Even as Chesapeake Energy released its third-quarter earnings report this week of $169 million in net income and $82 million in adjusted earnings for shareholders, it was still dealing with former co-founder and president Aubrey McClendon.
Buried in the report on file with the Securities and Exchange Commission and under the topic of ‘Restructuring and Other Termination Costs’, the company explained how it incurred charges of nearly $67 million related to McClendon’s departure in 2013. It was April 1, 2013 when McClendon was let go as President, CEO and Director of the company ‘pursuant to his agreement with the Board of Directors announced on January 29, 2013.’
As the SEC filing noted, his departure was treated as a termination without cause under his employment agreement. The two sides entered into a separation agreement on April 18, 2013 which not only concerned his separation from the company but how to handle his joint working interest in oil and gas wells and acreage.
Months later, Chesapeake started laying off workers as part of a company-wide reorgaization ‘effort intended to reduce costs’. Nearly 900 employees lost their jobs by early October 2013.
“In connection with the reduction, we recorded $31 million of termination charges of employees terminated in September 2013 and recorded the remaining $35 million in the 2013 fourth quarter for employees terminated in October 2013.
Earlier workforce reductions proved to be costly too. Chesapeake officials noted the December 2013 voluntary separation program offered to 275 workers was taken by 211 employees. Those termination benefits cost the company $63 million.
“We also incurred charges of approximately $28 milion and $42 million related to other workforce reductions including separations of executive officers other than the former CEO.”