Monday, March 17, 2014

Chesapeake Files Preliminary Papers for Spin-Off of Oilfield Services Division

This morning, Chesapeake Energy filed a form 10-12SB with the SEC to register the shares of its wholly owned oilfield services company as a public entity as a first step in spinning it off.  This is a preliminary step and not a done deal (press releaseForm 10-12SB in PDF).

The new company will be called Seventy Seven Energy (no, I don't know why) and will include the handful of oilfield service companies Chesapeake accumulated back in the aughts back when vertical integration in the oilfield was in vogue. Vertical integration is a cyclical business strategy that works much better when commodity prices are high and business is strong.  If the energy market continues to improve, look for investment bankers to start badgering E&P companies buy suppliers again in a few years.

The list of companies inside Seventy Seven includes NOMAC Drilling, Performance Technologies, Great Plains Oilfield Rental, Hodges Trucking and Oilfield Trucking Solutions.  Chesapeake is shedding these entities to raise money and return focus on the company's core business of E&P.


Check out the Form 10 - it's an interesting look behind the scenes of the company (although not THAT informative), if you like to geek out on that kind of stuff.

3 comments:

Anonymous said...

I had no idea that CHK had an oilfield services operation going. Do you know what kind of services they provide? Interesting.

Jason
Houston

Anonymous said...

I guess I could have checked their website, which I just did.

Robert Hutchinson said...

A few years ago, having their own in-house oilfield services team was a selling point. When cash dried up and opportunities became limited it turned into an albatross.