Chesapeake announces Voluntary Separation Program. Layoffs may be next.

Earlier this week, I received an email from a Mole claiming that Chesapeake Energy planned on laying-off 10% of its Oklahoma City staff this Friday. I wasn’t able to confirm that rumor, but apparently Chesapeake has sent an email to certain staff today at 9:00am announcing a Voluntary Separation Program. I know this because we’ve obtained a copy of that email. It was sent by Henry Hood, Senior Vice President.

Here it is:

As you know, the past year or so has been particularly tough on the natural gas industry. Although natural gas prices have recovered a bit, we believe the sustained low natural gas price environment we have seen will have an effect on the levels of activity in our industry and at Chesapeake for some time to come. That means we must continue to focus on initiatives designed to control expenses and maximize performance so that we are able to maintain our leadership role in this changing and competitive industry.

As a result, Chesapeake is offering a voluntary separation program to certain Oklahoma City Headquarters, Field Professional and Field employees in designated departments. You are receiving this email because based upon your age and your years of service with Chesapeake, you are eligible to participate in the program.

If you elect to participate in this voluntary program, you will receive the following generous benefits:

· Separation Payment: equivalent to 12 months base pay

· Cobra Supplement: lump sum payment (if participating in the Company benefits plan) to pay for 12 months of COBRA premiums

· Stock Acceleration Benefit: 100% vesting of all outstanding shares of restricted stock

· Deferred Compensation Plan Acceleration Benefit: 100% vesting of unvested matching contributions in the Company’s Deferred Compensation Plan (the “401(k) Make-Up Plan”), if applicable

· Seniority Bonus: For eligible employees with 10 or more years of full-time Chesapeake service. The plan includes a bonus equal to $5,000 per full year of Chesapeake service starting with year 10 (for example, a $5,000 bonus for the 10th full year of service; a $10,000 bonus for 11 full years of service; a $15,000 bonus for 12 full years of service, etc.)

Attached to this email is a detailed Q&A that should answer many of your questions regarding this voluntary separation program. Additionally, later today you will receive from Human Resources your individual packet that will contain the program documents, timing and resource information. If you have additional questions, please refer to the HR contact information located in the attached Q&A.

As you review and consider participating in this voluntary program, please remember Chesapeake values your dedication to our company over the years and appreciates your contributions to our past success and positioning for the future.

Well, that’s not good. Let’s hope that is the extent of the staff reductions. We’ll have more on this story as it develops.

Update: Here’s a PDF of the an Employee Q&A that was attached to the email.