Unconventional natural gas producer Chesapeake Energy Corp. announced on 16 May 2014, its 2014 Analyst Day, that it will spin off its oilfield services business, Chesapeake Oilfield Operating, LLC (COO), which has been somewhat hidden in the Chesapeake Energy corporate structure. COO provides contract drilling services and hydraulic fracturing services (mainly to Chesapeake Energy).
Oklahoma City-based Chesapeake had previously announced, on 24 February 2014, that it was "pursuing strategic alternatives for its oilfield services business."
The spin-off will be trading under the name Seventy Seven Energy. Following the spin-off and recapitalization, Chesapeake will eliminate about US$1.1billion of consolidated COO debt from its balance sheet and will receive a $400million dividend to pay off intercompany debt. Chesapeake will also reduce its capital spending by approximately $30 million annually.
Chesapeake says that the spin-off and recapitalization transactions will be completed by 30 June 2014.
It is unclear whether COO, as Seventy Seven Energy, will have agreements with Chesapeake to continue to drill wells for the mother company, and whether future drilling would be at market prices.
Chesapeake Energy is the second-largest producer of natural gas and the 10th largest producer of oil and natural gas liquids in the US.
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