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EX-32.2 - EX-32.2 - Chaparral Energy, Inc.chpe-ex322_7.htm
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EX-31.2 - EX-31.2 - Chaparral Energy, Inc.chpe-ex312_6.htm
EX-31.1 - EX-31.1 - Chaparral Energy, Inc.chpe-ex311_9.htm
EX-10.1 - EX-10.1 - Chaparral Energy, Inc.chpe-ex101_266.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 333-134748

 

Chaparral Energy, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

73-1590941

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma

 

73114

(Address of principal executive offices)

 

(Zip code)

 

(405) 478-8770

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer (Do not check if a smaller reporting company)

 

 

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.                  Yes      No  

Number of shares outstanding of each of the issuer’s classes of common stock as of May 9, 2018:

Class

 

Number of Shares

 

Class A Common Stock, $0.01 par value

 

 

38,626,615

 

Class B Common Stock, $0.01 par value

 

 

7,871,512

 

 

 

 


CHAPARRAL ENERGY, INC.

Index to Form 10-Q

 

 

 

Page

Part I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

 

7

Consolidated Balance Sheets

 

7

Consolidated Statements of Operations

 

8

Consolidated Statements of Stockholders' Equity

 

9

Consolidated Statements of Cash Flows

 

10

Condensed Notes to Consolidated Financial Statements

 

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

30

Overview

 

30

Results of Operations

 

32

Liquidity and Capital Resources

 

39

Non-GAAP Financial Measure and Reconciliation

 

42

Critical Accounting Policies

 

43

Recent Accounting Pronouncements

 

43

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

44

Item 4. Controls and Procedures

 

46

Part II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

47

Item 1A. Risk Factors

 

47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

47

Item 5. Other Information

 

47

Item 6. Exhibits

 

47

Signatures

 

49

 

2


CAUTIONARY NOTE

REGARDING FORWARD-LOOKING STATEMENTS

This report includes statements that constitute forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties. These statements may relate to, but are not limited to, information or assumptions about us, our capital and other expenditures, dividends, financing plans, capital structure, cash flow, pending legal and regulatory proceedings and claims, including environmental matters, future economic performance, operating income, cost savings, and management’s plans, strategies, goals and objectives for future operations and growth. These forward-looking statements generally are accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “expect,” “should,” “seek,” “project,” “plan” or similar expressions. Any statement that is not a historical fact is a forward-looking statement. It should be understood that these forward-looking statements are necessarily estimates reflecting the best judgment of senior management, not guarantees of future performance. They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements in this report may include, for example, statements about:

 

fluctuations in demand or the prices received for oil and natural gas;

 

the amount, nature and timing of capital expenditures;

 

drilling, completion and performance of wells;

 

competition and government regulations;

 

timing and amount of future production of oil and natural gas;

 

costs of exploiting and developing properties and conducting other operations, in the aggregate and on a per-unit equivalent basis;

 

changes in proved reserves;

 

operating costs and other expenses;

 

our future financial condition, results of operations, revenue, cash flows and expenses;

 

estimates of proved reserves;

 

exploitation of property acquisitions; and

 

marketing of oil and natural gas.

These forward-looking statements represent intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In addition to the risk factors described in Part II, Item 1A. Risk Factors, of this report and Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2017, the factors include:

 

the ability to operate our business following emergence from bankruptcy;

 

worldwide supply of and demand for oil and natural gas;

 

volatility and declines in oil and natural gas prices;

 

drilling plans (including scheduled and budgeted wells);

 

our new capital structure and the adoption of fresh start accounting, including the risk that assumptions and factors used in estimating enterprise value vary significantly from current values;

 

the number, timing or results of any wells;

 

changes in wells operated and in reserve estimates;

 

future growth and expansion;

 

future exploration;

 

integration of existing and new technologies into operations;

 

future capital expenditures (or funding thereof) and working capital;

 

availability and cost of equipment

3


 

risks related to the concentration of our operations in the mid-continent geographic area;

 

borrowings and capital resources and liquidity;

 

changes in strategy and business discipline, including our post-emergence business strategy;

 

future tax matters;

 

legislation and regulatory initiatives

 

any loss of key personnel;

 

geopolitical events affecting oil and natural gas prices;

 

outcome, effects or timing of legal proceedings;

 

the effect of litigation and contingencies;

 

environmental litigation

 

the ability to generate additional prospects; and

 

the ability to successfully complete merger, acquisition or divestiture plans, regulatory or other limitations imposed as a result of a merger, acquisition or divestiture, and the success of the business following a merger, acquisition or divestiture.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions may change the schedule of any future production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements contained herein. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

4


 

GLOSSARY OF CERTAIN DEFINED TERMS

The terms defined in this section are used throughout this Form 10-Q:

Basin

A low region or natural depression in the earth’s crust where sedimentary deposits accumulate.

 

 

Bbl

One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate, or natural gas liquids.

 

 

BBtu

One billion British thermal units.

 

 

Boe

Barrels of oil equivalent using the ratio of six thousand cubic feet of natural gas to one barrel of oil.

 

 

Boe/d

Barrels of oil equivalent per day.

 

 

Btu

British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

 

 

Completion

The process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry well, the reporting to the appropriate authority that the well has been abandoned.

 

 

CO2

Carbon dioxide.

 

 

Dry well or dry hole

An exploratory, development or extension well that proves to be incapable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well.

 

 

Enhanced oil recovery (EOR)

The use of any improved recovery method, including injection of CO2 or polymer, to remove additional oil after Secondary Recovery.

 

 

EOR Areas

Areas where we previously injected and/or recycle CO2 as a means of oil recovery which were divested in November 2017.

 

 

Exit Credit Facility

Ninth Restated Credit Agreement, dated as of March 21, 2017, by and among us, Chaparral Energy, Inc., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent and The Lenders and Prepetition Borrowers Party thereto.

 

 

Exit Revolver

A first-out revolving facility under the Exit Credit Facility.

 

 

Exit Term Loan

A second-out term loan under the Exit Credit Facility.

 

 

Field

An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

 

 

MBbls

One thousand barrels of crude oil, condensate, or natural gas liquids.

 

 

MBoe

One thousand barrels of crude oil equivalent.

 

 

Mcf

One thousand cubic feet of natural gas.

 

 

MMBtu

One million British thermal units.

 

 

MMcf

One million cubic feet of natural gas.

 

 

MMcf/d

Millions of cubic feet per day.

 

 

Natural gas liquids (NGLs)

Those hydrocarbons in natural gas that are separated from the gas as liquids through the process of absorption, condensation, adsorption or other methods in gas processing or cycling plants. Natural gas liquids primarily include propane, butane, isobutane, pentane, hexane and natural gasoline.

 

 

5


 

New Credit Facility

Tenth Restated Credit Agreement, dated as of December 21, 2017, by and among us, Chaparral Energy, Inc., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent and The Lenders and Prepetition Borrowers Party thereto.

 

 

NYMEX

The New York Mercantile Exchange.

 

 

Play

A term describing an area of land following the identification by geologists and geophysicists of reservoirs with potential oil and natural gas reserves.

 

 

Prior Credit Facility

Eighth Restated Credit Agreement, dated as of April 12, 2010, by and among us, Chaparral Energy, Inc., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent and The Lenders and Prepetition Borrowers Party thereto.

 

 

Proved developed reserves

Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, or in which the cost of the required equipment is relatively minor compared to the cost of a new well.

 

 

Proved reserves

The quantities of oil and natural gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain.

 

 

Proved undeveloped reserves

Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

 

 

PV-10 value

When used with respect to oil and natural gas reserves, PV-10 value means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, excluding escalations of prices and costs based upon future conditions, before income taxes, and without giving effect to non-property-related expenses, discounted to a present value using an annual discount rate of 10%.

 

 

Reorganization Plan

First Amended Joint Plan of Reorganization for Chaparral Energy, Inc. and its Affiliate Debtors under Chapter 11 of the Bankruptcy Code.

 

 

SEC

The Securities and Exchange Commission.

 

 

Secondary Recovery

The recovery of oil and natural gas through the injection of liquids or gases into the reservoir, supplementing its natural energy. Secondary Recovery methods are often applied when production slows due to depletion of the natural pressure.

 

 

Senior Notes

Collectively, our 9.875% senior notes due 2020, 8.25% senior notes due 2021, and 7.625% senior notes due 2022, of which all obligations have been discharged upon consummation of our Reorganization Plan.

 

 

STACK

An acronym standing for Sooner Trend Anadarko Canadian Kingfisher. A play in the Anadarko Basin of Oklahoma in which we operate.

 

 

Unit

The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a unitization agreement.

 

 

6


 

PART I — FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Chaparral Energy, Inc. and subsidiaries

Consolidated balance sheets

(Unaudited)

 

(dollars in thousands, except share data)

 

March 31, 2018

 

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,189

 

 

$

27,732

 

Accounts receivable, net

 

 

70,495

 

 

 

60,363

 

Inventories, net

 

 

7,463

 

 

 

5,138

 

Prepaid expenses

 

 

2,898

 

 

 

2,661

 

Total current assets

 

 

93,045

 

 

 

95,894

 

Property and equipment, net

 

 

49,004

 

 

 

50,641

 

Oil and natural gas properties, using the full cost method:

 

 

 

 

 

 

 

 

Proved

 

 

668,184

 

 

 

634,294

 

Unevaluated (excluded from the amortization base)

 

 

550,082

 

 

 

482,239

 

Accumulated depreciation, depletion, amortization and impairment

 

 

(142,107

)

 

 

(124,180

)

Total oil and natural gas properties

 

 

1,076,159

 

 

 

992,353

 

Other assets

 

 

361

 

 

 

418

 

Total assets

 

$

1,218,569

 

 

$

1,139,306

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

72,317

 

 

$

75,414

 

Accrued payroll and benefits payable

 

 

7,131

 

 

 

11,276

 

Accrued interest payable

 

 

576

 

 

 

187

 

Revenue distribution payable

 

 

20,118

 

 

 

17,966

 

Long-term debt and capital leases, classified as current

 

 

3,306

 

 

 

3,273

 

Derivative instruments

 

 

10,548

 

 

 

8,959

 

Total current liabilities

 

 

113,996

 

 

 

117,075

 

Long-term debt and capital leases, less current maturities

 

 

219,842

 

 

 

141,386

 

Derivative instruments

 

 

14,835

 

 

 

4,167

 

Deferred compensation

 

 

813

 

 

 

696

 

Asset retirement obligations

 

 

33,601

 

 

 

33,216

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, 5,000,000 shares authorized, none issued and outstanding

 

 

 

 

 

 

Class A Common stock, $0.01 par value, 180,000,000 shares authorized and 38,872,480 issued and 38,808,561 outstanding at March 31, 2018 and 38,956,250 shares issued and outstanding at December 31, 2017

 

 

388

 

 

 

389

 

Class B Common stock, $0.01 par value, 20,000,000 shares authorized and 7,871,512 shares issued and outstanding at March 31, 2018 and December 31, 2017

 

 

79

 

 

 

79

 

Additional paid in capital

 

 

966,781

 

 

 

961,200

 

Treasury stock, at cost, 63,919 shares as of March 31, 2018

 

 

(1,422

)

 

 

 

Accumulated deficit

 

 

(130,344

)

 

 

(118,902

)

Total stockholders' equity

 

 

835,482

 

 

 

842,766

 

Total liabilities and stockholders' equity

 

$

1,218,569

 

 

$

1,139,306

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

7


 

Chaparral Energy, Inc. and subsidiaries

Consolidated statements of operations

(Unaudited)

 

 

 

Successor

 

 

 

Predecessor

 

 

 

 

 

 

 

Period from

 

 

 

Period from

 

 

 

Three months

 

 

March 22, 2017

 

 

 

January 1, 2017

 

 

 

ended

 

 

through

 

 

 

through

 

(in thousands, except share and per share data)

 

March 31, 2018

 

 

March 31, 2017

 

 

 

March 21, 2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net commodity sales

 

 

57,889

 

 

 

7,808

 

 

 

 

66,531

 

Sublease revenue

 

 

1,198

 

 

 

 

 

 

 

 

Total revenues

 

 

59,087

 

 

 

7,808

 

 

 

 

66,531

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

 

14,543

 

 

 

4,259

 

 

 

 

19,941

 

Transportation and processing

 

 

 

 

 

361

 

 

 

 

2,034

 

Production taxes

 

 

2,677

 

 

 

316

 

 

 

 

2,417

 

Depreciation, depletion and amortization

 

 

21,106

 

 

 

3,414

 

 

 

 

24,915

 

General and administrative

 

 

11,507

 

 

 

5,744

 

 

 

 

6,843

 

Cost reduction initiatives

 

 

 

 

 

6

 

 

 

 

629

 

Other

 

 

828

 

 

 

 

 

 

 

 

Total costs and expenses

 

 

50,661

 

 

 

14,100

 

 

 

 

56,779

 

Operating income (loss)

 

 

8,426

 

 

 

(6,292

)

 

 

 

9,752

 

Non-operating (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,371

)

 

 

(650

)

 

 

 

(5,862

)

Derivative (losses) gains

 

 

(16,501

)

 

 

(12,115

)

 

 

 

48,006

 

(Loss) gain on sale of assets

 

 

(1,044

)

 

 

 

 

 

 

206

 

Other income (expense), net

 

 

85

 

 

 

(5

)

 

 

 

1,167

 

Net non-operating (expense) income

 

 

(18,831

)

 

 

(12,770

)

 

 

 

43,517

 

Reorganization items, net

 

 

(1,037

)

 

 

(620

)

 

 

 

988,727

 

(Loss) income before income taxes

 

 

(11,442

)

 

 

(19,682

)

 

 

 

1,041,996

 

Income tax expense

 

 

 

 

 

1

 

 

 

 

37

 

Net (loss) income

 

$

(11,442

)

 

$

(19,683

)

 

 

$

1,041,959

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic for Class A and Class B

 

$

(0.25

)

 

*

 

 

 

*

 

Diluted for Class A and Class B

 

$

(0.25

)

 

*

 

 

 

*

 

Weighted average shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic for Class A and Class B

 

 

45,143,297

 

 

*

 

 

 

*

 

Diluted for Class A and Class B

 

 

45,143,297

 

 

*

 

 

 

*

 

 ____________________________________________________________

* Item not disclosed. See “Note 2—Earnings per share.”

 

The accompanying notes are an integral part of these consolidated financial statements.

8


 

Chaparral Energy, Inc. and subsidiaries

Consolidated statements of stockholders’ equity

(Unaudited)

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Shares

outstanding

 

 

Amount

 

 

Additional

paid in capital

 

 

Treasury

stock

 

 

Accumulated

deficit

 

 

Total

 

Balance at December 31, 2017

 

 

46,827,762

 

 

$

468

 

 

$

961,200

 

 

$

 

 

$

(118,902

)

 

$

842,766

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,581

 

 

 

 

 

 

 

 

 

5,581

 

Restricted stock forfeited

 

 

(83,770

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

Repurchase of common stock

 

 

(63,919

)

 

 

 

 

 

 

 

 

(1,422

)

 

 

 

 

 

(1,422

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,442

)

 

 

(11,442

)

Balance at March 31, 2018

 

 

46,680,073

 

 

$

467

 

 

$

966,781

 

 

$

(1,422

)

 

$

(130,344

)

 

$

835,482

 

 

The accompanying notes are an integral part of these consolidated financial statements.

9


 

Chaparral Energy, Inc. and subsidiaries

Consolidated statements of cash flows

(Unaudited)

 

 

 

Successor

 

 

 

Predecessor

 

 

 

 

 

 

 

Period from

 

 

 

Period from

 

 

 

Three months

 

 

March 22, 2017

 

 

 

January 1, 2017

 

 

 

ended

 

 

through

 

 

 

through

 

(in thousands)

 

March 31, 2018

 

 

March 31, 2017

 

 

 

March 21, 2017

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(11,442

)

 

$

(19,683

)

 

 

$

1,041,959

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash reorganization items

 

 

 

 

 

 

 

 

 

(1,012,090

)

Depreciation, depletion and amortization

 

 

21,106

 

 

 

3,414

 

 

 

 

24,915

 

Derivative losses (gains)

 

 

16,501

 

 

 

12,115

 

 

 

 

(48,006

)

Loss (gain) on sale of assets

 

 

1,044

 

 

 

 

 

 

 

(206

)

Other

 

 

1,630

 

 

 

1,012

 

 

 

 

645

 

Change in assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(12,140

)

 

 

(3,577

)

 

 

 

198

 

Inventories

 

 

(3,168

)

 

 

38

 

 

 

 

466

 

Prepaid expenses and other assets

 

 

(179

)

 

 

180

 

 

 

 

(497

)

Accounts payable and accrued liabilities

 

 

(9,828

)

 

 

(3,423

)

 

 

 

8,733

 

Revenue distribution payable

 

 

2,151

 

 

 

1,510

 

 

 

 

(1,875

)

Deferred compensation

 

 

4,701

 

 

 

13

 

 

 

 

143

 

Net cash provided by (used in) operating activities

 

 

10,376

 

 

 

(8,401

)

 

 

 

14,385

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for property, plant, and equipment and oil and natural gas properties

 

 

(99,941

)

 

 

(5,832

)

 

 

 

(31,179

)

Proceeds from asset dispositions

 

 

73

 

 

 

 

 

 

 

1,884

 

(Payments) proceeds from derivative instruments

 

 

(4,244

)

 

 

1,692

 

 

 

 

1,285

 

Net cash used in investing activities

 

 

(104,112

)

 

 

(4,140

)

 

 

 

(28,010

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

79,000

 

 

 

 

 

 

 

270,000

 

Repayment of long-term debt

 

 

(146

)

 

 

(19

)

 

 

 

(444,785

)

Proceeds from rights offering, net

 

 

 

 

 

 

 

 

 

50,031

 

Principal payments under capital lease obligations

 

 

(661

)

 

 

(69

)

 

 

 

(568

)

Payment of other financing fees

 

 

 

 

 

 

 

 

 

(2,410

)

Net cash provided by (used in) financing activities

 

 

78,193

 

 

 

(88

)

 

 

 

(127,732

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(15,543

)

 

 

(12,629

)

 

 

 

(141,357

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

27,732

 

 

 

45,123

 

 

 

 

186,480

 

Cash, cash equivalents, and restricted cash at end of period

 

$

12,189

 

 

$

32,494

 

 

 

$

45,123

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

10


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

 

 

 

 

Note 1: Nature of operations and summary of significant accounting policies

Nature of operations

Chaparral Energy, Inc. and its subsidiaries (collectively, “we”, “our”, “us”, or the “Company”) are involved in the acquisition, exploration, development, production and operation of oil and natural gas properties. Our properties are located primarily in Oklahoma and our commodity products include crude oil, natural gas and natural gas liquids.

Reorganization, fresh start accounting and comparability of financial statements to prior periods

On May 9, 2016, the Company and ten of its subsidiaries filed voluntary petitions seeking relief under Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) commencing cases for relief under Chapter 11 of the Bankruptcy Code.

On March 10, 2017, the Bankruptcy Court confirmed our Reorganization Plan and on March 21, 2017 (the “Effective Date”), the Reorganization Plan became effective and we emerged from bankruptcy. Upon emergence, all existing equity was cancelled and we issued new common stock to the previous holders of our Senior Notes and certain general unsecured creditors whose claims were impaired as a result of our bankruptcy, as well as to certain other parties as set forth in the Reorganization Plan, including to parties participating in a rights offering.

Additionally, upon emergence we qualified for and applied fresh start accounting to our financial statements in accordance with the provisions set forth in FASB Accounting Standards Codification (ASC) 852: Reorganizations, as (i) the holders of existing voting shares of the Company prior to its emergence received less than 50% of the voting shares of the Company outstanding following its emergence from bankruptcy and (ii) the reorganization value of our assets immediately prior to confirmation of the Reorganization Plan was less than the post-petition liabilities and allowed claims.

As a result of the application of fresh start accounting, as well as the effects of the implementation of the Reorganization Plan, the Company’s consolidated financial statements after March 21, 2017, are not comparable with the consolidated financial statements prior to that date. To facilitate our financial statement presentations, we refer to the post-emergence reorganized company in these consolidated financial statements and footnotes as the “Successor” for periods subsequent to March 21, 2017, and to the pre-emergence company as “Predecessor” for periods prior to and including March 21, 2017.

Interim financial statements

The accompanying unaudited consolidated interim financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC and do not include all of the financial information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These financial statements and the notes thereto should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2017.

The financial information as of March 31, 2018 (Successor), and for the three months ended March 31, 2018 (Successor), and the periods of March 22, 2017, through March 31, 2017 (Successor), and January 1, 2017, through March 21, 2017 (Predecessor), is unaudited. The financial information as of December 31, 2017, has been derived from the audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2017. In management’s opinion, such information contains all adjustments considered necessary for a fair presentation of the results of the interim periods. The results of operations for the three months ended March 31, 2018 (Successor) are not necessarily indicative of the results of operations that will be realized for the year ended December 31, 2018.

Certain reclassifications have been made to prior period financial statements to conform to current period presentation. The reclassifications had no effect on our previously reported results of operations.

Cash and cash equivalents

We maintain cash and cash equivalents in bank deposit accounts and money market funds which may not be federally insured. As of March 31, 2018, cash with a recorded balance totaling approximately $10,330 was held at JP Morgan Chase Bank, N.A. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on such accounts.

11


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) – continued

(dollars in thousands, except per share amounts)

 

Accounts receivable

We have receivables from joint interest owners and oil and natural gas purchasers which are generally uncollateralized. Accounts receivable consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Joint interests

 

$

37,339

 

 

$

29,032

 

Accrued commodity sales

 

 

30,761

 

 

 

26,516

 

Derivative settlements

 

 

10

 

 

 

157

 

Other

 

 

3,008

 

 

 

5,326

 

Allowance for doubtful accounts

 

 

(623

)

 

 

(668

)

 

 

$

70,495

 

 

$

60,363

 

 

Inventories

Inventories consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Equipment inventory

 

$

6,440

 

 

$

4,163

 

Commodities

 

 

1,202

 

 

 

1,154

 

Inventory valuation allowance

 

 

(179

)

 

 

(179

)

 

 

$

7,463

 

 

$

5,138

 

 

Oil and natural gas properties

Costs associated with unevaluated oil and natural gas properties are excluded from the amortizable base until a determination has been made as to the existence of proved reserves. Unevaluated leasehold costs are transferred to the amortization base with the costs of drilling the related well upon proving up reserves of a successful well or upon determination of a dry or uneconomic well under a process that is conducted each quarter. Furthermore, unevaluated oil and natural gas properties are reviewed for impairment if events and circumstances exist that indicate a possible decline in the recoverability of the carrying amount of such property. The impairment assessment is conducted at least once annually and whenever there are indicators that impairment has occurred. In assessing whether impairment has occurred, we consider factors such as intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. Upon determination of impairment, all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization. The processes above are applied to unevaluated oil and natural gas properties on an individual basis or as a group if properties are individually insignificant. Our future depreciation, depletion and amortization rate would increase if costs are transferred to the amortization base without any associated reserves.

In the past, the costs associated with unevaluated properties typically related to acquisition costs of unproved acreage. As a result of the application of fresh start accounting in the first quarter of 2017, a substantial portion of the carrying value of our unevaluated properties are the result of a fair value increase to reflect the value of our acreage in our STACK play.

The costs of unevaluated oil and natural gas properties consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Leasehold acreage

 

$

527,450

 

 

$

466,711

 

Capitalized interest

 

 

3,655

 

 

 

2,134

 

Wells and facilities in progress of completion

 

 

18,977

 

 

 

13,394

 

Total unevaluated oil and natural gas properties excluded from amortization

 

$

550,082

 

 

$

482,239

 

 

Ceiling Test. In accordance with the full cost method of accounting, the net capitalized costs of oil and natural gas properties are not to exceed their related PV-10 value, net of tax considerations, plus the cost of unproved properties not being amortized.

Our estimates of oil and natural gas reserves as of March 31, 2018, and the related PV-10 value, were prepared using an average price for oil and natural gas on the first day of each month for the prior twelve months as required by the SEC.

12


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) – continued

(dollars in thousands, except per share amounts)

 

Producer imbalances. We account for natural gas production imbalances using the sales method, whereby we recognize revenue on all natural gas sold to our customers regardless of our proportionate working interest in a well. Liabilities are recorded for imbalances greater than our proportionate share of remaining estimated natural gas reserves. Our aggregate imbalance positions at March 31, 2018, and December 31, 2017, were immaterial.

Income taxes

In December 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 (the “Act”), making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate of 21%, additional limitations on executive compensation, and limitations on the deductibility of interest.  The FASB issued Accounting Standards Update (“ASU”) 2018-05, Income Taxes (Topic 740): "Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (“SAB”) No. 118" to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act.

As of March 31, 2018, we had not completed our accounting with regard to Section 162(m) provisions under the Act, and anticipate completing our analysis prior to filing our 2017 tax return in the third quarter of 2018, which is within the one year measurement period required under SAB 118. As such, we have not made an adjustment to the provisional tax benefit recorded under SAB 118 at December 31, 2017. We have estimated our provision for income taxes in accordance with the Act and guidance available as of the date of this filing. 

Despite the Company’s net loss for the quarter ended March 31, 2018 we did not record any net deferred tax benefit for the quarter ended March 31, 2018, as any deferred tax asset arising from the benefit is reduced by a valuation allowance as utilization of the loss carryforwards and realization of other deferred tax assets cannot be reasonably assured.

A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, as well as the jurisdiction in which such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economics of our industry.

We will continue to evaluate whether the valuation allowance is needed in future reporting periods. The valuation allowance will remain until we can determine that the net deferred tax assets are more likely than not to be realized. Future events or new evidence which may lead us to conclude that it is more likely than not that our net deferred tax assets will be realized include, but are not limited to, cumulative historical pre-tax earnings,  improvements in oil prices, and taxable events that could result from one or more transactions. The valuation allowance does not prevent future utilization of the tax attributes if we recognize taxable income. As long as we conclude that the valuation allowance against our net deferred tax assets is necessary, we likely will not have any additional deferred income tax expense or benefit.

The benefit of an uncertain tax position taken or expected to be taken on an income tax return is recognized in the consolidated financial statements at the largest amount that is more likely than not to be sustained upon examination by the relevant taxing authority. Interest and penalties, if any, related to uncertain tax positions would be recorded in interest expense and other expense, respectively. There were no uncertain tax positions at March 31, 2018, or December 31, 2017.

Elements of the Reorganization Plan provided that our indebtedness related to Senior Notes and certain general unsecured claims were exchanged for Successor common stock in settlement of those claims. Absent an exception, a debtor recognizes cancellation of indebtedness income (“CODI”) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code of 1986, as amended (“IRC”), provides that a debtor in a Chapter 11 bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. As a result of the market value of equity upon emergence from Chapter 11 bankruptcy proceedings, the estimated amount of CODI is approximately $61,000, which will reduce the value of the Company’s net operating losses. The actual reduction in tax attributes does not occur until the first day of the Company’s tax year subsequent to the date of emergence, or January 1, 2018. The reduction of net operating losses is expected to be fully offset by a corresponding decrease in valuation allowance.

The IRC provides an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses, against future taxable income in the event of a change in ownership. Emergence from Chapter 11 bankruptcy proceedings resulted in a change in ownership for purposes of the IRC Section 382. We analyzed alternatives available within the IRC

13


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) – continued

(dollars in thousands, except per share amounts)

 

to taxpayers in Chapter 11 bankruptcy proceedings in order to minimize the impact of the ownership change and CODI on our tax attributes. Upon filing our 2017 U.S. Federal income tax return, we plan to elect an available alternative which would likely result in the Company experiencing a limitation that subjects existing tax attributes at emergence to an IRC Section 382 limitation that could result in some or all of the remaining net operating loss carryforwards expiring unused. However, we will continue to evaluate the remaining available alternatives which would not subject existing tax attributes to an IRC Section 382 limitation.

Loss on asset sale.

In November 2017, we closed on the sale of our EOR assets. In conjunction with this divestiture, we recorded a loss on sale of $25,163 during the fourth quarter of 2017, which was computed based on preliminary closing estimates. As a result of the final closing adjustments on the sale, we recorded an additional loss of $1,064 during the first quarter of 2018.

Other

Other includes certain expenses related to our restructuring and subleasing activities.

Restructuring. We incurred exit costs in conjunction with our EOR asset divestiture, which are predominantly comprised of one-time severance and termination benefits for the affected employees. During the three months ended March 31, 2018, we recorded $425 of expense as a result of termination benefits for the final slate of employees terminated as a result of the divestiture.

Subleases. Prior to the sale of our EOR assets in November 2017, we utilized CO2 compressors that were considered integral to our EOR operations and were leased under six lease agreements from U.S. Bank.  In conjunction with the sale, we continued to lease the compressors, but executed sublease agreements with the purchaser of our EOR assets (the “Sublessee”). Minimum payments under the subleases are equal to the original leases and hence we did not record any losses upon initiation of the subleases. Of the original lease agreements, three are classified as capital leases while the remaining three are classified as operating leases. Prior to the asset sale, the capital leases were included in our full cost amortization base and hence subject to amortization on a units-of-production basis, while also incurring interest expense. The payments under our operating leases were previously recorded as “Lease operating expense” in our statement of operations. All the subleases have been classified as operating leases from a lessor’s standpoint. Subsequent to the execution of the subleases, all payments received from the Sublessee are reflected as revenues on our statement of operations. Payments we make to U.S. Bank on the original operating leases, which were $403 for the three months ended March 31, 2018, are reflected in “Other” on our statement of operations. With respect to the capital leases, we have reclassified the amount associated with these leases from the full cost amortization base to plant, property and equipment on our balance sheet and are amortizing the asset on a straight line basis prospectively. We will continue incurring interest expense on the capital leases. Our sublease revenue is not within the scope of the new revenue recognition guidance discussed below.

Joint Venture

On September 25, 2017, we entered into a joint development agreement (“JDA”) with BCE Roadrunner LLC, a wholly-owned subsidiary of Bayou City Energy Management, LLC (“BCE”), pursuant to which BCE will fund 100 percent of our drilling, completion and equipping costs associated with 30 joint venture STACK wells, subject to average well cost caps that vary by well-type across location and targeted formations, approximately between $3,400 and $4,000 per gross well. The JDA wells, which will be drilled and operated by us, include 17 wells in Canadian County and 13 wells in Garfield County. The JDA provides us with a means to accelerate the delineation of our position within our Garfield and Canadian County acreage, realizing further efficiencies and holding additional acreage by production, and potentially adding reserves. In exchange for funding, BCE will receive wellbore-only interest in each well totaling an 85% carve-out working interest from our original working interest (and we retain 15%) until the program reaches a 14% internal rate of return. Once achieved, ownership interest in all JDA wells will revert such that we will own a 75% working interest and BCE will retain a 25% working interest. We will retain all acreage and reserves outside of the wellbore, with both parties entitled to revenues and paying lease operating expenses based on their working interest.

14


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) – continued

(dollars in thousands, except per share amounts)

 

Cost reduction initiatives

Cost reduction initiatives include expenses related to our efforts to reduce our capital, operating and administrative costs in response to the depressed commodity pricing environment. The expense consists of costs for one-time severance and termination benefits in connection with our reductions in force and third party legal and professional services we have engaged to assist in our cost savings initiatives as follows:

 

 

 

Successor

 

 

 

Predecessor

 

 

 

Period from

 

 

 

Period from

 

 

 

March 22, 2017

 

 

 

January 1, 2017

 

 

 

through

 

 

 

through

 

 

 

March 31, 2017

 

 

 

March 21, 2017

 

One-time severance and termination benefits

 

$

1

 

 

 

$

608

 

Professional fees

 

 

5

 

 

 

 

21

 

Total cost reduction initiatives expense

 

$

6

 

 

 

$

629

 

 

Reorganization items

Reorganization items reflect, where applicable, expenses, gains and losses incurred that are incremental and a direct result of the reorganization of the business. As a result of our emergence from bankruptcy, we have also recorded gains on the settlement of liabilities subject to compromise and gains from restating our balance sheet to fair values under fresh start accounting. “Professional fees” in the table below for periods subsequent to the Effective Date are comprised of legal fees for continuing work to resolve outstanding bankruptcy claims and fees to the U.S. Bankruptcy Trustee, which we will continue to incur until our bankruptcy case is closed. Reorganization items are as follows:

 

 

Successor

 

 

 

Predecessor

 

 

 

 

 

 

 

Period from

 

 

 

Period from

 

 

 

Three months

 

 

March 22, 2017

 

 

 

January 1, 2017

 

 

 

ended

 

 

through

 

 

 

through

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

March 21, 2017

 

Loss (gain) on the settlement of liabilities subject to compromise

 

$

48

 

 

$

 

 

 

$

(372,093

)

Fresh start accounting adjustments

 

 

 

 

 

 

 

 

 

(641,684

)

Professional fees

 

 

989

 

 

 

620

 

 

 

 

18,790

 

Rejection of employment contracts

 

 

 

 

 

 

 

 

 

4,573

 

Write off unamortized issuance costs on Prior Credit Facility

 

 

 

 

 

 

 

 

 

1,687

 

Total reorganization items

 

$

1,037

 

 

$

620

 

 

 

$

(988,727

)

 

Recently adopted accounting pronouncements

In May 2014, the FASB issued authoritative guidance that supersedes previous revenue recognition requirements and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Please see “Note 5—Revenue recognition” for our disclosure regarding adoption of this update.

In January 2017, the FASB issued authoritative guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities constitutes a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described under updated revenue recognition guidance. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years. We adopted this update effective January 1, 2018, without a material impact to our financial statements. We expect that the new guidance, when applied to the facts and circumstances of a future transaction, may impact the likelihood whether a future transaction would be accounted for as a business combination.

In January 2016, the FASB issued authoritative guidance that amends existing requirements on the classification and measurement of financial instruments. The standard principally affects accounting for equity investments and financial liabilities where the fair value option has been elected. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. We adopted this update effective January 1, 2018, with no material impact to our financial statements or results of operations.

15


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) – continued

(dollars in thousands, except per share amounts)

 

In August 2016, the FASB issued authoritative guidance which provides clarification on how certain cash receipts and cash payments are presented and classified on the statement of cash flows. This update provides guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, and is required to be adopted using a retrospective approach if practicable. We adopted this update effective January 1, 2018, without a material impact on our financial statements or results of operations.

In November 2016, the FASB issued authoritative guidance requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied using a retrospective transition method to each period presented. We adopted this update effective January 1, 2018, with no material impact to our financial statements or results of operations.

Recently issued accounting pronouncements

In February 2016, the FASB issued authoritative guidance significantly amending the current accounting for leases. Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. Furthermore, all leases will fall into one of two categories: (i) a financing lease or (ii) an operating lease. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. For sale leaseback transactions, a sale will only be recognized if the criteria in the new revenue recognition standard are met. For public business entities, this guidance is effective for fiscal periods beginning after December 15, 2018 and interim periods thereafter, and should be applied using a modified retrospective approach. Early adoption is permitted. Our current operating leases are predominantly comprised of a limited number of leases for CO2 compressors. However, we also enter into contractual arrangements relating to rights of ways or surface use that are typical of upstream oil and gas operations. We are currently assessing whether such arrangements are included in the new guidance, especially in light of a guidance update issued in January 2018 which provides a practical expedient on land easements. The land easement practical expedient allows an entity to continue its legacy accounting policy for land easements that exist or expire before the new standard’s effective date and  which are not accounted for under the current lease standard. We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures and as contracts are reviewed under the new standard, this analysis could result in an impact to our financial statements; however, that impact is currently not known.

In June 2016, the FASB issued authoritative guidance which modifies the measurement of expected credit losses of certain financial instruments. The guidance is effective for fiscal years beginning after December 15, 2020, however early adoption is permitted for fiscal years beginning after December 15, 2018. The updated guidance impacts our financial statements primarily due to its effect on our accounts receivables. Our history of accounts receivable credit losses almost entirely relates to receivables from joint interest owners in our operated oil and natural gas wells. Based on this history and on mitigating actions we are permitted to take to offset potential losses such as netting past due amounts against revenue and assuming title to the working interest, we do not expect this guidance to materially impact our financial statements or results of operations.

Note 2: Earnings per share

We have not historically presented earnings per share (“EPS”) because our common stock did not previously trade on a public market, either on a stock exchange or in the over-the-counter (“OTC”) market. Accordingly, we were permitted under accounting guidance to omit such disclosure. However, the OTCQB tier of the OTC Markets Group Inc. began quoting our Class A common stock on May 26, 2017, under the symbol “CHPE”. From May 18, 2017, through May 25, 2017, our Class A common stock was quoted on the OTC Pink marketplace under the symbol “CHHP”. Our Class B common stock is not listed or quoted on the OTCQB or any other stock exchange or quotation system. Our Class A and Class B common stock shares equally in dividends and undistributed earnings. We are presenting basic and diluted EPS for all Successor periods subsequent to our emergence from bankruptcy but are not presenting EPS for any Predecessor period.

We are required under accounting guidance to compute EPS using the two-class method which considers multiple classes of common stock and participating securities. All securities that meet the definition of a participating security are to be included in the computation of basic EPS under the two-class method.

16


Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) – continued

(dollars in thousands, except per share amounts)

 

A reconciliation of the components of basic and diluted EPS is presented below:

 

 

Three months

 

 

 

ended

 

(in thousands, except share and per share data)

 

March 31, 2018

 

Numerator for basic and diluted earnings per share

 

 

 

 

Net loss

 

$

(11,442

)

Denominator for basic earnings per share

 

 

 

 

Weighted average common shares - Basic for Class A and Class B

 

 

45,143,297

 

Denominator for diluted earnings per share

 

 

 

 

Weighted average common shares - Diluted for Class A and Class B

 

 

45,143,297

 

Earnings per share

 

 

 

 

Basic for Class A and Class B

 

$

(0.25

)

Diluted for Class A and Class B

 

$

(0.25

)

Participating securities excluded from earnings per share calculations

 

 

 

 

Unvested restricted stock awards (2)

 

 

1,589,332

 

Antidilutive securities excluded from earnings per share calculations

 

 

 

 

Warrants (1)

 

 

140,023

 

________________________________

(1)

The warrants to purchase shares of our Class A common stock are antidilutive due to the exercise price exceeding the average price of our Class A shares for the periods presented and due to the net losses we incurred.

(2)

Our unvested restricted stock awards are considered to be participating securities as they include non-forfeitable dividend rights in the event a dividend is paid on our common stock. Our participating securities do not participate in undistributed net losses because they are not contractually obligated to do so and hence are not included in the computation of EPS in periods when a net loss occurs.

Note 3: Supplemental disclosures to the consolidated statements of cash flows

 

 

Successor

 

 

 

Predecessor

 

 

 

 

 

 

 

Period from

 

 

 

Period from

 

 

 

Three months

 

 

March 22, 2017

 

 

 

January 1, 2017

 

 

 

ended

 

 

through

 

 

 

through

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

March 21, 2017

 

Net cash provided by operating activities included:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

2,206

 

 

$