anymore either. If they plan to keep that small of drilling program there will be layoffs across the board.

I don't see how that is true. The drilling engineers may not be needed as much as previously, but the production/completion engineers, reservoir engineers, and geologists still have plenty to do even with the drop in rig count. Now instead of churning out new wells assembly line style, and all the engineers and geologists needing to be on board to keep up with that schedule, they can have those same engineers and geologists start looking at efficiency studies and analyzing new formations in tracts of land they already own. Such as the optimal number of frac stages to maximize production, amount or type of proppant used, optimal well spacing, potential for production in nearby zones/formations, continually updating reserve estimates, etc. There is a lot more that goes on than just drilling wells on the engineering/geology side.

And I'll point out that CHK's planned drilling program is by no means small. It may be a lot smaller than it used to be, but they still have one of the largest drilling programs in the US.

I have a friend who works for ConocoPhillips down in Houston and he was telling me about how crazy busy things have been for the engineers working in the eagleford, which is the area he is working in. He said they had 8 rigs running down there at the time. Even with CHK's dropped rig count they still have about 20 rigs running in the eagleford, according to one of their last investor presentations. Just some perspective.

[WilliamTell]

Landmen arent a real technical trades like engineers and geologist, thats why companies hold onto those positions during downturns. Landmen are salesmen, where you have a couple of all stars but most are interchangeable with the next guy in line. I know people who got hired as landmen who failed out of college or went on to graduate in hotel and restaurant hospitality from OSU.

[PhiAlpha]

Landmen arent a real technical trades like engineers and geologist, thats why companies hold onto those positions during downturns. Landmen are salesmen, where you have a couple of all stars but most are interchangeable with the next guy in line. I know people who got hired as landmen who failed out of college or went on to graduate in hotel and restaurant hospitality from OSU.

Whoa there tiger, it depends on the type landman. They may not be technical employees, but they are not salesmen and most do not function in that capacity in-house. The sales portion, leasing, is usually taken care of by contracted field landmen that do not need a degree or any relevant experience to start a career and are more or less interchangeable. Field landmen that specialize in title are far less interchangeable as a working knowledge of state laws for any state youre working in is required, especailly by those in a supervisor role. Inhouse landmen, especailly those with 5 or more years experience are not anymore interchangeable than engineers and geologist. It may not be a technical knowledge, but a very detailed understanding of state laws and regulations is required for every entity you have to work with, whether that be states, BLM, Native American lands, etc. You can't just drop a random person into a position like that and say go. It's also important to have a very detailed knowledge of and good relationship with other companies, attorneys and landowners you have to deal with on a daily basis. Landmen are the PR face of the company with these entities. A working knowledge of the geology, GIS and engineering processes involved in the area you're working is also very important, it sometimes takes years to build up that kind of knowledge. So while landmen don't have a technical role, they do play a crucial part in every oil and gas company and a good one, just like a good engineer or geologist, is not interchangeable with someone hired off the street or without the experience to fill the role. There is a reason company landmen are paid nearly as well as (or in some cases much more than) geologists and engineers (I have seen company wide salary sheets and starting salary stats that back that statement up), it is far from easy work and requires a different type of skill to do it.

CHK's problem is that they hired way too many landmen in proportion to everything else to manage all of the field people they were hiring during the land grab, and the huge amount of wells they were drilling among other things. They also divided out the tasks that one landman may do for a small company into many different positions that people are pidgeon holed into. My friends that work for Devon would always joke about CHK saying that they had twice the assets (at least as reflected in their market caps) and half the employees...that is the core of CHK's overemployment issue. Too many people that are doing work that one person is handling elsewhere.

[PhiAlpha]

I don't see how that is true. The drilling engineers may not be needed as much as previously, but the production/completion engineers, reservoir engineers, and geologists still have plenty to do even with the drop in rig count. Now instead of churning out new wells assembly line style, and all the engineers and geologists needing to be on board to keep up with that schedule, they can have those same engineers and geologists start looking at efficiency studies and analyzing new formations in tracts of land they already own. Such as the optimal number of frac stages to maximize production, amount or type of proppant used, optimal well spacing, potential for production in nearby zones/formations, continually updating reserve estimates, etc. There is a lot more that goes on than just drilling wells on the engineering/geology side.

And I'll point out that CHK's planned drilling program is by no means small. It may be a lot smaller than it used to be, but they still have one of the largest drilling programs in the US.

I have a friend who works for ConocoPhillips down in Houston and he was telling me about how crazy busy things have been for the engineers working in the eagleford, which is the area he is working in. He said they had 8 rigs running down there at the time. Even with CHK's dropped rig count they still have about 20 rigs running in the eagleford, according to one of their last investor presentations. Just some perspective.

It takes just as many or more landmen as it does geologists and production/operations engineers to handle an district, even one that isn't that active. There are many maintainence tasks on the land side as well for producing properties. Generally fewer reservoir and drilling engineers are needed as they often work across districts. I still stand by what I said, you don't need as many drilling or reservoir engineers in general, but you don't need as many production/operations engineers or geologists if you are drilling far fewer wells. These are generalizations based on how all the companies I've worked with are set up but it generally holds true.

The issues for land start when companies like CHK try to vertically integrate every aspect of the land business and hire way too many In house land people to handle an tasks in an aquisition period and splitting off tasks that one person could handle thus creating new, sometimes unnesessary positions.

I will add that I agree with you, a 68 rig drilling program is still massive. At an average drilling time of a month per well(give or take) that figures out to be around 850 wells a year, which is still a ton of wells.

[PWitty]

It takes just as many or more landmen as it does geologists and production/operations engineers to handle an district, even one that isn't that active. There are many maintainence tasks on the land side as well for producing properties. Generally fewer reservoir and drilling engineers are needed as they often work across districts. I still stand by what I said, you don't need as many drilling or reservoir engineers in general, but you don't need as many production/operations engineers or geologists if you are drilling far fewer wells. These are generalizations based on how all the companies I've worked with are set up but it generally holds true.

The issues for land start when companies like CHK try to vertically integrate every aspect of the land business and hire way too many In house land people to handle an tasks in an aquisition period and splitting off tasks that one person could handle thus creating new, sometimes unnesessary positions.

I will add that I agree with you, a 68 rig drilling program is still massive. At an average drilling time of a month per well(give or take) that figures out to be around 850 wells a year, which is still a ton of wells.

CHK seems to be a unique situation though, because asset wise they have some of the best assets in the business. The problem is/was that when Aubrey was there they devoted all their money to buying up new land and drilling a HUGE number of wells, even though they didn't have the cash to pay for it, so they could hold all their new acreage with production. Because of this they never even really got a chance to begin DEVELOPING their acreage in the way that most E&P companies do. My point was that now that the development phase is underway, even if they are drilling less wells, this is when the engineering positions are actually put to good use.

Like I said earlier in the thread, I've also heard that they are still actively hiring new engineers. This is another reason I have a hard time seeing any significant reduction in the number of engineering positions. It would just seem counter intuitive for them to hire new engineers if they know they're about to let engineers go.

[Libbymin]

Whoa there tiger, it depends on the type landman. They may not be technical employees, but they are not salesmen and most do not function in that capacity in-house. The sales portion, leasing, is usually taken care of by contracted field landmen that do not need a degree or any relevant experience to start a career and are more or less interchangeable. Field landmen that specialize in title are far less interchangeable as a working knowledge of state laws for any state youre working in is required, especailly by those in a supervisor role. Inhouse landmen, especailly those with 5 or more years experience are not anymore interchangeable than engineers and geologist. It may not be a technical knowledge, but a very detailed understanding of state laws and regulations is required for every entity you have to work with, whether that be states, BLM, Native American lands, etc. You can't just drop a random person into a position like that and say go. It's also important to have a very detailed knowledge of and good relationship with other companies, attorneys and landowners you have to deal with on a daily basis. Landmen are the PR face of the company with these entities. A working knowledge of the geology, GIS and engineering processes involved in the area you're working is also very important, it sometimes takes years to build up that kind of knowledge. So while landmen don't have a technical role, they do play a crucial part in every oil and gas company and a good one, just like a good engineer or geologist, is not interchangeable with someone hired off the street or without the experience to fill the role. There is a reason company landmen are paid nearly as well as (or in some cases much more than) geologists and engineers (I have seen company wide salary sheets and starting salary stats that back that statement up), it is far from easy work and requires a different type of skill to do it.

CHK's problem is that they hired way too many landmen in proportion to everything else to manage all of the field people they were hiring during the land grab, and the huge amount of wells they were drilling among other things. They also divided out the tasks that one landman may do for a small company into many different positions that people are pidgeon holed into. My friends that work for Devon would always joke about CHK saying that they had twice the assets (at least as reflected in their market caps) and half the employees...that is the core of CHK's overemployment issue. Too many people that are doing work that one person is handling elsewhere.

I've heard this too from people who work there who ended up leaving. Other people think you'd have to be crazy to leave a place like CHK where the pay is so good and the benefits are so great (seriously, that 401k match is just ridiculous) but you can get pigeon-holed doing the same thing very easily in that company. And with the number of people they had employed, it's kinda hard to move on to something more challenging or with more responsibility.

[WilliamTell]

I agree that a broad amount of people and skills fall under the title of landmen, and given the right dditude t and a few years experincr someone.can become a valuable asset. Ill leave it at that since a lot of people in okc are going through trying times and I have no dog in this fight.

[PhiAlpha]

I agree that a broad amount of people and skills fall under the title of landmen, and given the right dditude t and a few years experincr someone.can become a valuable asset. Ill leave it at that since a lot of people in okc are going through trying times and I have no dog in this fight.

That's true of all jobs in Energy or any other Industry.

[warreng88]

I have a friend at CHK and he said every VP in the Land Department just got let go. Doesn't surprise me since middle management is the first to get let go.

[Pete]

I have a friend at CHK and he said every VP in the Land Department just got let go. Doesn't surprise me since middle management is the first to get let go.

Is this happening today?

[PhiAlpha]

I have a friend at CHK and he said every VP in the Land Department just got let go. Doesn't surprise me since middle management is the first to get let go.

Just heard this as well, but from my source, several engineering and Land Administration managers were also included. I wont mention any names but they were more key people that had been there a long time.

[warreng88]

Is this happening today?

Yep.

[CuatrodeMayo]

I just found out an acquaintance and their department were all laid off.

[okc_bel_air]

What department? Is this in OKC or out of state? I have been reading thelayoff.com and trying to decipher what is fact and fiction over there.

[Pete]

The tough things about these situations is that companies never release numbers to the press or even talk about this sort of thing at all... So you never really know how many have been impacted.

I know when I've been part of layoffs even the employees themselves really had no idea how many people were cut; just anecdotal information such as being shared here.

[adaniel]

My friend who works there says 30 VPs have been let go, the vast majority in land/leasing. But it sounds like there may be more than that.

[bradh]

Have a friend who is in land (not sure what division, and he's been there 7 years so he's got some time in), lost his VP but he's still there.

[ctchandler]

Adaniel,
Why does a company have thirty VPs? I have worked for a bigger company than CHK and they didn't have 30 VPs. Just curious.
C. T.

My friend who works there says 30 VPs have been let go, the vast majority in land/leasing. But it sounds like there may be more than that.

[Pete]

Adaniel,
Why does a company have thirty VPs? I have worked for a bigger company than CHK and they didn't have 30 VPs. Just curious.
C. T.

In many companies -- especially in energy and financial services -- a VP is a middle manager and there are hundreds of them.

Usually it starts with Associate VP (many sit in a cubicle and don't manage people), then VP (usually manage a team but it could even be a small one), then Senior VP, Executive VP, Managing Director, etc., etc.

I was a Senior VP and still several layers down in the org. chart.

[CuatrodeMayo]

[warreng88]

From the Oklahoman:

Chesapeake reorganizes amid layoff reports

The company would not confirm it was cutting jobs, but email accounts of several employees are no longer active.

BY JAY F. MARKS
Business Writer jmarks@opubco.com • Modified: September 10, 2013 at 2:18 pm • Published: September 10, 2013

Chesapeake Energy Corp. laid out a new organizational structure Tuesday amid multiple reports of layoffs at the Oklahoma City-based oil and natural gas company.

Chesapeake has declined to comment on possible layoffs, but email accounts for several company employees are no longer active.

Spokesman Gordon Pennoyer issued a statement Tuesday afternoon that did not address the layoff reports.

“Chesapeake is transitioning key leadership positions and making adjustments to its organization to properly align resources, reduce expenses, and improve its operating and competitive performance,” he said. “The company's focus remains on financial discipline and profitable and efficient growth from captured resources. We look forward to realizing Chesapeake's full potential for our shareholders and employees.”

Asked about specific managers, Pennoyer said, “We will have no comment beyond what I sent you.”

CEO Doug Lawler told employees that additional organizational changes are expected in the coming weeks.

“During this time, it is imperative that each of us maintain our focus on safety and execute our day-to-day duties in an operationally prudent manner,” Lawler wrote in an email to employees Tuesday afternoon. “We thank you for your patience and dedication as we work together to transform our company.”

Chesapeake had more than 4,700 employees in Oklahoma City as of Jan. 31, according to a report it provided to the city in March.

Chairman Archie Dunham hinted at possible job reductions last summer after he was tabbed to replace co-founder Aubrey McClendon at the head of the company's board.

He said Chesapeake's cost structure should be on par with peers like Devon Energy Corp. and Anadarko Petroleum Corp.

Both companies had about half as many employees as Chesapeake last year, despite much larger market capitalizations.

In the company's Aug. 1 earnings call with analysts, Lawler said he had launched a “comprehensive review” of Chesapeake's assets and organization. He said he planned to work with senior management to help Chesapeake realize its full potential.

Four senior executives, including former interim CEO Steve Dixon, were fired Aug. 12 as part of the company's reorganization effort.

“This is a business decision resulting from Chesapeake's continuing transformation to where we want to be as a top performing company,” Lawler told The Oklahoman when the moves were announced.

Chesapeake reorganizes amid layoff reports | News OK

[ctchandler]

Pete,
I worked for Hertz and I believe they had about 20 VPs. None that worked in a cubicle, and all had directors reporting to them. All the directors had managers and all the managers had supervisors/people working for them. Obviously, the oil business does things differently.
C. T.

In many companies -- especially in energy and financial services -- a VP is a middle manager and there are hundreds of them.

Usually it starts with Associate VP (many sit in a cubicle and don't manage people), then VP (usually manage a team but it could even be a small one), then Senior VP, Executive VP, Managing Director, etc., etc.

I was a Senior VP and still several layers down in the org. chart.

[Pete]

Pete,
I worked for Hertz and I believe they had about 20 VPs. None that worked in a cubicle, and all had directors reporting to them. All the directors had managers and all the managers had supervisors/people working for them. Obviously, the oil business does things differently.
C. T.

Yes, absolutely there is a big difference between industries.

At any large bank, there are literally hundreds -- and sometimes thousands -- of people with VP in their title.


In the end, it's just a title that means very little.