Chesapeake Energy to spin off oilfield services division
(Reuters) - Chesapeake Energy Corp (CHK.N: Quote) said it would spin off its oilfield services division, less than a month after saying it was pursuing options including a sale of the business.
The spin-off would enable each of its two businesses - exploration and production, and oilfield services - to better leverage opportunities and appeal to a wider combined investor base, Chesapeake Energy said in a regulatory filing by the division, Chesapeake Oilfield Operating LLC. (r.reuters.com/ker67v)
Chesapeake Energy, which will not retain any ownership interest in the new company, has been aggressively trying to repair its balance sheet and cut high spending programs put in place by its co-founder and former CEO, Aubrey McClendon.
McClendon left the second-largest U.S. natural gas producer following a tumultuous year which included a liquidity crunch caused by heavy spending on oil and gas properties, a governance crisis and civil and criminal investigations.
Doug Lawler, who replaced McClendon in June, said Chesapeake Energy would cut spending by 20 percent in 2014 and sell assets to plug a $1 billion gap between operating cash flow and capital expenditure.
Last month, Chesapeake Energy announced the sale of its natural gas compression units and said it was pursuing alternatives for the oilfield services division, including an outright sale or a spin-off.
The division, Chesapeake Oilfield, provides equipment to U.S. land-based exploration and production companies, including Chesapeake Energy. It offers services such as drilling, hydraulic fracturing, oilfield rentals and rig relocation.
Chesapeake Oilfield reported a loss of $19.7 million in 2013, compared with a profit of $69.6 million a year earlier as margins were hurt due to a rise in operating costs caused by lower utilization rates and pricing pressures.
Revenue at the division rose 16 percent to about $2.2 billion in 2013, and accounted for 5 percent of Chesapeake Energy's total revenue of $17.51 billion. Continued...