By Kim S. Nash  |  Posted 2004-10-18 Print this article Print

Insights from counterparts and temporary specialists fuel chesapeake energy's growth.

At age 15, the $1.7 billion Chesapeake Energy Corp. may be young, but it could school more senior competitors in how to manage information.

Founded by two 29-year-old, third-generation Oklahomans, Chesapeake drills for and sells natural gas to utilities such as Duke Energy and Reliant Energy. The company is also acquisitive, spending $2.8 billion on drilling outfits and other assets in the last four years.

Silky handling of those acquisitions and the accompanying business growth pushed Oklahoma City-based Chesapeake to No. 2 in the Baseline 500—and the top spot in the Energy sector, ahead of such rivals as Burlington Resources (No. 14 in Energy; No. 27 in the 500) and Anadarko Petroleum Corp. (No. 44 in the 500).

The Baseline 500 formula favors energy firms—companies with huge revenues, relatively small head counts and low transaction costs compared to, say, retailers.

Even so, highly productive energy companies have something else going for them: technology leaders who are also oilmen. Unlike other cios who migrate between industries, most of the cios in the Energy sector have been in the oil business for decades. Hal Zesch at Valero (No. 2), Greg Ostendorf at Apache (No. 3), Henry Neumann Jr. at Kinder Morgan Energy (No. 8) and Mario Coll at Anadarko have built their careers in energy.

That longevity produces a golden asset: people who have experienced industry gyrations over decades, says Lon Winton, who has been cio at Chesapeake for the past seven years. Before Chesapeake, he directed technology at Chesapeake's archrival, Union Pacific Resources, for 13 years.

Winton brought critical know-how with him. For example, soon after he was promoted to technology director at Union Pacific Resources in late 1985, the price of oil crashed by 50%, he recalls. Technology costs are often the biggest part of sales, general and administrative (sg&a) expenses at an energy firm. When prices drop, there's usually a comparable reduction in sg&a, Winton says. His favorite way to keep the budget trim is to avoid hiring too many workers.

"I'm very cognizant of the fact that there are lean years and fat years," he says. "Right now, we're in a fat year, but I still have to stay lean in i.t."

At Chesapeake, that means hiring "adaptable" staff who don't specialize in one technology. When a project needs a particular expertise, Winton finds temporary specialists. Right now, Chesapeake is installing Microsoft's Active Directory network management software and has hired contractors who have done several such projects. "Our people don't have to spend their time researching and discovering potholes that are already identified," he says.

Sharing information also helps. Not everything's considered a state secret in the energy business—all to the benefit of each company. No one will share details of their 3D seismic interpretation systems for figuring out where oil fields are buried, but there is a lot else to swap.

Winton collects insight from counterpart cios at other oil companies. Chesapeake, Anadarko, Burlington Resources and others take turns hosting a regular breakfast to discuss hot issues. There, Winton has picked up tips for quickly mapping data from 25 acquired companies since 2000 into the Artesia accounting package Chesapeake uses.

The company is five times bigger than when Winton started—1,800 employees today compared to 350 in 1998. The technology group has 45 people, on the way to 75 by next fall. Winton's charge is to bring more discipline to defining project requirements and change management.

"We're going through a maturation of the company, and along with it has to be the maturation of the i.t. department," Winton says. "These are bread-and-butter things."

Chesapeake Energy Corp.
Oklahoma City, OK
Overall Rank 2
Sector Rank 1