Chesapeake Energy Corp. has created an oilfield services unit to house its growing business and to complement its massive U.S. drilling program. A former Boots & Coots executive was named CEO.

The Oklahoma City-based producer formed Chesapeake Oilfield Services LLC (COS) with a goal of becoming a “top five U.S.-focused” company. Jerry L. Winchester, 52, who will helm the unit, was CEO of Boots & Coots International Well Control Inc. for 13 years until the company was acquired by Halliburton Co. last year (see Daily GPI, April 13, 2010).

COS may be worth as much as $10 billion in 2012, said Chesapeake CEO Aubrey McClendon.

“Chesapeake benefits greatly from its vertically integrated business model and believes that owning and operating quality service assets to drill and complete its wells uniquely insulates Chesapeake from inflationary pressures,” said McClendon. “The buildout of these oilfield service businesses further demonstrates the energy sector’s contribution to economic recovery in the U.S. by adding high-paying, quality jobs across all the COS business units in multiple states.”

The exploration and production (E&P) company initiated its service company integration strategy in 2001 with a $25 million investment to build and refurbish five drilling rigs. Through acquisitions the company now owns a stable of oilfield-related service companies that serve Chesapeake’s oil and natural gas exploration.

Among other things Chesapeake is a 30% shareholder in privately held Frac Tech International, a fast growing hydraulic fracturing company that told the Securities and Exchange Commission earlier this month that it intends to launch an initial public offering (IPO) to raise up to $1.15 billion. How that IPO performs could be key in whether Chesapeake eventually spins off COS. Frac Tech’s big customers include ExxonMobil Corp.’s XTO Energy Inc. and Range Resources Corp.

“The goal of Chesapeake’s service company vertical integration strategy is to provide premium services at attractive prices to Chesapeake’s E&P operations while improving operating efficiencies, lowering costs and serving as an inflation hedge,” it stated.

COS subsidiaries would include Nomac Drilling LLC, which now is the fourth largest U.S. drilling contractor with 114 operated rigs. In April Chesapeake agreed to pay $315 million to buy land driller Bronco Drilling Co. Inc. to advance its goal to own two-thirds of the rigs it operated in the U.S. onshore (see Daily GPI, April 18). Ten days later Nomac launched the cash tender offer to acquire Bronco’s common stock (see Daily GPI, April 27).

Performance Technologies LLC (PTL) , a start-up pressure pumping company, also would be part of COS. PTL is expected to have 60,000 hp in the field in October, 140,000 hp by February 2012 and 300,000 hp by year-end 2012.

Thunder Oilfield Services LLC, a holding company for trucking, equipment rental and rock excavation businesses, is included in the new unit, along with Compass Manufacturing LLC, which supplies natural gas compression packages and related production equipment to Chesapeake subsidiaries MidCon Compression LLC and CHK Directional Drilling LLC.

According to data issued on Monday that was compiled by RigData and analysts with Tudor, Pickering, Holt & Co. (TPH), Chesapeake is the top U.S. land E&P operator in terms of operated rigs, with 171 in operation as of Friday (Sept. 16). A week earlier it had 163 rigs in operation. In second place was Devon Energy Corp., which had 67 rigs in operation last Friday, followed by EOG Resources Inc, with 64 rigs, and ExxonMobil Corp. subsidiary XTO Energy Inc., which was running 62 rigs.

Most of Chesapeake’s rigs are drilling in the Midcontinent (43), followed by the Northeast (33), according to RigData and the TPH team led by Jeff Tillery. The producer also had 27 rigs drilling in South Texas, 22 rigs in East Texas/North Louisiana, 15 in North Texas and 11 each in the Rockies and West Texas/New Mexico. Eight rigs were targeting the Arkoma Basin, while one rig was drilling along the Gulf Coast of Texas.

In addition to Chesapeake naming Winchester as CEO of COS, Jay Minmier is to serve as president of Nomac and CHK Directional Drilling. Minmier formerly was vice president and general manager for Precision Drilling Corp. Bill Stanger, 57, who joined Chesapeake in January 2010, has assumed the role of PTL president. Zac Graves, 36, would be president of Thunder Oilfield. Dave Fisher, 58, was appointed chief administrative officer of COS in May.

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