bearish analysis of CHAP

[k1f]

At Seeking Alpha. Conclusion:

<<Chaparral Energy's good recent well results may not be able to keep its stock from going down due to concerns over leverage and cash burn. Its leverage may reach over 3.0x in 2020 at mid-$50s oil if it continues attempting to ramp up growth. It is also spending around as much in capex in 2019 as it is projected to have in revenue. Chaparral appears to have a breakeven point of around $60 WTI oil, which will make it somewhat challenging to deleverage with oil futures averaging less than that.

In any case, Chaparral's bonds are indicating significant concerns over the company's long-term future (trading at under 60 cents on the dollar), but at a nearly $4 per share, the stock hasn't priced in those concerns as much. I believe that the stock may fall to $2 to $3 if oil remains in the mid-$50s.

Chaparral's bonds offer some potential value, especially if it can continue to generate solid well results. Chaparral's high rate of cash burn means that there will likely be a significant amount (perhaps $200+ million) in credit facility debt ahead of the unsecured bonds by the end of next year though.

[dan_s]

Take a look at the bottom of the CHAP forecast model.
Q2 production s/b 27,500 Boepd and they appear to have a clear path to an exit rate over 30,000 Boepd by year-end.
They should be able to live within cash flow from operations in 2020 if WTI stays in the $55-$60 range and still hit my forecast of 32,000 Boepd in 2020.

Also, note that their LT debt doesn't mature until 2022.