Chaparral to focus on STACK
New-look Chaparral Energy Inc. has a new CEO, new directors and a new focus after emerging last month from 10 months in Chapter 11 bankruptcy reorganization.
Through the process, the Oklahoma City-based oil and natural gas producer shed $1.2 billion in debt and eliminated $107 million in annual interest payments.
“From a financial perspective, Chaparral now has one of the healthiest balance sheets in the industry compared to companies our size and is well positioned to deliver significant returns and competitive growth even in the current commodity price environment,” CEO Earl Reynolds said Thursday morning during a conference call with analysts.
Chaparral’s new directors discussed the company’s new focus during their first board meeting last week.
Reynolds promised to reveal more details during another conference call later this month, but on Thursday provided an overview of the company’s new strategic plan.
“It is our intention for Chaparral to become a pure play
BY ADAM WILMOTH Energy Editor awilmoth@oklahoman.com
STACK-focused company,” he said.
The company will focus its upcoming drilling activity on its 100,000 acres in Kingfisher, Canadian and Garfield counties, he said.
Central Oklahoma’s STACK play is one of the fastest growing, lowestcost plays in the country.
It has attracted attention from oil and natural gas companies because it includes several layers of producible rock, allowing companies to drill wells into different rock layers from the same surface drilling pad.
Chaparral and its partners drilled wells into at least four STACK rock layers last year.
“Our understanding of the STACK play was transformed last year,” Reynolds said.
Chaparral has two rigs drilling for oil and natural gas in the STACK but plans to cut the count to one by midyear, he said.
Continuing enhanced recovery
While shifting the primary focus to the STACK, Reynolds said the company continues to see “solid production” from its carbon dioxide enhanced oil recovery project in Osage Country’s North Burbank unit.
Chaparral is injecting about 30 million cubic feet of carbon dioxide per day into the field through a 68-mile pipeline that delivers the gas from a fertilizer plant in Coffeyville, Kansas.
Production in the field increased to 2,950 barrels of oil equivalent per day at the end of 2016, up from an average of 2,200 equivalent barrels per day in 2015.
Reynolds said he expects the company to finish 2017 with about 3,400 equivalent barrels per day of production.
Chaparral is expected to spend about $47 million on North Burbank and its other carbon dioxide projects in 2017, Reynolds said.
“We continue to optimize our EOR (enhanced oil recovery) fields to identify ways to reduce capital without impacting flood performance during this low commodity price environment,” he said.
While Chaparral will continue to make investments into its STACK and North Burbank projects, the company has shifted its focus away from its remaining assets.
Chaparral executives have reduced the company’s proved reserves by 24.2 million barrels to 131.3 million barrels.
“The biggest reason for the decrease was that essentially all of our proved undeveloped and behind-thepipe reserves outside of the STACK or North Burbank were removed because we do not expect to spend the capital required to develop them in the current price environment,” Reynolds said
The eliminated reserves include the company’s holdings in the water-rich Mississippi Lime formation in northwestern Oklahoma.
Some of the eliminated assets could end up being sold to other companies.
Reynolds said the company plans to sell $25 million to $35 million in noncore assets by the end of the year.
Chaparral is expected to spend $135 million to $155 million in 2017 to produce between 8.2 million and 8.6 million equivalent barrels.