Chesapeake Energy considering spinning off oilfield services unit
Chesapeake Energy, the second-largest U.S. natural-gas producer, said Monday it has notified regulators of a plan to spin off its oilfield-services subsidiary.
The wholly owned unit of the struggling energy company, Chesapeake Oilfield Operating (COO), would have an initial public offering on the New York Stock Exchange, according to the preliminary information Chesapeake filed with the U.S. Securities and Exchange Commission.
Immediately before the completion of the potential spin-off, Chesapeake said in a statement, the unit would convert into a stand-alone corporation and change its name to Seventy Seven Energy. It would trade on the NYSE under the ticker symbol SSE.
The spin-off is 100 percent for its shareholders and is intended to be essentially tax-free for them, the Oklahoma City, Oklahoma-based company said.
The oilfield-services company COO is valued at $1.6 billion, according to the preliminary filing, which provided no information on a timetable for the operation.
The unit, which manages services that help produce natural gas and oil in the US, had revenue of $2.2 billion in 2013. It considerably reduced its full-year net loss to $19.7 million in 2013, compared with $69.6 million in 2012.
Chesapeake in February reported a swing into net profit to $474 million for full-year 2013, after a loss of $940 million in 2012, but the 2013 fourth quarter ended $159 million in the red.
The company has been restructuring as it faces sharply lower natural gas prices amid the shale production boom in which it heavily invested.
Chesapeake has been shedding non-core assets in the face of heavy debt. Over the past two years, the company has sold more than $10 billion in assets. The latest transaction was in July, when the company sold $1 billion in shale assets to U.S. firm Exco Resources.
At the end of last year, the company’s total debt was $30.2 million, or 40 percent of capitalization, down from a ratio of 41 percent a year earlier.
Shares in Chesapeake were down 0.9 percent at $24.80 in early-afternoon trade in New York.
[Image via Agence France-Presse]