Cha­parral to sell CO2-en­hanced oil re­cov­ery projects for $170M

The Oklahoman - - BUSINESS - BY ADAM WILMOTH En­ergy Ed­i­tor aw­ilmoth@ok­la­homan.com

Cha­parral En­ergy Inc. has agreed to sell its car­bon diox­ide-en­hanced oil re­cov­ery projects in Osage County and the Texas Pan­han­dle for $170 mil­lion, the Ok­la­homa City com­pany said Tues­day.

Un­der terms of the deal, Cha­parral could re­ceive ad­di­tional pay­ments through the end of 2020 if the fields’ fu­ture pro­duc­tion is sold at a price higher than the buyer’s hedged price.

“The third quar­ter was an­other trans­for­ma­tional quar­ter for Cha­parral, par­tic­u­larly due to sev­eral trans­ac­tions that ef­fec­tively marked Cha­parral’s tran­si­tion to a pure-play STACK op­er­a­tor,” CEO Earl Reynolds said Tues­day on a con­fer­ence call with an­a­lysts.

Cha­parral ex­ec­u­tives an­nounced the re­struc­tur­ing plans when the com­pany emerged from bank­ruptcy re­or­ga­ni­za­tion in March.

The com­pany pre­vi­ously fo­cused pri­mar­ily on its en­hanced oil re­cov­ery projects, where Cha­parral pumped car­bon diox­ide and wa­ter into some of the state’s old­est oil fields in an ef­fort to boost oil re­cov­ery.

Un­der new lead­er­ship and af­ter shed­ding $1.2 bil­lion in

in debt, the com­pany is fo­cused on hor­i­zon­tal drilling in the STACK, a process that is now less ex­pen­sive and gen­er­ates a re­turn much more quickly.

Reynolds said the com­pany will use pro­ceeds from the sale to re­pay the com­pany’s $149 mil­lion term loan and to pay down its credit fa­cil­ity.

“The fo­cus on debt re­duc­tion demon­strates Cha­parrals’ com­mit­ment to main­tain­ing a strong bal­ance sheet, which pro­vides us the flex­i­bil­ity and se­cu­rity nec­es­sary to thrive in a low-com­mod­ity-price en­vi­ron­ment,” Reynolds said. “This an­tic­i­pated re­duc­tion in debt will make Cha­parral one of the in­dus­try’s least­lev­ered com­pa­nies of our size.”

Reynolds also said Tues­day that the com­pany’s lenders have reaf­firmed Cha­parral’s credit fa­cil­ity bor­row­ing base of $225 mil­lion, but that ex­ec­u­tives are work­ing with lenders in hopes of in­creas­ing the credit limit af­ter the pend­ing as­set sales.

Tues­day’s an­nounce­ment comes about two months af­ter Cha­parral ex­ec­u­tives un­veiled a $100 mil­lion joint ven­ture with Hous­ton-based Bayou En­ergy de­signed to boost the com­pany’s oil and nat­u­ral gas pro­duc­tion in north­west Ok­la­homa.

Also on Tues­day, Cha­parral ex­ec­u­tives said the com­pany posted a net loss of $19.1 mil­lion, or 42 cents a share, in the third quar­ter, com­pared to a loss of $5.49 mil­lion in the sec­ond quar­ter of 2016. Rev­enues in­creased to $75.9 mil­lion, up from $65.8 mil­lion in the year-ago quar­ter.

The com­pany re­ported ad­justed earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion of $44.3 mil­lion, up from $27.4 mil­lion one year ago.

STACK pro­duc­tion surged to 10,300 bar­rels of oil equiv­a­lent per day, up 34 per­cent from the year­ago quar­ter and 12 per­cent more than in the sec­ond quar­ter of 2017. The com­pany’s to­tal pro­duc­tion in­creased to 24,500 equiv­a­lent bar­rels per day.

Cha­parral ex­ec­u­tives said they plan to op­er­ate three rigs in the fourth quar­ter, bring­ing on­line 11 new wells. Pro­duc­tion growth likely will slow in the quar­ter as more of the joint-ven­ture wells be­come pro­duc­tive.

[THE OK­LA­HOMAN AR­CHIVES]

Cha­parral En­ergy Inc. ex­ec­u­tives on Tues­day an­nounced $170 mil­lion in as­set sales.

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