Today Chesapeake Energy Corporation (NYSE:CHK) has filed to possibly spinoff its oilfield services division. This filing doesn’t mean that it will definitely happen, but it is a move the energy company has been considering. The filing makes it seem more likely than not that a spinoff will happen.
Chesapeake Energy to change the name
The Wall Street Journal reports that the new name of Chesapeake Energy Corporation (NYSE:CHK)’s oilfield services division would become Seventy Seven Energy Inc. if the spinoff happens. Currently that division is called Chesapeake Oilfield Operating LLC. The company said it intends for the spinoff to come to shareholders as a tax-free distribution.
Last month, Chesapeake Energy Corporation (NYSE:CHK) said it was looking into strategic possibilities for the division, including either a spinoff or a possible sale of the division. It offers several services for oilfields, including drilling, rig relocation and hydraulic fracturing. The division also sells equipment to land-based exploration for oil companies. Last year, the business reported approximately $2.2 billion in revenue.
Chesapeake Energy highlights the benefits
In the company’s regulatory filing, it said both of its two businesses would be able to better leverage their opportunities while also appealing to a broader investor base. Chesapeake Energy Corporation (NYSE:CHK) said it would not keep any interest in the new company. It has been working to fix its balance sheet and put cost-cutting measures in place to counteract the high-spending programs which former CEO Aubrey McClendon had put into place.
CEO Doug Lawler said they aim to slash spending by 20% this year and sell off some assets to take care of a $1 billion gap between their operating cash flow and capital expenditures. Since then, the company has revealed intentions to sell its natural gas compression units.
Last month, Chesapeake Energy Corporation (NYSE:CHK) surprised investors by reporting losses for the fourth quarter. It said production growth and revenue were negatively impact by the sales of its assets and a number of other special items.