Spinning off this business allows Chesapeake to unload around $1 billion in debt and raise cash. Moreover, since Chesapeake won't retain any interest in the unit after the spinoff, it will not be responsible for its capital expenditure.
The unit will be converted into a new company called Seventy Seven Energy, which is currently valued at between $2.5 billion and $7 billion. It will be listed at the New York Stock Exchange under "SSE."
Chesapeake's oilfield services unit, which has reported double-digit revenue growth, will have the fifth-largest land-based rig fleets in the United States, with operations in the leading shale plays including Eagle Ford, Utica, Permian Basin and Marcellus.
Chesapeake's shares have risen by 21.5% in the last 12 months and currently trade around $25. The company has outperformed the S&P 500, which has risen by 19.6% in the corresponding period.
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