Chesapeake Energy (NYSE: CHK ) announced today that it is pursuing strategic alternatives for its oil-field services division. Those options include selling the division or spinning it off to shareholders. The wholly owned subsidiary, Chesapeake Oilfield Services, or COS, had revenue of $2.2 billion last year from operations including drilling, hydraulic fracturing, oil-field rentals, rig relocation, and fluid handling and disposal.
According to the company's press release, at the end of last year COS owned or leased 115 land drilling rigs, which encompassed 10 proprietary, fit-for-purpose PeakeRigs that use advanced electronic drilling technology. In addition, COS owned nine hydraulic fracturing fleets, 260 rig relocation trucks, 67 cranes and forklifts, and 246 fluid handing trucks.
Chesapeake Oilfield Services can focus on optimizing the assets in order to succeed as a stand-alone entity. One way it can do this is by growing the number of rigs working for third-party operators, the press release states. COS today has 35% of its marketable rigs working for third parties, but its ability to grow is restricted while Chesapeake Energy remains its first priority.
Chesapeake Energy CEO Doug Lawler said in the press release, "A separation of COS is aligned with our strategies of financial discipline and profitable and efficient growth from captured resources." The separation would enable Chesapeake Energy to focus its capital -- both human and financial -- on drilling for oil and gas, while enabling a stand-alone COS to grow beyond the constraints of being a wholly owned subsidiary.