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