Chaparral Energy (CHAP) Q2 Results - August 8

[dan_s]

Chaparral's Q2 results beat my forecast for production and operating cash flow per share (CFPS).

Here is what John White at Roth Capital sent to his clients this morning (8-8-2019):

Chaparral Energy (CHAP): Our valuation is based on a net asset value (NAV) analysis which produced $27.08 per share which we adjusted lower to $27.00 which is our price target.

CHAP: Beats on Production, EBITDA; Capex Notched Lower, Production Guide Intact

In our view this was a strong quarter for CHAP, beating on production, CFPS/EBITDA and reducing capex while maintaining 2019 production guide. While 3Q 2019 production guide is lower than our estimates this is being driven by operations timing considerations.

CHAP reported production of 28,285 BOE per day, beating our estimate of 27,500 BOE per day and beating the consensus number of 27,200 BOE per day. CHAP reported 2Q 2019 CFPS/EBITDA of $0.81/$43.7 million, solidly beating our estimates of $0.73/$41.8 million and beating the consensus estimates of $0.78/$42.0 million. Capex for the full year 2019 is being reduced by 5% while full year production guide unchanged. < My operating CFPS forecast for Q2 was $0.76, so this is a bullish update. The company remains on-track for full-year operating CFPS of $2.80 to $3.00. - Dan.

CHAP expects capital expenditures in 2H 2019 to be lower than 1H 2019 due to the reduction from four to three operated rigs, better drilling and completion efficiencies per well, lower than anticipated non-operated activity and lower acquisition capital. CHAP is reducing full year 2019 capex guidance to a range of $260 million to $285 million from the previous range of $275 million to $300 million or 5% using the midpoints of each range. CHAP is also lowering its guidance ranges for LOE/BOE to a range of $4.90 to $5.40 from the previous range of $5.00 to $5.50.

CHAP is also re-affirming its original production guidance range of 25,000 BOE per day to 27,000 BOE per day for the full year 2019. CHAP expects 3Q 2019 production to be between 26,000 and 27,500 BOE per day, which is lower than our projected 29,150 BOE per day. The decline from the 2Q actual production is primarily due to the impact of reducing operated activity from four rigs to three in late March and the associated timing of new operated development wells being placed online, going from 28 wells in the second quarter to an estimated 10 to 15 in the third quarter.

CHAP is moving to reduce G&A with a corporate workforce reduction of 23% year to date and expected annualized G&A reductions of approximately 20% to 25%.

After the earnings conference call and further analysis we will revise our estimates and price target accordingly.

[dan_s]

Stifel's take on CHAP as of 8-8-2019

Chaparral Energy, Inc. (CHAP, $2.57, Buy; Target $13.00) by Derrick Whitfield

CHAP delivers strong quarter and lowers capital and cost guidance

We view the release as positive. The positives include: i) a beat on total equivalent and oil production (3.0% and 5.4% above consensus, respectively) on lower than expected capex (0.8% below consensus), ii) a beat on EBITDAX (4.1% above consensus), iii) announcement of G&A reduction initiatives (20-25% annualized G&A savings in 2020), iv) decreased 2019 capex guidance (7.0% below consensus), and v) strong longer-dated results from the company's 11-well Foraker spacing test (~34% above our blended oil type curve).
The only negative in the release was weaker than expected 2H19 production guidance with Q319 total production guidance 8.5% below consensus. We caution
investors to note guidance is likely conservative as management has beat consensus six out of the last seven quarters.
Net-net, we believe the strong quarter, lowered capex guidance on reiterated production, and positive longer-dated results from the Foraker project should offset weaker than expected Q319 guidance.