NEW YORK (TheStreet) -- Chesapeake Energy's (CHK) shares were underperforming the broad market even after the company disclosed that it would spin its oil services business to shareholders, in a deal that analysts anticipate can finally plug a capital hole the oil and natural gas producer has worked to close for years.
Chesapeake Energy's underperformance may boil down to the profitability of its oil services business, which will be called Seventy Seven Energy when the spin-off occurs.
Seventy Seven Energy provides well-site services and equipment to onshore oil and natural gas fields.
The company disclosed Monday that it earned $368.6 million before interest, taxes, depreciation and amortization (EBITDA) on $2.2 billion in revenue. Overall, Seventy Seven Energy turned from a $70 million profit in 2012 to a near $20 million loss in 2013, as operating expenses rose faster than revenue during the year.
Those figures may be slightly disappointing to investors and analysts who have long-expected Chesapeake Energy to spin off its oilfield services division.
In a February valuation of the soon-to-be spun off unit, Jefferies analyst Biju Perincheril wrote that the business could be worth $2.5 billion and could also fund most of the E&P's cash flow deficit in 2014, minimizing the need for additional asset sales, particularly among its portfolio of producing oil and natural gas fields.
That valuation hinged on forecasts that the division would book $2.2 billion in revenue and $419 million of (EBITDA) in 2013. While revenues disclosed by Seventy Seven Energy were in-line with Jefferies' forecasts, EBITDA of $368.5 million fell about 12% short of forecast.