Chesapeake Energy Corp.’s (NYSE:CHK) oilfield services company, Seventy Seven Energy, has officially spun off from the mother ship, creating a more nimble but debt laden services company with plenty of competition.

Chesapeake will look even more like a pure-play E&P and reduces its net debt by about $1.5 billion, said Mark P. Hanson, sector strategist at Morningstar Equity Research, in a June 30 report.

Seventy Seven previously operated as Chesapeake Oilfield Operating LLC. The spinoff will trade on the NYSE under the ticker SSE. The company should be able to devote more resources to business development and see exposure to contracts with E&Ps uncomfortable with using a firm related to Chesapeake.

Hanson said that of SSE's $2.8 billion in contracted backlog as of June 1, just 6% was from firms other than Chesapeake.

CHK is also expected to receive a $400 million dividend from SSE as well as transferring debt to SSE’s balance sheet.

“As we have indicated in the past, we view the consummation of this transaction as continued forward progress to reducing CHK’s leverage and the complexity of the CHK story going forward,” said Bill Herbert, managing director and co-head of securities for Simmons & Co. International.

Seventy Seven's elevated debt levels right out of the gate do increase the risk profile for shareholders. Hanson said the fair value estimate for Chesapeake decreases to $37 per share from $38, as a result of the spin-off.

“We see meaningful upside in SSE shares post-spin-off. Our price target for SSE is $31 per share, 30% above its current when-issued price of $24,” Hanson said. “At our target price, SSE would trade at 5.8 times our 2015 EBITDA estimate and 16 times our 2015 EPS estimate.”

Seventy Seven Energy services by play.

Chesapeake said in February it would either sell or spinoff the oilfield service division. SSE is the nation’s second-largest producer of natural gas, a top-15 producer of oil and NGLs and the most active driller of onshore wells in the U.S. In 2013 revenue totaled $2.2 billion and at year-end 2013 the company owned or leased 115 land rigs, nine frac fleets with 360,000 horsepower, and a fleet of trucks/cranes associated with oilfield services.

With the horsepower at its disposal, SSE is the 13th-largest hydraulic fracturing service provider in North America. Of its nine fleets, eight are currently under contract with Chesapeake in the Anadarko Basin, and Eagle Ford and Utica shales. SSE plans to add an additional fleet of 40,000 horsepower by year-end 2014.

SSE trading began July 1. Following the close of business on June 30, Chesapeake distributed to its shareholders one share of common stock of SSE for every 14 shares of Chesapeake common stock outstanding as of June 19.

Jerry L. Winchester remains CEO and Cary D. Baetz remain as CFO of SSE. Karl Blanchard has been appointed the COO of SSE.