OKLAHOMA CITY, Aug 10, 2021 (GLOBE NEWSWIRE) – Chaparral Energy, Inc. (the “Company” or “Chaparral”), a privately held company, has announced its updated strategic vision, the divestment of non-core assets from the South of Oklahoma and the acquisition of complementary assets in the Chaparral field of intervention. In addition, the Company provided an operational update, including recent development drilling results.
- Development and adoption of a renewed strategic vision focusing on:
- Production excellence with a leading cost structure, sustainable free cash flow generation, a flexible and disciplined development plan, maintenance of low leverage and debt repayment;
- Disposal of non-core South Oklahoma assets with net production of approximately 900 boe / d (~ 50% oil) on July 30, 2021;
- Agreement signed to acquire assets in our area of interest with net production of approximately 1,900 boe / d (approximately 33% oil) and approximately 39,000 net acres;
- Reported June 30, 2021, net first lien leverage of 0.50x (total net leverage of 0.77x);
- Repayment of $ 62 million in debt since the start of the year ($ 47 million as of June 30, 2021);
- Second quarter 2021 proved reserves (pro forma for acquisition and disposal) using the NYMEX strip price as of July 30, 2021 with a PV-10 value of $ 670 million.
“Management has achieved a high degree of alignment with our board of directors, which represents over 80% of our equity, and together we have performed an in-depth review of the company’s strategy,” said Chuck Duginski , chief Executive Officer. “We are focused on operational excellence to reduce costs and maximize cash flow from our production operations, while maintaining production and creating value by investing prudently in the bit. It turns out to be a sustainable business model for long-term value creation. In 2021, we created significant free cash flow allowing us to internally fund our investment program while generating liquidity to pursue growth opportunities. In addition, we have used this cash flow to reduce our debt by $ 62 million in 2021 and we remain committed to a target leverage ratio of 1.0x or less. Our in-depth experience and operational expertise offer competitive advantages in an increasingly active pool. Despite its complexities, Mid-Con remains one of the most prolific oil and gas regions in the United States.
“On July 30, 2021, we finalized the sale of end-of-life non-core assets that were producing around 900 boe / d net. This enables us to reduce our operating costs per barrel, decreases future plugging and abandonment liabilities, and provides additional liquidity to help fund accretive acquisitions.
“On July 23, 2021, we signed an agreement to acquire 39,000 net acres in our area of interest and existing wells producing approximately 1,900 net boe / d. Primarily located in Major and Woods counties, an area we refer to as Glass Mountain, we have existing operations nearby and look forward to applying our expertise to improve cash flow from production assets. We are also pleased with the additional mined drilling units acquired and how they compare to our current development areas.
“In summary, we are implementing our strategic vision while prudently reinvesting in our assets through drilling operations and opportunistically assessing the many opportunities around us. We have low leverage and significant operational and financial flexibility to execute our vision – to be the low cost operator in Mid-Con, create sustainable free cash flow through field operations that are unmatched in terms of quality and efficiency and a continuous reduction in the costs of the company, while identifying and carrying out the deployment of capital that creates the most value. Our equity and management are aligned with our strategy and we demonstrate our ability to deliver results. Pro forma for acquisition and disposal, with our modest development plans, we have the ability to sustain production and repay the entire balance of our credit facility by the second half of 2022 in the pricing environment current, ”concluded Mr. Duginski.
Operational and financial highlights
- Completion of three highly successful extended lateral CDUs in December 2020 and resumption of drilling operations in May 2021;
- Production in the first half of 2021 of 23.2 Mboe / d (57% liquids);
- Continuous reduction of LOE and general and administrative costs with a focus on maximizing margins.
In the fourth quarter of 2020, Chaparral completed three extended 1.5 mile Merge Miss Hubbard side wells. These wells began to ebb in mid-December and provide a substantial increase in production in a high price environment. These development wells are among the most profitable in the history of the Company and have paid off in less than six months.
In May 2021, the company began drilling operations in the Canadian county with a focus on prudently reinvesting strong operating cash flows into high yielding wells. We currently plan to dig three separate developments in 2021 comprising eight wells, two of which will continue through early 2022. One of the developments is the four-well Blackburn lateral development, extended over 1.5 miles, offsetting our Hubbard development. . We expect these wells to be commissioned early in the fourth quarter. The capital program will be funded from operating cash flows.
Chaparral is focused on reducing already low costs to maximize margins and cash flow. The Company implemented lasting reductions in LOE associated with changes in lifting methods, compression optimization, chemical program, power improvements and other efficiency improvements in operations on the ground. The LOE per boe for the first half of 2021 in total and for our focus area was $ 3.44 and $ 2.02, representing reductions of 33% and 48%, respectively, compared to the year 2019.
In order to better align our general and administrative expenses with operational activity, the Company reduced its workforce in 2020 and implemented cost reduction initiatives for all general and administrative non-salary expenses. In early January 2021, Chaparral moved its headquarters, which will translate into annual savings of around $ 1 million. The company estimates the annualized savings associated with staff reductions of approximately $ 5 million as well as a further savings of $ 3-4 million in non-payroll general and administrative costs. General and administrative cash costs per boe, adjusted for restructuring and other non-recurring expenses, for the first half of 2021 was $ 1.84, a reduction of 31% from the previous year. year 2019.
Disposal of assets outside the intervention area
The transferred assets are located in Southern Oklahoma and consist primarily of low volume, higher cost flooding. The transferred assets consist of more than 400 wells with a net production of approximately 900 boe / d (50% oil) and an LOE of over $ 14 per barrel. The transaction has an effective date of May 1, 2021 and closed on July 30, 2021. The divestiture will reduce Chaparral’s operating costs and reduce the future liability for plugging and abandoning assets that have not. no potential for horizontal development. This sale accelerates our deleveraging and provides additional liquidity used to finance the announced acquisition.
Acquisition of assets in the field of intervention
The acquired assets are primarily located in Major and Woods counties, an area the Company calls Glass Mountain, and consist of approximately 39,000 net acres (94% BPH) and current net production of approximately 1,900 boe / d (33% oil, 57% liquids) of which more than 90% comes from approximately 35 more recent horizontal wells operating, and an LOE of less than $ 6 per barrel. The transaction has an effective date of June 1, 2021 and is expected to close in September. The Company has identified over 20 developing economy operated sections that will compete for capital with its current development zones in Canada and Kingfisher counties. The acquisition straddles the current focus and the company is excited to take control of the assets and sees the opportunity to further improve the cash flow of new assets by applying the same level of control that it applies to its own assets and operations.
Second quarter pro forma proved reserves
The Company’s total proved reserves in the second quarter of 2021, pro forma for divestiture and acquisition, using the NYMEX strip price as of July 30, 2021, generate 83.0 million barrels of oil equivalent and a PV- value. 10 of $ 670 million. The total volume of proved reserves consists of 21% petroleum and 55% liquids. Proven developed production reserves represent 81% of total proven reserves and generate $ 569 million in PV-10 value.
Chaparral Energy, Inc. is a privately held, independent oil and natural gas exploration and production company headquartered in Oklahoma City. Chaparral is concentrated in the oil window of the Anadarko Basin in the heart of Oklahoma. For more information, visit the Company’s website at www.chaparralenergy.com.