Chaparral Energy (CHAP) Update - Aug 11

Post Reply
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Chaparral Energy (CHAP) Update - Aug 11

Post by dan_s »

I've updated my forecast/valuation model for CHAP and posted it to the EPG website.

I have adjusted my valuation to $12.00/share, which compares to First Call's price target of $15.63. There are only three analysts' reports in the First Call estimates and none of them have been updated since the Company released Q2 results. The Company's Q2 results beat my forecast. John White at Roth Capital rates CHAP a BUY with a net asset value of $27.00/share. I posted John's comments that came out shortly after CHAP reported Q2 results (they were positive), but he has not officially updated his forecast/valuation model.

Based on my forecast, CHAP should end the year with 28% year-over-year production growth and an exit rate of 29,500 to 30,000 Boepd.
Full-year operating cash flow per share should be $2.70 to $3.00, which compares to the August 9 stock price of $2.07.

So, why does a company with solid production growth and rising cash flow from operations trade under 1X CFPS ???
> CHAP is a pure play on the STACK play in Central Oklahoma, but their leasehold is not considered Tier One. However, they keep reporting solid well results.
> CHAP is outspending cash flow from operations. This is the "BIG NO-NO" these days. However, it does have ample liquidity.

At the current share price the downside does appear to be very limited, but investors have companies like this in the "penalty box" for now. That can change quickly if oil prices rise into year-end. The Company does think they will be generating free cash flow from operations in 2H 2020.
Dan Steffens
Energy Prospectus Group
Post Reply