Chesapeake to spin off midstream natural gas unit

HOUSTON, Aug 18 (Reuters) - Chesapeake Energy Corp (CHK.N) is planning to spin off its natural gas gathering unit but the company would not say what form the business will eventually take.

In June, the Oklahoma City-based company said it had temporarily delayed plans to raise capital through the sale of a minority interest in its gas gathering or midstream business, a move that had been expected to bring in $1 billion.

The firm on Monday declined to reveal its plans for the as yet unnamed business, offering only that the spinoff was meant to extract value from its assets.

"We are still moving forward making it its own stand-alone operation," said Jeff Mobley, head of investor relations at Chesapeake. "What we do down the road remains to be seen."

The midstream business would have its own reporting statements, be its own legal entity and have its own separate financing, Mobley said.

But first Chesapeake has to receive consent from holders of about $2 billion of its debt to allow it to arrange separate financing for its midstream business. Chesapeake filed the consent solicitation on Wednesday.

If the bondholders agree, the midstream business, which includes gas gathering and processing facilities in the Barnett Shale in North Texas and the Fayetteville Shale in Arkansas, may end up as a master limited partnership or a separate private company.

Chesapeake is spending heavily to develop new natural gas fields such as the Haynesville Shale in northern Louisiana. The company plans to spend about $8 billion in 2008 acquiring acreage and leaseholds.

Shares of Chesapeake were off more than 1.3 percent, or 62 cents, at $44.91 in afternoon trading on the New York Stock Exchange. (Reporting by Anna Driver in Houston; Editing by Daniel Trotta)