Press Release

Chaparral Energy

Chaparral Energy Announces First Quarter 2018 Financial and Operational Results

Oklahoma City, May 10, 2018 — Chaparral Energy, Inc. (CHPE) today announced its first quarter 2018 financial and operational results with the filing of its form 10-Q. The company will hold its quarterly financial and operating results conference call this morning, May 10, at 9 a.m. Central. 

First Quarter Highlights and Recent Key Items
• Grew STACK production by 50% on a year-over-year basis to 12,289 barrels of oil equivalent per day (Boe/d) 
• Reported a net loss of $11.4 million driven by a $12.3 million non-cash loss associated with commodity derivatives
• Generated Adjusted EBITDA, as defined below, of $29.4 million 
• Brought online six new gross operated wells, one of which was part of its joint venture drilling program, with an average three-stream peak 30-day initial production (IP) rate of 785 Boe/d, of which 75% was liquids
• Closed on the previously announced 7,000-acre, bolt-on STACK Play acquisition in Kingfisher County, Oklahoma in January 2018

“I am extremely pleased with the strong performance Chaparral delivered during the first quarter. Over the past year our operational expertise has been focused on our outstanding STACK Play position, where we continue to drive strong operational results while maintaining our low-cost structure,” said Chief Executive Officer Earl Reynolds. “Chaparral has continued to deliver exceptional well performance, which has helped us grow our STACK program by more than 50% on a year-over-year-basis. Most of our recent wells are continuing to perform above our type curve and rate-of-return expectations. We are encouraged by these early production results and expect our growth to continue throughout the year.”

“Performance such as this will allow us to build on the tremendous successes and momentum we generated throughout 2017 and help us deliver on or exceed our 2018 guidance,” commented Reynolds. “With strong well results, higher stabilized pricing and rationalization of higher cost, non-core assets, we will continue to focus on execution and cost management throughout the year. This will allow us to quickly and efficiently grow our premier STACK position as we strive to deliver top-quartile results for our stockholders.”

Operational Update — STACK Production Grows 50% 
Chaparral grew its STACK production to 12,289 Boe/d in the first quarter of 2018 from 8,167 Boe/d in the first quarter of 2017 and from 10,379 Boe/d in the fourth quarter of 2017. This is a greater than 50% year-over-year increase and an 18% quarter-over-quarter growth rate. Excluding production from divested EOR assets, the company’s first quarter 2018 average total production grew by 14% on a year-over-year basis to 19,300 Boe/d, of which 64% was liquids and 36% natural gas. This increase was driven by the strong well results and significant growth in STACK production, which underscores Chaparral’s strategic shift to focus 100% of its resources and expertise on developing its prolific STACK acreage.

Chaparral operated three rigs in the first quarter in Canadian and Garfield counties. The company brought six new gross STACK wells on production, one of which was part of the company’s ongoing joint venture drilling program with Bayou City Energy. These wells delivered an average three-stream peak 30-day IP rate of 785 Boe/d, of which 75% was liquids. 

The company is encouraged by the progress and strong well results in its 40,000-acre Garfield County position. Three of its first quarter Garfield wells delivered particularly strong results with an average three-phase, 30-day IP rate of almost 1,000 Boe/d. The Barbee 2105, a joint venture well, produced at a three-phase 30-day IP rate of 1,112 Boe/d, of which 69% was liquids. In addition, the Gerken 2205 delivered 1,063 Boe/d on the same basis, of which 55% was liquids, while the Fuska 2007, recorded a three-phase 30-day IP rate of 710 Boe/d, of which 83% was liquids. 

Chaparral’s total capital expenditures during the first quarter were $101.8 million, including $65.8 million associated with STACK acreage and seismic acquisitions, of which $55 million was associated with the company’s previously announced bolt-on Kingfisher County acquisition. Chaparral invested $33.4 million in STACK drilling and completion activities.

Financial Summary
Chaparral recorded a net loss of $11.4 million, or 25 cents per share, during the first quarter of 2018 driven by a $12.3 million non-cash loss associated with commodity derivatives. The company’s Adjusted EBITDA for the quarter was $29.4 million. Adjusted EBITDA, as well as the company’s production, revenues and expenses mentioned in this release, were impacted by its 2017 asset sales on a quarter-over-quarter and year-over-year basis. 

Total gross commodity sales for the quarter were $61.4 million, which represents a 17% year-over-year and an 11% quarter-over-quarter decrease. This decline was driven by a decrease in total company production associated with its 2017 asset sales.

Chaparral’s average realized price, excluding derivative settlements, for crude oil increased to $61.76 per barrel in the first quarter of 2018. This represented an increase of approximately 16% on a quarter-over-quarter basis, compared to $53.30 per barrel in the fourth quarter of 2017. The company’s realized natural gas liquids price was down 9% on a quarter-over-quarter basis from $25.77 per barrel in the fourth quarter of 2017 to $23.45 per barrel in the first quarter of 2018. Chaparral’s realized natural gas price was down slightly from $2.47 per thousand cubic feet (Mcf) in the fourth quarter of 2017 to $2.31 per Mcf in the first quarter of 2018.

The company’s total lease operating expense (LOE) for the first quarter of 2018 was $14.5 million or $8.37 per Boe. This represents a significant 21% quarter-over-quarter decrease compared to $10.62 in the fourth quarter of 2017 and was primarily driven by the sale of Chaparral’s EOR properties and other non-core, higher cost assets in 2017. Its LOE per Boe is expected to continue to decline throughout 2018 as a result of additional asset sales, as well as its strategic shift to lower cost STACK operations, which will continue to account for a greater percentage of total company production.

Chaparral’s net general and administrative (G&A) expenses during the quarter were $11.5 million, or $6.62 per Boe, which was down 14% on a quarter-over-quarter basis compared to $15 million, or $7.72 per Boe in the fourth quarter of 2017. This is primarily due to decreases in compensation expenses. Adjusted for non-cash compensation, the company’s net G&A expense per Boe in the first quarter was $3.96, which is down compared to $4.08 per Boe in the fourth quarter of 2017.

Production taxes for the first quarter were $2.7 million, or $1.54 per Boe, which was 24% lower than $3.5 million, or $1.81 per Boe, for the fourth quarter of 2017. This was driven lower by a reduction in production associated with the company’s 2017 asset sales. 

Balance Sheet and Liquidity
As previously announced, Chaparral entered into an amended credit agreement in December 2017 that increased its borrowing base by $60 million to $285 million. Chaparral’s borrowing base was reaffirmed by its bank syndicate on May 9, 2018 at $285 million. The company’s balance sheet remains strong and it has no significant debt maturities until December of 2022. 

Earnings Call Information
Chaparral will hold its financial and operating results call this morning, Thursday, May 10 at 9 a.m. Central. Interested parties may access the call toll-free at 800-263-0877 and ask for the Chaparral Energy conference call 10 minutes prior to the start time. The conference ID number is 6702870. A live webcast of the call and corresponding presentation will be available on the company’s website at chaparralenergy.com/investors.

The company’s first quarter form 10-Q is available on the Investor section of Chaparral’s website at chaparralenergy.com/investors and the Securities and Exchange Commission at sec.gov. A recording of this morning’s call will also be available shortly after the call’s conclusion at chaparralenergy.com/investors

All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Chaparral expects, believes or anticipates will or may occur in the future are forward-looking statements. Statements made in this release contain “forward-looking statements.” These statements are based on certain assumptions and expectations made by Chaparral, which reflect management’s experience, estimates and perception of historical trends, current conditions, anticipated future developments, potential for reserves and drilling, completion of current and future acquisitions and growth, benefits of acquisitions, future competitive position and other factors believed to be appropriate. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are our ability to find oil and natural gas reserves that are economically recoverable, the volatility of oil and natural gas prices, the uncertain economic conditions in the United States and globally, the decline in the reserve values of our properties that may result in ceiling test write-downs, our ability to replace reserves and sustain production, our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in prospect development and property acquisitions or dispositions and in projecting future rates of production or future reserves, the timing of development expenditures and drilling of wells, the impact of natural disasters on our present and future operations, the impact of government regulation and the operating hazards attendant to the oil and natural gas business. Initial production (IP) rates are discreet data points in each well’s productive history. These rates are sometimes actual rates and sometimes extrapolated or normalized rates. As such, the rates for a particular well may decline over time and change as additional data becomes available. Peak production rates are not necessarily indicative or predictive of future production rates or economic rates of return from such wells and should not be relied upon for such purpose. The ability of the company or the relevant operator to maintain expected levels of production from a well is subject to numerous risks and uncertainties, including those referenced and discussed above. In addition, methodology the company and other industry participants utilize to calculate peak IP rates may not be consistent and, as a result, the values reported may not be directly and meaningfully comparable. Please read “Risk Factors” in our annual reports, form 10-K or other public filings. We undertake no duty to update or revise these forward-looking statements, whether as a result of new information or future events. 

About Chaparral 
Chaparral is an independent oil and natural gas exploration and production company headquartered in Oklahoma City. Founded in 1988, Chaparral is a pure-play operator focused in Oklahoma’s highly economic STACK Play, where it has approximately 117,000 net acres primarily in Kingfisher, Canadian and Garfield counties. The company has potential total production reserves of more than 1 billion barrels of oil equivalent and approximately 315,000 net surface acres in the Mid-Continent region. For more information, please visit chaparralenergy.com.

Investor Contact
Joe Evans
Chief Financial Officer
405-426-4590
joe.evans@chaparralenergy.com

Media Contact
Brandi Wessel
Communications Manager
405-426-6657
brandi.wessel@chaparralenergy.com

 

 

Operating Results Data (Unaudited)

 

Successor

 

Predecessor

 

(in thousands, except share and per share data)

Three months

ended

March 31, 2018

 

Period from

March 22, 2017

through

March 31, 2017

 

Period from

January 1, 2017

through

March 21, 2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Net commodity sales

$

 

57,889

 

$

 

7,808

 

$

 

66,531

 

Sublease revenue

 

 

1,198

 

 

 

 

 

 

 

Total revenues

 

 

59,087

 

 

 

7,808

 

 

 

66,531

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

 

14,543

 

 

 

4,259

 

 

 

19,941

 

Transportation and processing

 

 

 

 

 

361

 

 

 

2,034

 

Production taxes

 

 

2,677

 

 

 

316

 

 

 

2,417

 

Depreciation, depletion and amortization

 

 

21,106

 

 

 

3,414

 

 

 

24,915

 

General and administrative

 

 

11,507

 

 

 

5,744

 

 

 

6,843

 

Cost reduction initiatives

 

 

 

 

 

6

 

 

 

629

 

Other

 

 

828

 

 

 

 

 

 

 

Total costs and expenses

 

 

50,661

 

 

 

14,100

 

 

 

56,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

8,426

 

 

 

(6,292

)

 

 

9,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,371

)

 

 

(650

)

 

 

(5,862

)

Derivative (losses) gains

 

 

(16,501

)

 

 

(12,115

)

 

 

48,006

 

(Loss) gain on sale of assets

 

 

(1,044

)

 

 

 

 

 

206

 

Other income (expense), net

 

 

85

 

 

 

(5

)

 

 

1,167

 

Net non-operating (expense) income

 

 

(18,831

)

 

 

(12,770

)

 

 

43,517

 

Reorganization items, net

 

 

(1,037

)

 

 

(620

)

 

 

988,727

 

(Loss) income before income taxes

 

 

(11,442

)

 

 

(19,682

)

 

 

1,041,996

 

Income tax expense

 

 

 

 

 

1

 

 

 

37

 

Net (loss) income

$

 

(11,442

)

$

 

(19,683

)

$

 

1,041,959

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic for Class A and Class B

$

 

(0.25

)

 

*

 

 

*

 

Diluted for Class A and Class B

$

 

(0.25

)

 

*

 

 

*

 

Weighted average shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic for Class A and Class B

 

 

45,143,297

 

 

*

 

 

*

 

Diluted for Class A and Class B

 

 

45,143,297

 

 

*

 

 

*

 

 

 

Consolidated Balance Sheets

 (dollars in thousands)

March 31, 2018

(unaudited)

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

12,189

 

$

 

27,732

 

Accounts receivable, net

 

 

70,495

 

 

 

60,363

 

Inventories, net

 

 

7,463

 

 

 

5,138

 

Prepaid expenses

 

 

2,898

 

 

 

2,661

 

Total current assets

 

 

93,045

 

 

 

95,894

 

Property and equipment, net

 

 

49,004

 

 

 

50,641

 

Oil and natural gas properties, using the full cost method:

 

 

 

 

 

 

 

 

Proved

 

 

668,184

 

 

 

634,294

 

Unevaluated (excluded from the amortization base)

 

 

550,082

 

 

 

482,239

 

Accumulated depreciation, depletion, amortization and impairment

 

 

(142,107

)

 

 

(124,180

)

Total oil and natural gas properties

 

 

1,076,159

 

 

 

992,353

 

Other assets

 

 

361

 

 

 

418

 

Total assets

$

 

1,218,569

 

$

 

1,139,306

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

 

72,317

 

$

 

75,414

 

Accrued payroll and benefits payable

 

 

7,131

 

 

 

11,276

 

Accrued interest payable

 

 

576

 

 

 

187

 

Revenue distribution payable

 

 

20,118

 

 

 

17,966

 

Long-term debt and capital leases, classified as current

 

 

3,306

 

 

 

3,273

 

Derivative instruments

 

 

10,548

 

 

 

8,959

 

Total current liabilities

 

 

113,996

 

 

 

117,075

 

Long-term debt and capital leases, less current maturities

 

 

219,842

 

 

 

141,386

 

Derivative instruments

 

 

14,835

 

 

 

4,167

 

Deferred compensation

 

 

813

 

 

 

696

 

Asset retirement obligations

 

 

33,601

 

 

 

33,216

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Class A Common stock

 

 

388

 

 

 

389

 

Class B Common stock

 

 

79

 

 

 

79

 

Additional paid in capital

 

 

966,781

 

 

 

961,200

 

Treasury stock

 

 

(1,422

)

 

 

 

Accumulated deficit

 

 

(130,344

)

 

 

(118,902

)

Total stockholders' equity

 

 

835,482

 

 

 

842,766

 

Total liabilities and stockholders' equity

$

 

1,218,569

 

$

 

1,139,306

 

 

 

Consolidated Statements of Cash Flows (Unaudited)

 

Successor

 

Predecessor

 

(in thousands)

Three months

ended

March 31, 2018

 

Period from

March 22, 2017

through

March 31, 2017

 

Period from

January 1, 2017

through

March 21, 2017

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

 

(11,442

)

$

 

(19,683

)

$

 

1,041,959

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash reorganization items

 

 

 

 

 

 

 

 

(1,012,090

)

Depreciation, depletion and amortization

 

 

21,106

 

 

 

3,414

 

 

 

24,915

 

Derivative losses (gains)

 

 

16,501

 

 

 

12,115

 

 

 

(48,006

)

Loss (gain) on sale of assets

 

 

1,044

 

 

 

 

 

 

(206

)

Other

 

 

1,630

 

 

 

1,012

 

 

 

645

 

Change in assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(12,140

)

 

 

(3,577

)

 

 

198

 

Inventories

 

 

(3,168

)

 

 

38

 

 

 

466

 

Prepaid expenses and other assets

 

 

(179

)

 

 

180

 

 

 

(497

)

Accounts payable and accrued liabilities

 

 

(9,828

)

 

 

(3,423

)

 

 

8,733

 

Revenue distribution payable

 

 

2,151

 

 

 

1,510

 

 

 

(1,875

)

Deferred compensation

 

 

4,701

 

 

 

13

 

 

 

143

 

Net cash provided by (used in) operating activities

 

 

10,376

 

 

 

(8,401

)

 

 

14,385

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for property, plant, and equipment and oil and natural gas properties

 

 

(99,941

)

 

 

(5,832

)

 

 

(31,179

)

Proceeds from asset dispositions

 

 

73

 

 

 

 

 

 

1,884

 

(Payments) proceeds from derivative instruments

 

 

(4,244

)

 

 

1,692

 

 

 

1,285

 

Net cash used in investing activities

 

 

(104,112

)

 

 

(4,140

)

 

 

(28,010

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

79,000

 

 

 

 

 

 

270,000

 

Repayment of long-term debt

 

 

(146

)

 

 

(19

)

 

 

(444,785

)

Proceeds from rights offering, net

 

 

 

 

 

 

 

 

50,031

 

Principal payments under capital lease obligations

 

 

(661

)

 

 

(69

)

 

 

(568

)

Payment of other financing fees

 

 

 

 

 

 

 

 

(2,410

)

Net cash provided by (used in) financing activities

 

 

78,193

 

 

 

(88

)

 

 

(127,732

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(15,543

)

 

 

(12,629

)

 

 

(141,357

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

27,732

 

 

 

45,123

 

 

 

186,480

 

Cash, cash equivalents, and restricted cash at end of period

$

 

12,189

 

$

 

32,494

 

$

 

45,123

 

 

 

Non-GAAP Financial Measures and Reconciliations
Adjusted EBITDA is a Non-GAAP financial measure and is described and reconciled to net income in the table “Adjusted EBITDA Reconciliation, NON-GAAP.”

Adjusted EBITDA Reconciliation, Non-GAAP

 

Successor

 

Predecessor

 

(in thousands)

Three months

ended

March 31, 2018

 

Period from

March 22, 2017

through

March 31, 2017

 

Period from

January 1, 2017

through

March 21, 2017

 

Net (loss) income

$

 

(11,442

)

$

 

(19,683

)

$

 

1,041,959

 

Interest expense

 

 

1,371

 

 

 

650

 

 

 

5,862

 

Income tax expense

 

 

 

 

 

1

 

 

 

37

 

Depreciation, depletion, and amortization

 

 

21,106

 

 

 

3,414

 

 

 

24,915

 

Non-cash change in fair value of derivative instruments

 

 

12,257

 

 

 

13,807

 

 

 

(46,721

)

Impact of derivative repricing

 

 

(572

)

 

 

 

 

 

 

Loss (gain) on settlement of liabilities subject to compromise

 

 

48

 

 

 

 

 

 

(372,093

)

Fresh start accounting adjustments

 

 

 

 

 

 

 

 

(641,684

)

Interest income

 

 

(1

)

 

 

 

 

 

(133

)

Stock-based compensation expense

 

 

4,623

 

 

 

 

 

 

155

 

Loss on sale of assets

 

 

1,044

 

 

 

 

 

 

(206

)

Write-off of debt issuance costs, discount and premium

 

 

 

 

 

 

 

 

1,687

 

Restructuring, reorganization and other

 

 

989

 

 

 

626

 

 

 

24,297

 

Adjusted EBITDA

$

 

29,423

 

$

 

(1,185

)

$

 

38,075