Chaparral Energy (CHAP)

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Chaparral Energy (CHAP)

Post by dan_s »

"CHAP announced today the company’s bank group has completed its regularly scheduled fall borrowing base redetermination, which increased the borrowing base from $265 to $325 million, reduced pricing grid by 50 basis points and allows hedge capacity to 80% of internally forecasted production for the first 24 months." - John White at Roth Capital Partners sent out this quote after attending out luncheon today in Houston.

I was very impressed by Earl Reynolds' (Chaparral's CEO) presentation at our luncheon.

1. The company's production has exceeded my forecast for three straight quarters and they have raised their production guidance twice this year.
2. They are running four operated rigs in STACK and MERGE.
3. Their wells are exceeding pre-drill type curves and on-track to generate 50% to 100% IRRs. Even if oil stays at $50/bbl they will generate strong well level economics.
4. The company has de-risked a high percentage of their leasehold.
5. The 2018 drilling program will add a lot more proven reserves to their year-end reserve report.
6. Most of their leasehold is operated and HBP, which makes the company a PRIME TAKEOVER TARGET.
7. Last but not least, they are heading to NYC to meet with several of their large shareholders and analysts.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Chaparral Energy (CHAP)

Post by dan_s »

"Our valuation of CHAP is based on a net asset value (NAV) analysis which produced $34.50 per share which is our $34.50 per share price target." - John White at Roth Capital Partners on 12/10/2018.

CHAP closed at $9.27 today. First Call's price target is $29.93.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Chaparral Energy (CHAP)

Post by dan_s »

On 11/23/2018 Derrick Whitfield at Stifel Nicolaus sent an updated report on CHAP to Reuters. He rates it a BUY with a price target of $23.00.

Prior to checking Reuters, I updated my forecast/valuation model for CHAP and my valuation also came to $23.00/share. Keep in mind that CHAP has not issued production guidance for 2019, so my 2019 valuation is based primarily on the presentation that Earl Reynolds made at our luncheon yesterday. Their production was 21,342 Boepd in Q3.
> I now expect CHAP to exit 2018 with production over 22,500 Boepd
> My 2019 forecast assumes that they continue to run a four rig program and have average production of 24,000 Boepd. < This is probably too conservative.
> My 2019 revenue forecast is $280.6 million, which compares to First Call's revenue forecast of $313.5 million.

I have posted my updated forecast/valuation model for CHAP to the EPG website. We will be publishing an updated profile on the company late in December.

CHAP is currently trading at less than 4X my 2019 operating cash flow per share forecast. Take a hard look at the RED BOX on the forecast model. It will give you an idea of why this small-cap as a lot of upside for us.
Dan Steffens
Energy Prospectus Group
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