By Anna Driver
HOUSTON Oct 9 The chaplains and company
gardener are gone now, along with a weatherman who made more
than a quarter million dollars a year, as Chesapeake Energy Corp
CEO Doug Lawler chops away at the high costs left behind by his
free-spending predecessor, Aubrey McClendon.
If McClendon was known for lavish spending on perks for
employees and his voracious appetite for acquiring oil and gas
properties in U.S. shale basins, Lawler is building a reputation
for focusing the country's No. 2 producer of natural gas on its
"You had too much land and you had too many people," said a
source close to the company's board of directors. "Those things
had to be fixed."
The company has cut 1,200 jobs so far this year, or 10
percent of its workforce, and its stock price has risen by 20
percent since Lawler took over. On Tuesday, it said it cut 800
of those jobs, with more than 600 at its Oklahoma City campus.
Lawler's broad review that aims to shrink the oil and gas
company was scheduled to end by Nov. 1.
Chesapeake has sold about $4 billion in assets this year in
addition to trimming jobs.
Internal records seen by Reuters show that the company's
payroll in 2012 included a meteorologist who made $350,000 in
salary, three chaplains, seven chefs, two company archivists, a
fitness center staff of 15 people and a gardener, along with the
hundreds of geologists and petroleum engineers normally needed
to run an oil and gas business.
A company chaplain reached at home said he no longer works
for Chesapeake. No one answers the phone at the Chicago office
for Chesapeake Weather and its website has been taken down.
McClendon, who started Chesapeake in 1989 with a friend,
left in April after clashes over spending with the company's
board and a series of Reuters investigations led to civil and
criminal probes of the company.
An internal investigation has cleared McClendon of any
The reductions are aimed at putting the company back on
solid financial footing after McClendon's lavish spending.
Anything not directly related to the exploration and
production business is a target for cutting, the source close to
the company's board said.
Earlier this year, more than 200 workers took voluntary
buyouts, and about 90 employees from departments including land,
human resources and operating services were laid off last month,
according to a company email.
Investor relations executive Jeff Mobley told Deutsche Bank
investors last week there was a "tremendous opportunity to
reduce our income statement costs," noting that the size of the
oil and gas unit's workforce was meant to support 175 drilling
rigs, nearly three times the number now running.
Chesapeake will also tie compensation more closely to
performance than in the past, Mobley said.
Lawler has believers on Wall Street. The stock is trading
around its highest level in nearly two years. It closed on
Tuesday off 0.8 percent at $26.05.
The rally has been driven in part by a bull market for
exploration and production companies, but also by investors
believing Lawler's mantra on efficiencies and cost reduction,
said Tim Rezvan, analyst at Sterne Agee.
"Even though we haven't received official 2014 spending
guidance, he has been clear that it will be aligned with cash
flow, which has reassured investors," Rezvan said.
NOTHING LIKE IT
McClendon spared little expense to build a sprawling
120-acre red-brick Georgian-style campus that includes a
72,000-square-foot fitness center with an Olympic sized swimming
pool, five restaurants and a community garden.
Payroll for fitness center employees, a gardener and the
chaplains and the company historians alone totaled more than $1
million in 2012, according to internal records.
The luxurious campus was needed to lure workers to
landlocked Oklahoma City and retain them in a tight labor
market, the company has said. Others disagree.
"I've never seen anything quite like they had over there at
Chesapeake," said the source close to the company's board. "I
think (McClendon) carried it to an extreme, especially when you
look at what it cost you to do all that stuff and how much
people were being paid."
Even Joe McClendon, Aubrey McClendon's father and a former
energy executive, had a job at Chesapeake when his son was CEO.
Internal records from 2012 show he worked a few hours a week on
"special projects" and reported directly to his son.
A spokesman for Chesapeake declined to say whether the elder
McClendon still works for the company and he could not be
reached for comment. He earned a nominal salary of $2,500 a