OKLAHOMA CITY, May 10, 2018 (GLOBE NEWSWIRE) -- Chaparral Energy, Inc. (OTC: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 | ||||||