Chesapeake Energy to Spin Off Oil Services Unit
Chesapeake Energy said on Friday that it would shed of its oilfield services business as the company works to streamline itself.
The unit, known as Chesapeake Oilfield Operating, will relieve the parent company of about $1 billion in debt. Once on its own, the oilfield services business will be known as Seven Seventy Energy.
The new company will be recapitalized, and pay the parent company a $400 million dividend to take care of intracompany debts.
The spin-off and recapitalization should be completed by the end of June. The deal should be tax-free to Chesapeake shareholders.
Chesapeake also announced two other moves intended to improve its balance sheet.
It will divest a subsidiary, CHK Cleveland Tonkawa, by giving the subsidiary shares and terminating a preferred equity agreement. That will eliminate about $1 billion from Chesapeake's balance sheet attributable to third parties, and $160 million in debt.
The company also said it would sell some producing assets in Oklahoma and Texas for $310 million.
Chesapeake was built by the billionaire wildcatter Aubrey McClendon, who was ousted last year after unusual details of his compensation came under scrutiny. He now runs American Energy Partners, which he set up a stone's throw from the Chesapeake headquarters.
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