Chesapeake Energy Corporation
(
CHK
) is contemplating to squeeze value from its oil-field service
business - Chesapeake Oilfield Services LLC - by spinning it off in
a public stock offering. The company aims to create value for
investors and enhance the share price of the parent company.
Chesapeake plans to hold on to a majority stake of about 80% in
the separated entity once it goes public. Chesapeake will try to
have a hold over the service company's board and simultaneously
retain as much stock as it can. The spun off company's operation
will mainly be for Chesapeake.
Post separation, the new entity would be one of the largest
service firms in the U.S. with 114 drilling rigs, a vast trucking
fleet and a large hydraulic-fracturing business. Management has
valued the services business at approximately $10 billion. Assuming
this valuation is correct, Chesapeake Oilfield Services would have
a market value in line with the recent market capitals of
Helmerich & Payne
(
HP
),
Oceaneering International
(
OII
) and
Rowan Companies
(
RDC
).
The public offering by Chesapeake is part of a series of
initiatives lined up for 2012. With plans of generating an
estimated $13 billion in cash in 2012, the company has quickly
embarked on its mission to create more joint ventures and focus on
more profitable businesses.
Chesapeake intends to drop its holdings in Frac Tech Services
Inc. - an oil-field services firm that is planning to go public and
in Oklahoma based Chaparral Energy Inc. These sales are expected to
raise nearly $3 billion for the company.
Moreover, Chesapeake is in search of joint venture (JV) partners
for its oil fields in North Dakota and the Mississippi Lime
formation in northern Oklahoma and southern Kansas, including an
unrevealed area where it is spending heavily to lease property.
Earlier in the month, Chesapeake signed a letter of intent with
an undisclosed international energy company to form a JV through
which the latter will acquire a 25% stake in approximately 650,000
net acres of leasehold in the Utica Shale play.
Oklahoma-based Chesapeake is an independent energy company
engaged in the acquisition, development, and production of onshore
U.S. natural gas resources. The company has grown rapidly and now
ranks the second-largest natural gas producer in the country after
ExxonMobil Corp.
(
XOM
).
Chesapeake holds a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months. For the long term, we
maintain a Neutral rating on the stock.
CHESAPEAKE ENGY (
CHK
): Free Stock Analysis Report
HELMERICH&PAYNE (
HP
): Free Stock Analysis Report
OCEANEERING INT (
OII
): Free Stock Analysis Report
ROWAN COS INC (
RDC
): Free Stock Analysis Report
EXXON MOBIL CRP (
XOM
): Free Stock Analysis Report
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