The board of directors of Chesapeake Energy has approved the planned spin-off of the US shale giant's oilfield services unit into a separate company called Seventy Seven Energy.
Jerry Winchester and Cary Baetz, the chief executive officer and chief financial officer of the Chesapeake Oilfield Services business unit will remain in their roles with the newly independent Seventy Seven Energy.
Chesapeake said it believes the transaction will be allowed as a tax-free spin-off under US securities regulations.
According to terms of the spin-off, shareholders will receive one share of Seventy Seven for every 14 Chesapeake shares held as of 19 June.
Chesapeake plans to spin off the entirety of Seventy Seven, and will not retain any major ownership interest, the company said.
Chesapeake Oilfield Services had 2013 revenues of $2.2 billion and a net profit of $369 million, according to Chesapeake. Its primary holdings include a fleet of 115 drilling rigs, a pressure pumping fleet of 360,000 horsepower units, 260 trucks to move rigs, 67 cranes and about 250 fluid-hauling trucks.
Global Hunter Securities analyst Mike Kelly said Chesapeake "stands to shed (about) $1.5 billion of net debt with this transaction, while only losing a net $20 million of cash flow in 2014 after capex/interest/dividdends are taken into account".
Seventy Seven Energy will trade under the symbol SSE on the New York Stock Exchange.