Operating with Strict Standards

Chesapeake iis dedicated to maintaining an ethical, safe and high-performing supply base. We recognize that working closely with high-quality suppliers and proactively managing supplier relationships are critical to responsible corporate performance.

 

Our centralized Supply Chain Department protects the company by managing the inherent risks associated with supplier relationships. Through robust contracting processes and the monitoring of supplier performance, we measure our third-party suppliers against company core values and the financial benefit they offer our stakeholders.   

From the start of a relationship with Chesapeake, suppliers must pass a qualification process including an evaluation of each potential supplier’s safety and environmental records as well as its financial performance. Before approval the prospective supplier must also agree to abide by Chesapeake’s Supplier Code of Conduct? and execute appropriate contracts to govern its relationship with Chesapeake.


Upholding Our Supplier Code of Conduct

Our Supplier Code of Conduct mandates that all suppliers share Chesapeake’s commitment to providing a safe and ethical workplace and conducting operations in an environmentally responsible manner. It also identifies methods for reporting concerns and ethical issues. Suppliers receive a copy of our Supplier Code during qualification, and once contracted, companies often participate in a Supplier Code training session to further understand Chesapeake’s expectations.

Members of the Supply Chain team monitor the performance of each active supplier through a risk-based program. Suppliers with higher risk profiles are reevaluated more frequently, allowing for faster response should a partner violate our Supplier Code or not meet company standards during their work for Chesapeake.

A key outcome of abiding by the Supplier Code is a safe work site. For example, , the possession or use of drugs and alcohol is strictly prohibited on company locations. Suppliers and their employees agree to these standards, and Chesapeake’s Security team monitors sites regularly for compliance. In 2018, Chesapeake Security conducted 21 rig checks and randomly drug tested 618 people on Chesapeake locations. As a result of these inspections, certain individuals and suppliers were permanently prohibited from working at Chesapeake sites.

Performance Management

Certain strategic suppliers also participate in Chesapeake’s Supplier Performance Management Program, a scorecard system evaluating each company’s operational, financial, and health, safety, environmental and regulatory (HSER) performance while working on Chesapeake locations. Through this program, suppliers also have the opportunity to provide feedback to Chesapeake during business review meetings occurring at least twice per year. These two-way performance discussions focus on new ways to collaborate and improve as performance.

Enterprise-Wide Procurement and Contract Policies

Honoring our company’s core values of commercial focus and change leadership, the Supply Chain team recently streamlined our Enterprise Procurement Policy and Contracts Policy to increase accountability. These policies help ensure that all goods and services are contracted through the Supply Chain Department, enabling proper legal review and delegation of authority. Adherence to the policy also allows for systematic price validation of invoices to prevent overbilling. In 2018, Chesapeake employees were required to complete online training of these policies to increase the organization’s knowledge of appropriate procurement channels for goods and services and contracts with outside parties. 

Changes to Our Supply Chain

During 2018 our company initiated significant changes to deliver greater shareholder value. We announced both the divestiture of our Utica Shale assets and the acquisition of WildHorse Resource Development Corporation, creating a new business unit in Brazos Valley (Texas). Operating in a new location introduces the company to a new supply base, and we are working to identify, evaluate and contract with ethical, safe and high-performing suppliers who will align with Chesapeake to realize improved corporate performance. 

Another change resulting from our WildHorse acquisition was the addition of a sand mining business, which enables Chesapeake to self-source sand for completions operations across multiple business units. The extensive logistics required to deliver this sand to our well sites is now managed through our Supply Chain Department.