Chesapeake Energy's Board Approves Spin-Off Of Oilfield Services Unit - Update

(RTTNews) - Oil and gas company Chesapeake Energy Corp. (CHK) Monday announced that its Board of Directors has approved the spin-off of oilfield services business into a stand-alone, publicly traded company called Seventy Seven Energy Inc.

Under the plan, Chesapeake shareholders will receive one share of Seventy Seven Energy or SSE common stock for every 14 shares of Chesapeake common stock held at the close of business on the record date of June 19.

Oklahoma City, Oklahoma-based Chesapeake noted that no fractional shares of SSE common stock will be issued, but those who are entitled to receive SSE fractional share in the distribution will instead receive the cash value of that fractional share.

The company expects the distribution to occur following the close of business on June 30, subject to the satisfaction of the conditions to closing.

Following the stock distribution, SSE will be an independent, publicly traded company, and Chesapeake will retain no equity interest. SSE has applied to list its common stock on the New York Stock Exchange under the symbol 'SSE'.

Chesapeake said it has received a private letter ruling from the Internal Revenue Service and expects to obtain an opinion of tax counsel.

Chesapeake added that it expects that a "when-issued" public trading market for SSE common stock will commence on the NYSE on or about June 17 under the symbol "SSE WI" and will continue through the distribution date.

The company also anticipates that "regular way" trading of SSE common stock will begin on the first trading day following the distribution date.

Chesapeake noted that SSE's capital structure would consist of a new senior secured term loan, a new asset-backed lending facility, existing senior notes due 2019 and, subject to market conditions, new senior notes due 2022.

Upon completion of the spin-off, Jerry Winchester and Cary Baetz will remain as Chief Executive Officer and Chief Financial Officer, respectively, of SSE.

In the deal, Morgan Stanley & Co. LLC is acting as financial advisor to Chesapeake and Baker Botts L.L.P. and McAfee & Taft are legal advisors.

Chesapeake shares closed Friday's trading at $29.72, down $0.15 or 0.50 percent.