June 19 Record Date and June 30 Distribution
Date
Chesapeake Energy Corporation (NYSE:CHK) announced today that
the spin-off of Chesapeake’s oilfield services business into a
stand-alone, publicly traded company called Seventy Seven Energy
Inc. (SSE) has been approved by the Chesapeake Board of
Directors.
The two companies will be separated through the distribution of
SSE common stock to holders of Chesapeake common stock on a pro
rata basis. Chesapeake shareholders will receive one share of SSE
common stock for every 14 shares of Chesapeake common stock held at
the close of business on the record date of June 19, 2014. No
fractional shares of SSE common stock will be issued; however,
shareholders entitled to receive a fractional share of SSE common
stock in the distribution will instead receive the cash value of
that fractional share. Subject to the satisfaction of the
conditions to closing, the distribution is expected to occur
following the close of business on June 30, 2014.
Following the distribution of SSE common stock, 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 (NYSE) under the symbol “SSE.”
Chesapeake has received a private letter ruling from the
Internal Revenue Service and expects to obtain an opinion of tax
counsel, in each case, substantially to the effect that, based on
certain facts, assumptions, representations, and covenants, and
subject to certain limitations set forth therein, for U.S. federal
income tax purposes, the distribution of SSE common stock generally
will be tax-free to U.S. holders of Chesapeake common stock, other
than with respect to any cash received in lieu of fractional share
interests, which generally will be taxable to such holders as
capital gain.
No action is required by Chesapeake shareholders in order to
receive shares of SSE common stock in the distribution. Chesapeake
shareholders entitled to receive shares of SSE common stock in the
distribution will receive a book-entry account statement reflecting
their ownership of SSE common stock, or their brokerage account
will be credited for the shares.
Chesapeake expects that a “when-issued” public trading market
for SSE common stock will commence on the NYSE on or about June 17,
2014 under the symbol “SSE WI” and will continue through the
distribution date. Chesapeake also anticipates that “regular way”
trading of SSE common stock will begin on the first trading day
following the distribution date.
Beginning on or about June 17, 2014, and through the
distribution date, it is expected that there will be two ways to
trade Chesapeake common stock – either with or without the right to
receive shares of SSE common stock in the distribution.
Shareholders who sell their shares of Chesapeake common stock in
the “regular-way” market (that is, the normal trading market on the
NYSE under the symbol “CHK”) after the record date and on or prior
to the distribution date will be selling their right to receive
shares of SSE common stock in connection with the distribution. It
is anticipated that shareholders may also trade their shares of
Chesapeake common stock ex-distribution (that is, without the right
to receive the SSE distribution) during that period under the
symbol “CHK WI.”
Investors are encouraged to consult with their financial and tax
advisors regarding the specific implications of buying or selling
shares of Chesapeake common stock on or before the distribution
date.
Prior to the distribution, Chesapeake will mail an information
statement to all shareholders entitled to receive the distribution
of SSE common stock. The information statement will describe SSE,
including the risks of owning SSE common stock, and other details
regarding the distribution.
The completion of the distribution is subject to the
satisfaction or waiver of certain customary conditions, including
the Registration Statement on Form 10 for the SSE common stock
being declared effective by the Securities and Exchange Commission,
the SSE common stock being authorized for listing on the NYSE and
other conditions described in the information statement, which will
be filed as an exhibit to the Form 10.
SSE’s capital structure is expected to 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 L. Winchester and Cary D.
Baetz will remain as Chief Executive Officer and Chief Financial
Officer, respectively, of SSE. The Board of Directors of SSE is
expected to consist of Jerry L. Winchester, Anne-Marie N.
Ainsworth, Bob G. Alexander, Edward J. DiPaolo, Tucker Link, Marran
H. Ogilvie, Ronnie Irani and Alvin Bernard Krongard. Detailed
biographies of the Officers and Board of Directors following this
release begin on Page 3.
Morgan Stanley & Co. LLC is acting as financial advisor to
Chesapeake in connection with the spin-off. Baker Botts L.L.P. and
McAfee & Taft are acting as legal advisors to Chesapeake in
connection with the spin-off while Wachtell, Lipton Rosen &
Katz is advising the Chesapeake Board of Directors.
Chesapeake Energy Corporation (NYSE:CHK) is the
second-largest producer of natural gas and the 10th largest
producer of oil and natural gas liquids in the U.S.
Headquartered in Oklahoma City, the company's operations are
focused on discovering and developing its large and geographically
diverse resource base of unconventional natural gas and oil assets
onshore in the U.S. The company also owns substantial
marketing, compression and oilfield services businesses. Further
information is available at www.chk.com where
Chesapeake routinely posts announcements, updates, events, investor
information, presentations and news releases.
About Seventy Seven Energy Inc.
Headquartered in Oklahoma City, SSE, which currently operates
as Chesapeake Oilfield Operating, L.L.C., provides a wide range of
wellsite services and equipment to U.S. land-based exploration and
production customers operating in unconventional resource plays.
SSE’s services include drilling, hydraulic fracturing, oilfield
rentals, rig relocation and water transport and disposal, and its
operations are geographically diversified across many of the most
active oil and natural gas plays in the onshore U.S., including the
Anadarko and Permian basins and the Barnett, Eagle Ford,
Haynesville, Marcellus, Niobrara and Utica shales.
Certain statements in this document regarding anticipated
financial, legal or other outcomes including business and market
conditions, outlook and other similar statements relating to future
events, developments or financial or operational performance or
results, are "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995 and other federal securities laws. These forward looking
statements are identified by the use of words such as "should,"
"expect," "estimate," "believe," "intend,” "anticipate" and other
similar language. However, the absence of these or similar words or
expressions does not mean that a statement is not forward-looking.
While management believes that these forward-looking statements are
reasonable when made, forward-looking statements are not guarantees
of future performance or events and undue reliance should not be
placed on these statements.
Although the company believes that the expectations reflected in
any forward-looking statements are based on reasonable assumptions,
it can give no assurance that these expectations will be attained
and it is possible that actual results may differ materially from
those indicated by these forward-looking statements due to a
variety of risks and uncertainties. Such risks and uncertainties
include, but are not limited to: uncertainties as to the timing of
the spin-off and whether it will be completed, the possibility that
various closing conditions for the spin-off may not be satisfied or
waived, the expected tax treatment of the spin-off, the impact of
the spin-off on the businesses of the company and SSE, the
availability and terms of financing and expectations of credit
rating. Other important factors are described in Chesapeake’s most
recent Form 10-K and 10-Q on file with the U.S. Securities and
Exchange Commission and in SSE’s Form 10 that could cause actual
results or events to differ materially from those expressed in
forward-looking statements that may have been made in this
document. Neither Chesapeake nor SSE assumes any obligation to
update these statements except as is required by law.
This press release shall not constitute an offer to sell or a
solicitation of an offer to buy the senior notes due 2022 or any
other securities.
Officer and Board of Director Biographies
Mr. Winchester has served as the President and Chief Executive
Officer of Chesapeake’s oilfield services business since September
2011. From November 2010 to June 2011, Mr. Winchester served as the
Vice President – Boots & Coots of Halliburton Company. From
July 2002 to September 2010 Mr. Winchester served as the President
and Chief Executive Officer of Boots & Coots International Well
Control, Inc. (“Boots & Coots”), an NYSE-listed oilfield
services company specializing in providing integrated pressure
control and related services. In addition, from 1998 until
September 2010 Mr. Winchester served as a director of Boots &
Coots and from 1998 until May 2008 served as Chief Operating
Officer of Boots & Coots. Mr. Winchester started his career
with Halliburton in 1981. He received a Bachelor of Science degree
from Oklahoma State University.
Mr. Baetz has served as the Chief Financial Officer and
Treasurer of Chesapeake’s oilfield services business since January
2012. From November 2010 to December 2011 Mr. Baetz served as
Senior Vice President and Chief Financial Officer of Atrium
Companies, Inc., and, from August 2008 to September 2010 served
with Mr. Winchester as Chief Financial Officer of Boots &
Coots. From 2005 to 2008 Mr. Baetz served as Vice President of
Finance, Treasurer and Assistant Secretary of Chaparral Steel
Company. Prior to joining Chaparral Mr. Baetz had been employed
since 1996 with Chaparral’s parent company, Texas Industries Inc.
From 2002 to 2005 he served as Director of Corporate Finance of
Texas Industries Inc. Mr. Baetz received a Bachelor of Science
degree from Oklahoma State University and a Master of Business
Administration degree from the University of Arkansas.
Ms. Ainsworth served as President and Chief Executive Officer
and a member of the Board of Directors of the general partner of
Oiltanking Partners, L.P. and as President and Chief Executive
Officer of Oiltanking Holding Americas, Inc. from November 2012 to
March 2014. Ms. Ainsworth previously held the position of Senior
Vice President of Refining of Sunoco Inc. from November 2009 until
March 2012. Prior to joining Sunoco, Ms. Ainsworth was employed by
Motiva Enterprises, LLC, where she was the General Manager of the
Motiva Norco Refinery in Norco, Louisiana from 2006 to 2009. From
2003 to 2006 Ms. Ainsworth was Director of Management Systems &
Process Safety at Shell Oil Products U.S., and from 2000 to 2003
she was Vice President of Technical Assurance at Shell Deer Park
Refining Company. Ms. Ainsworth holds a Master of Business
Administration degree from Rice University, where she served as an
adjunct professor from October 2000 to October 2009, and a Bachelor
of Science degree in Chemical Engineering from the University of
Toledo.
Mr. Alexander, a founder of Alexander Energy Corporation, served
as its Chairman of the Board and Chief Executive Officer from 1980
until its sale to National Energy Group in 1996, at which time he
became a director of National Energy Group, Inc. He later served as
Chairman of the Board and Chief Executive Officer of National
Energy Group from 1998 until its sale in 2006 to SandRidge Energy,
Inc. Earlier in his career Mr. Alexander was Vice President and
General Manager of the Northern Division of Reserve Oil, Inc. and
President of Basin Drilling Corporation, both subsidiaries of
Reserve Oil and Gas Company. Mr. Alexander currently serves on the
Board of Directors of Transatlantic Petroleum Corporation, CVR
Energy, Inc and Chesapeake, although he will retire from the
Chesapeake Board of Directors on June 13, 2014 at its annual
meeting of shareholders. He also served on the Board of Directors
of Quest Resource Corporation from June to August 2008. Mr.
Alexander has served on numerous committees with the Independent
Petroleum Association of America, the Oklahoma Independent
Petroleum Association and the State of Oklahoma Energy Commission.
Mr. Alexander received a Bachelor of Science degree in Geological
Engineering from the University of Oklahoma.
Mr. DiPaolo has served as a Duff & Phelps Senior Advisor
since 2011. Mr. DiPaolo was a Partner at Growth Capital Partners,
L.P. for eight years. Prior to that, Mr. DiPaolo worked for more
than 27 years at Halliburton Company where he held several
positions. Mr. DiPaolo was a Group Senior Vice President of Global
Business Development with Halliburton Company since from 1998 to
2002. Prior roles at Halliburton included serving as North American
Regional Vice President and Far East Regional Vice President. In
these roles he was responsible for overall operations of
Halliburton Energy Services' North America and Far East operations.
Mr. DiPaolo currently serves on the Board of Directors of the
following public companies: Evolution Petroleum Corporation,
Willbros Group, Inc. and Eurasia Drilling Company. He also sits on
several private company boards. He previously served as Interim
Chairman of the Board of Directors of Boots & Coots Group. Mr.
DiPaolo also served on Superior Well Services' board prior to its
sale to Nabors Industries, the Edgen Group board until it was sold
to Sumitomo Corp and the Innicor Subsurface Technologies board
prior to its sale to BJ Services. Mr. DiPaolo received a Bachelor
of Science degree in Agricultural Engineering from West Virginia
University in 1976 as well as an honorary doctorate degree. He also
serves on the Advisory Board for the West Virginia University
College of Engineering and is a member of the Society of Petroleum
Engineers.
Mr. Link is the Chairman and founder of Knightsbridge
Investments Limited. His investment interests and experience span
oil exploration and production, chemicals, renewable energy, beef
and cattle and real estate industries. He currently represents
Knightsbridge interests in the following capacities: Chairman of
Knightsbridge Chemicals, LTD Chairman of Knightsbridge Biofuels,
LLC Chairman and Chief Executive Officer of Ecogy Biofuels, LLC.
Mr. Link served as President and Chief Operating Officer of Nimir
Group Limited, an international oil and petrochemical company with
operations in South America, several Middle Eastern counties,
northern Africa and Kazakhstan where he led a senior management
buy-out of the company by Knightsbridge Investment Limited. He
subsequently oversaw the sale of Knightsbridge's oil interests to
Maurel et Prom and the China National Petroleum Corporation. In
previous assignments Mr. Link served in the roles of President and
Chief Operating Officer of several financial institutions, the
largest having $3.5 billion in assets. In his early career Mr. Link
was a certified public accountant and audit division supervisor for
KPMG, working primarily with financial institutions in the United
States. Mr. Link holds a Bachelor degree with post-graduate credits
from Oklahoma State University. He also holds a Certified Public
Accountant designation (currently inactive) in the State of
Oklahoma. Mr. Link currently serves as a Chairman of the Board of
Regents for Oklahoma Agricultural and Mechanical Colleges, one of
which is Oklahoma State University. Mr. Link received a Bachelor of
Science degree in Accounting from Oklahoma State University
Ms. Ogilvie currently serves as an Advisor to the Creditors
Committee for the Lehman Brothers International (Europe)
Administration, as a director and Chairman of the Compensation
Committee of Zais Financial Corporate, an externally managed and
advised real estate investment trust, as a director of Southwest
Bancorp, Inc., a commercial bank with branches in Oklahoma, Texas
and Kansas, and as a director of the Korea Fund, a non-diversified,
closed-end investment company which invests in Korean companies.
Prior to that, Ms. Ogilvie was a founding member of Ramius, LLC, an
alternative investment management firm, where she served in various
capacities from 1994 to 2009 before the firm's merger with Cowen
Group, Inc., a diversified financial services firm, including as
Chief Operating Officer from 2007 to 2009 and General Counsel from
1997 to 2007. Following the merger, Ms. Ogilvie became Chief of
Staff at Cowen Group, Inc. until 2010. Ms. Ogilvie received a
Bachelor or Arts degree from the University of Oklahoma and a Juris
Doctorate degree from St. John's University.
Mr. Irani is President, Chief Executive Officer and Director of
RKI Exploration & Production, LLC. Prior to forming RKI, Mr.
Irani was Senior Vice President and General Manager of the Western
US Business Unit for Dominion Resources, Inc., a Fortune 200
company. Prior to Dominion, Mr. Irani served in executive positions
at Louis Dreyfus Natural Gas Corp. and Woods Petroleum Corporation,
both NYSE-listed companies headquartered in Oklahoma City. Mr.
Irani serves or has served in the past five years on the board of
the Mewbourne School of Petroleum & Geological Engineering, and
the Mewbourne College of Earth and Energy at the University of
Oklahoma, the Interstate Oil & Gas Compact Commission and the
Board of Visitors for International Programs at the University of
Oklahoma. Mr. Irani is currently serving as Chairman of the
Oklahoma Independent Petroleum Association and is a director and
past Chairman of the Oklahoma Energy Resources Board. Mr. Irani
also serves as Chairman of the Executive Committee of Sustaining
Oklahoma’s Energy Resources. Mr. Irani is a founding board member
and past Chairman of Oklahoma Energy Explorers. He has served on
the board and is founder and past President of the India-U.S.
Chamber of Commerce of Greater Oklahoma City. Mr. Irani is a member
of Leadership Oklahoma and Leadership Oklahoma City. Mr. Irani
received a Bachelor of Science degree in Chemistry from Bombay
University, India. He also holds Bachelor and Master of Science
degrees in Petroleum Engineering from the University of Oklahoma
and a Master of Business Administration degree from Oklahoma City
University. He additionally has completed the Executive Management
Program offered by the IPAA in conjunction with Harvard
University.
Mr. Krongard served as an Executive Director of the Central
Intelligence Agency from 2001 to 2004 and also served as a
Counselor to Director of Central Intelligence from February 1998 to
March 2001. Prior to such time, Mr. Krongard served in various
capacities at Alex.Brown, Incorporated, including as Chief
Executive Officer and Chairman of the Board. Upon the merger of
Alex.Brown with Bankers Trust Corporation in September 1997, Mr.
Krongard became Vice Chairman of the Board of Bankers Trust
Corporation and served in such capacity until joining the Central
Intelligence Agency in 2001. He also served as a Non-Executive
Chairman of PHH Corp from February 28, 2005 to June 10, 2009. Prior
to that, Mr. Krongard served as the Vice Chairman of the Board of
Bankers Trust Corporation until joining the Central Intelligence
Agency in 2001. Mr. Krongard served as an Executive Director of the
Central Intelligence Agency from 2001 to 2004 and also served as a
Counselor to Director of Central Intelligence from February 1998 to
March 2001. Mr. Krongard serves as a Member of Board of Trustees of
In-Q-Tel, Inc. He has been an independent director of Iridium
Communications Inc. since August 9, 2006 and serves as its Member
of Government Advisory Board. Mr. Krongard serves as Interim
Chairman of the Johns Hopkins Health System. He has been a director
at Under Armour, Inc. since July 2005 and has been its Lead
Director since May 3, 2006. Mr. Krongard has also served as
Director of Apollo Global Management, LLC since 2011. He served for
three years of active duty as an Infantry Officer with the U.S.
Marine Corps. Mr. Krongard received a Juris Doctorate degree, with
Honors, from the University of Maryland School of Law in 1975 and
an A.B. degree, with Honors, from Princeton University in 1958.
Chesapeake Energy CorporationInvestor Contact:Gary T.
Clark, CFA, 405-935-8870ir@chk.comorMedia Contact:Gordon
Pennoyer, 405-935-8878media@chk.com
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