SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For the transition period from to

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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.

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

☐

Accelerated filer

☒

Non-accelerated filer

☐

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).

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.

Number of shares outstanding of each of the issuer’s classes of common stock as of ~~November 14, 2017:~~

August 17, 2020: 47,790,146 shares of Class A Common Stock, par value $0.01 per share.

~~Class~~	~~Number of Shares~~
~~Class A Common Stock, $0.01 par value~~		~~38,943,766~~
~~Class B Common Stock, $0.01 par value~~		~~7,871,512~~

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:

•the Chapter 11 Cases;

•the effects of the Chapter 11 Cases on our liquidity or results of operations or business prospects;

•the expected terms of a proposed plan of reorganization;

•our ability to confirm and consummate a Chapter 11 plan of reorganization;

•our ability to continue to operate in the ordinary course while the Chapter 11 Cases are pending;

•the treatment of our creditors and other stakeholders (including, without limitation, holders of our common stock) under a plan of reorganization;

•the potential impact of any epidemics or pandemics, including COVID-19;

•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;

•inventory of drillable locations;

~~competition and~~ •competition;

•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;

•takeaway constraints and

storage capacity for oil and natural gas; 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, ~~our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2017,~~of this report and Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, the ~~factors include:~~

risks and uncertainties include or relate to:

•risks and uncertainties regarding the Company’s ability to complete a reorganization process under Chapter 11 of the Bankruptcy Code, including consummation of the restructuring in accordance with the terms of our restructuring support agreement;

•the Company’s ability to obtain timely approval by the Bankruptcy Court regarding the motions filed in the Chapter 11 Cases;

•the time that the Company will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 Cases;

•the effects of the Chapter 11 Cases on our liquidity or results of operations or business prospects;

•the effects of the Chapter 11 Cases on our business ~~following emergence from bankruptcy;~~

and the interests of various constituents, including our stockholders;

•employee attrition and the Company’s ability to retain senior management and other key personnel due to the distractions and uncertainties, including the Company’s ability to provide adequate compensation and benefits during the Chapter 11 Cases;

•the Company’s ability to maintain relationships with suppliers, customers, employees and other third parties and regulatory authorities because of the Chapter 11 filing;

•the effects of the Chapter 11 Cases on the market price of the Company’s common stock and on the Company’s ability to access the capital markets;

•risks associated with third party motions in the Chapter 11 Cases, which may interfere with the Company’s ability to consummate the restructuring or an alternative restructuring;

•increased administrative and legal costs related to the Chapter 11 process;

•potential delays in the Chapter 11 process due to the effects of COVID-19;

•other litigation and inherent risks involved in a bankruptcy process;

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

•worldwide supply of and demand for oil and natural ~~gas;~~

gas, including to the extent affected by the COVID-19 pandemic and the recovery therefrom;

•volatility and declines in oil and natural gas ~~prices;~~

prices, including to the extent affected by the COVID-19 pandemic and the recovery therefrom;

•geopolitical events affecting oil and natural gas prices;

•the impact of COVID-19 on the health of our key personnel;

•risks related to the geographic concentration of our assets;

•our ability to develop, explore for, acquire and replace oil and natural gas reserves and sustain production;

•drilling plans (including scheduled and budgeted wells);

•the extent to which we are able to continue to reduce lease operating expense and G&A costs;

•geologic and reservoir complexity and variability;

•uncertainties in estimating our ~~new capital structure~~oil and gas reserves and the ~~adoption~~present values 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;

•

~~supply of CO~~₂ ;

•activities on properties we do not operate;

•availability and cost of drilling and production equipment, facilities, field service providers, gathering, processing and transportation;

•takeaway constraints and storage capacity for oil and natural gas;

•competition in the oil and natural gas industry;

•outcome, effects or timing of legal proceedings (including environmental litigation);

•weather, including its impact on oil and natural gas demand and weather-related delays on operations;

•the impact of natural disasters on our present and future ~~growth~~operations;

•the operating hazards attendant to the oil and ~~expansion;~~

•effectiveness and extent of our risk management activities;

•effectiveness of orders from the Oklahoma Corporation Commission and other regulatory bodies in mitigating the risk of lease cancellation actions associated with the voluntary shut-in of production;

•current borrowings, capital resources and liquidity;

•covenant compliance under instruments governing any of our existing or future ~~exploration;~~

•the effects of government regulation and permitting and other legal requirements;

•the impact of legislative, tax and regulatory initiatives, including in response to the COVID-19 pandemic;

•volatility in the price of our common stock;

•integration of existing and new technologies into operations;

•future exploration;

•

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

~~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;~~

discipline; and

~~future tax matters;~~

~~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;~~

~~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.

GLOSSARY OF CERTAIN DEFINED TERMS

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

~~Active EOR Areas~~	~~Areas where we are currently or where we plan to inject and/or recycle CO~~₂ ~~as a means of oil recovery.~~
Bankruptcy Code		Title 11 of the United States Code.
~~Basin~~		~~A low region or natural depression in the earth’s crust where sedimentary deposits accumulate.~~

Bankruptcy Court	United States Bankruptcy Court for the District of ~~Delaware~~ Delaware.

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~~One barrel of crude oil equivalent, determined 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~~ Chapter 11 Cases		Voluntary petitions seeking relief under the Bankruptcy Code in the Bankruptcy Court for relief under Chapter 11 of the Bankruptcy Code filed on August 16, 2020, 2020, by Chaparral Energy, Inc. and its subsidiaries, including Chaparral Resources, L.L.C., Chaparral Real Estate, L.L.C., Chaparral CO₂, L.L.C., CEI Pipeline, L.L.C., Chaparral Energy, L.L.C., CEI Acquisition, L.L.C., Green Country Supply, Inc., Chaparral Biofuels, L.L.C., Chaparral Exploration, L.L.C., Roadrunner Drilling, L.L.C., Trabajo Energy, L.L.C., Charles Energy, L.L.C. and Chestnut Energy, L.L.C.

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.

~~Developed acreage~~ COVID-19		~~The number of acres that are assignable to productive wells.~~ An infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). It was first identified in late 2019 and has since spread globally, resulting in a sustained pandemic.

Credit Agreement		Tenth Restated Credit Agreement, as amended, by and among Chaparral Energy, Inc., Royal Bank of Canada as Administrative Agent and the Lenders thereto.

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.

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~~ Limited Forbearance Agreement		Forbearance Agreement dated as of July 15, 2020, by and among Chaparral Energy, Inc., the subsidiary guarantors party thereto, certain Lenders identified therein, and Royal Bank of Canada, as Administrative Agent and Issuing Bank.

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.

~~New Term Loan~~	~~A second-out term loan under the New Credit Facility.~~
~~NYMEX~~	The New York ~~Mercantile~~Stock Exchange.

~~Play~~ Plan of Reorganization		Plan of Reorganization contemplated by the RSA.

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~~ Chapter 11 Cases		~~Eighth Restated Credit Agreement,~~ Voluntary petitions seeking relief under the Bankruptcy Code in the Bankruptcy Court for relief under Chapter 11 of the Bankruptcy Code filed on May 9, 2016, by Chaparral Energy, Inc. and its subsidiaries including Chaparral Energy, L.L.C., Chaparral Resources, L.L.C., Chaparral Real Estate, L.L.C., Chaparral CO₂ , L.L.C., CEI Pipeline, L.L.C., CEI Acquisition, L.L.C., Green Country Supply, Inc., Chaparral Biofuels, L.L.C., Chaparral Exploration, L.L.C., Roadrunner Drilling, L.L.C.

Prior Effective Date		March 21, 2017, the date of the Company’s emergence from the Prior Chapter 11 Cases.

Prior Reorganization Plan		First Amended Joint Plan of Reorganization under the Prior Chapter 11 Cases, dated as of April 12, 2010, by and among us, Chaparral Energy, L.L.C., in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent and each of the Lenders named therein, as amended. January 25, 2017.

Proved developed reserves		Reserves that can be expected to be recovered (i) 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 and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a 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.~~ certain, regardless of whether deterministic or probabilistic methods are used for estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. For additional information, see the SEC’s definition in Rule 1-10(a)(22) of Regulation S-X, a link for which is available at the SEC’s website.

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%.

~~Registration Rights Agreement~~ RSA		~~Registration Rights~~Restructuring Support Agreement, dated as of ~~March 21, 2017,~~August 15, 2020, by and among Chaparral Energy, Inc., certain of its subsidiaries and the ~~Stockholders named therein.~~ Consenting Creditors (as defined therein).

~~Reorganization Plan~~ SEC		~~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%~~Our 8.75% 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.~~ 2023.

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

~~Undeveloped acreage~~	Lease acreage on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil or natural gas regardless of whether such acreage contains proved reserves.

~~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.

Chaparral Energy, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

PART I — ~~FINANCI~~ALFINANCIAL INFORMATION

Successor

Predecessor

September 30,

December 31,

(dollars in thousands, except share data)

2017

2016

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$
22,395

$
186,480

Accounts receivable, net

63,952

46,226

Inventories, net

4,207

7,351

Prepaid expenses

2,161

3,886

Derivative instruments

8,130

—

Total current assets

100,845

243,943

Property and equipment, net

52,766

41,347

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

Proved

707,938

4,323,964

Unevaluated (excluded from the amortization base)

599,885

20,353

Accumulated depreciation, depletion, amortization and impairment

(59,157
)

(3,789,133
)
Total oil and natural gas properties

1,248,666

555,184

Derivative instruments

5,990

—

Other assets

3,082

5,513

Total assets

$
1,411,349

$
845,987

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

Successor

Predecessor

Three months

Three months

ended

ended

(in thousands, except share and per share data)

September 30, 2017

September 30, 2016

Revenues - commodity sales

$
75,947

$
65,847

Costs and expenses:

Lease operating

24,209

22,291

Transportation and processing

2,942

2,429

Production taxes

4,536

2,174

Depreciation, depletion and amortization

32,167

29,624

Loss on impairment of other assets

—

202

General and administrative

9,924

1,519

Cost reduction initiatives

34

89

Total costs and expenses

73,812

58,328

Operating income

2,135

7,519

Non-operating (expense) income:

Interest expense

(5,283
)

(7,436
)
Derivative (losses) gains

(15,448
)

—

Other income (expense), net

376

(129
)
Net non-operating (expense) income

(20,355
)

(7,565
)
Reorganization items, net

(858
)

(5,504
)
Loss before income taxes

(19,078
)

(5,550
)
Income tax expense (benefit)

37

(59
)
Net loss

$
(19,115
)

$
(5,491
)
Earnings per share:

Basic for Class A and Class B

$
(0.42
)

*

Diluted for Class A and Class B

$
(0.42
)

*

Weighted average shares used to compute earnings per share:

Basic for Class A and Class B

44,982,142

*

Diluted for Class A and Class B

44,982,142

*

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

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

(in thousands, except share and per share data)

September 30, 2017

March 21, 2017

September 30, 2016

Revenues - commodity sales

$
157,803

$
66,531

$
180,076

Costs and expenses:

Lease operating

51,527

19,941

68,462

Transportation and processing

6,370

2,034

6,493

Production taxes

8,235

2,417

6,812

Depreciation, depletion and amortization

66,432

24,915

94,396

Loss on impairment of oil and gas assets

—

—

281,079

Loss on impairment of other assets

—

—

1,461

General and administrative

24,641

6,843

14,812

Liability management

—

—

9,396

Cost reduction initiatives

155

629

3,228

Total costs and expenses

157,360

56,779

486,139

Operating income (loss)

443

9,752

(306,063
)
Non-operating (expense) income:

Interest expense

(10,984
)

(5,862
)

(57,243
)
Derivative (losses) gains

(4,089
)

48,006

(9,468
)
Write-off of Senior Note issuance costs, discount and premium

—

—

(16,970
)
Other (expense) income, net

(180
)

1,373

217

Net non-operating (expense) income

(15,253
)

43,517

(83,464
)
Reorganization items, net

(2,548
)

988,727

(10,859
)
(Loss) income before income taxes

(17,358
)

1,041,996

(400,386
)
Income tax expense

75

37

165

Net (loss) income

$
(17,433
)

$
1,041,959

$
(400,551
)
Earnings per share:

Basic for Class A and Class B

$
(0.39
)

*

*

Diluted for Class A and Class B

$
(0.39
)

*

*

Weighted average shares used to compute earnings per share:

Basic for Class A and Class B

44,982,142

*

*

Diluted for Class A and Class B

44,982,142

*

*

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

Chaparral Energy, Inc. and subsidiaries

~~Consolidated statements of stockholders’ equity (deficit)~~

~~(Unaudited)~~

Additional

Common stock

paid in

Accumulated

(dollars in thousands)

Shares

Amount

capital

deficit

Total

Balance at December 31, 2016 - Predecessor

1,392,706

$
14

$
425,231

$
(1,467,398
)

$
(1,042,153
)
Restricted stock forfeited

(1,454
)

—

—

—

—

Restricted stock cancelled

(8,964
)

—

—

—

—

Stock-based compensation

—

—

194

—

194

Net income

—

—

—

1,041,959

1,041,959

Balance at March 21, 2017 - Predecessor

1,382,288

14

425,425

(425,439
)

—

Cancellation of Predecessor equity

(1,382,288
)

(14
)

(425,425
)

425,439

—

Balance at March 21, 2017 - Predecessor

—

$
—

$
—

$
—

$
—

Issuance of Successor common stock - rights offering

4,197,210

$
42

$
49,985

$
—

$
50,027

Issuance of Successor common stock - backstop premium

367,030

4

—

—

4

Issuance of Successor common stock - settlement of claims

40,417,902

404

898,510

—

898,914

Issuance of Successor warrants

—

—

118

—

118

Balance at March 21, 2017 - Successor

44,982,142

450

948,613

—

949,063

Stock-based compensation

1,796,943

18

3,559

—

3,577

Net income

—

—

—

(17,433
)

(17,433
)
Balance at September 30, 2017 - Successor

46,779,085

$
468

$
952,172

$
(17,433
)

$
935,207

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

~~Chaparral Energy, Inc. and subsidiaries~~

~~Consolidated statements of cash flows~~

~~(Unaudited)~~

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

(in thousands)

September 30, 2017

March 21, 2017

September 30, 2016

Cash flows from operating activities

Net (loss) income

$
(17,433
)

$
1,041,959

$
(400,551
)
Adjustments to reconcile net loss to net cash provided by operating activities

Non-cash reorganization items

—

(1,012,090
)

—

Depreciation, depletion and amortization

66,432

24,915

94,396

Loss on impairment of assets

—

—

282,540

Write-off of Senior Note issuance costs, discount and premium

—

—

16,970

Derivative losses (gains)

4,089

(48,006
)

9,468

Loss (gain) on sale of assets

876

(206
)

128

Other

1,300

645

2,832

Change in assets and liabilities

Accounts receivable

(16,082
)

198

(4,866
)
Inventories

2,683

466

2,758

Prepaid expenses and other assets

2,560

(497
)

(370
)
Accounts payable and accrued liabilities

(13,369
)

8,733

24,026

Revenue distribution payable

4,549

(1,875
)

1,173

Deferred compensation

2,565

143

(5,384
)
Net cash provided by operating activities

38,170

14,385

23,120

Cash flows from investing activities

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

(114,358
)

(31,179
)

(119,994
)
Proceeds from asset dispositions

7,791

1,884

954

Proceeds from derivative instruments

15,143

1,285

90,590

Cash in escrow

42

—

49

Net cash used in investing activities

(91,382
)

(28,010
)

(28,401
)
Cash flows from financing activities

Proceeds from long-term debt

33,000

270,000

181,000

Repayment of long-term debt

(1,154
)

(444,785
)

(1,563
)
Proceeds from rights offering, net

—

50,031

—

Principal payments under capital lease obligations

(1,362
)

(568
)

(1,860
)
Payment of other financing fees

—

(2,410
)

—

Net cash provided by (used in) financing activities

30,484

(127,732
)

177,577

Net (decrease) increase in cash and cash equivalents

(22,728
)

(141,357
)

172,296

Cash and cash equivalents at beginning of period

45,123

186,480

17,065

Cash and cash equivalents at end of period

$
22,395

$
45,123

$
189,361

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

~~Chaparral Energy, Inc. and subsidiaries~~

Condensed notes to consolidated financial statements (unaudited)

Nature of operations

Chaparral Energy, Inc. and its subsidiaries (collectively, “we”, “our”, “us”, or the “Company”) are involved in the ~~acquisition,~~ exploration, development, production, operation and ~~operation~~acquisition of oil and natural gas properties. Our properties are located primarily in Oklahoma and ~~Texas. To facilitate~~ our ~~financial statement presentations, we refer to the post-emergence reorganized company in these consolidated financial statements~~commodity products include crude oil, natural gas 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. As discussed in “Note 3—Chapter 11 reorganization,” we filed voluntary petitions for bankruptcy relief and subsequently operated as debtor in possession, in accordance with the applicable provisions of the Bankruptcy Code, until our emergence from bankruptcy on March 21, 2017. The cancellation of all existing shares outstanding followed by the issuance of new shares in the reorganized Company upon our emergence from bankruptcy caused a related change of control under US GAAP. 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 on or after March 21, 2017, are not comparable with the consolidated financial statements prior to that date.

natural gas liquids.

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, ~~2016.~~

2019.

The financial information as of ~~September~~June 30, ~~2017 (Successor),~~2020, and for the three and six months ended ~~September~~June 30, ~~2017 (Successor),~~2020 and 2016 (Predecessor), the periods of March 22, 2017, through September 30, 2017 (Successor) and January 1, 2017, through March 21, 2017 (Predecessor), and the nine months ended September 30, 2016 (Predecessor),2019, is unaudited. The financial information as of December 31, ~~2016,~~2019 has been derived from the audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. 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 and six months ended ~~September~~June 30, ~~2017 and the periods of March 22, 2017, through September 30, 2017 (Successor), and January 1, 2017, through March 21, 2017 (Predecessor),~~2020 are not necessarily indicative of the results of operations that will be realized for the year ended December 31, ~~2017.~~

2020.

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.

Chapter 11 Cases and going concern

On August 16, 2020 (the “Petition Date”), Chaparral Energy, Inc. and its consolidated subsidiaries, including Chaparral Resources, L.L.C., Chaparral Real Estate, L.L.C., Chaparral CO2, L.L.C., CEI Pipeline, L.L.C., Chaparral Energy, L.L.C., CEI Acquisition, L.L.C., Green Country Supply, Inc., Chaparral Biofuels, L.L.C., Chaparral Exploration, L.L.C., Roadrunner Drilling, L.L.C., Trabajo Energy, L.L.C., Charles Energy, L.L.C. and Chestnut Energy, L.L.C. (collectively, the “Debtors”) filed voluntary petitions commencing the Chapter 11 Cases, seeking relief under Chapter 11 ofthe Bankruptcy Code in the Bankruptcy Court.The Company has requested court approval for the joint administration of the Chapter 11 Cases under the caption In re Chaparral Energy, Inc.We are currently operating our business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court, in accordance with the applicable provisions of the Bankruptcy Code.

To maintain and continue uninterrupted ordinary course operations during the bankruptcy proceedings, the Debtors filed a variety of “first day” motions seeking approval from the Bankruptcy Court for various forms of customary relief designed to minimize the effect of bankruptcy on the Debtors’ operations, customers and employees.Upon entry by the Bankruptcy Court of the orders approving all requested “first day” relief, we will be able to conduct normal business activities and pay all associated obligations for the period following our bankruptcy filing and (subject to caps applicable to payments of certain pre-petition obligations) pre-petition employee wages and benefits, pre-petition amounts owed to certain lienholders and vendors, royalty interest and working interest holders, and partners. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of our business require the prior approval of the Bankruptcy Court.

The commencement, through the Chapter 11 Cases, of a voluntary proceeding in bankruptcy constituted an immediate event of default under our Credit Agreement and the indenture governing our Senior Notes (the “Indenture”), resulting in the automatic and immediate acceleration of all outstanding amounts under those financing arrangements. Accordingly, we have classified the outstanding balances under our Credit Agreement and Senior Notes as current liabilities on our condensed consolidated balance sheet as of June 30, 2020.

Please see “Note 11: Subsequent events” for a discussion of the restructuring support agreement and the related proposed plan of reorganization.

Ability to continue as a going concern—The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The filing of the Chapter 11 Cases constituted an event of default

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

under the Indenture and the Credit Agreement, resulting in the automatic and immediate acceleration of outstanding balances under those financing arrangements. The Company projects that it will not have sufficient cash on hand or available liquidity to repay all of such debt. These conditions along with the significant risks and uncertainties related to the Company’s liquidity and the Chapter 11 Cases raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.

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 ~~September~~June 30, ~~2017,~~2020, cash with a recorded balance totaling approximately ~~$17,956~~$55,445 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.

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016–13, Financial Instruments–Credit Losses (Topic 326): Measurement of ~~December 31, 2016, we had restricted cash~~Credit Losses on Financial Instruments (“ASU 2016–13”), which changes the recognition model for the impairment of ~~$1,400~~financial instruments, including accounts receivable, loans and held-to-maturity debt securities, among others. We adopted ASU 2016–13 using the modified retrospective method effective January 1, 2020. In contrast to previous guidance, which ~~was required~~considered current information and events, and only recognized losses when they became probable (an “incurred loss” model), ASU 2016–13 mandates an “expected loss” model. The expected loss model: (i) estimates the risk of loss even when risk is remote, (ii) estimates losses over the contractual life, (iii) considers past events, current conditions and reasonable supported forecasts and (iv) has no recognition threshold. ASU 2016–13 is applicable to our accounts receivable portfolio, particularly those receivables attributable to our joint interest partners which have a higher credit risk than those associated with our traditional customer receivables.

Basis of accounting. Our accounts receivable are carried at gross cost, representing amounts due, less an allowance for expected credit losses. We write off accounts receivable when they are determined to be ~~maintained during~~uncollectible. When we recover amounts that were previously written off, those amounts are offset against the ~~pendency~~allowance and reduce expense in the year of ~~our bankruptcy.~~ recovery.

The ~~restricted cash is included in “Cash and cash equivalents” in our consolidated balance sheets. As of September 30, 2017, we no longer had restricted cash.~~

~~Accounts receivable~~

~~We have receivables from~~Company has 4 portfolio segments constituting its total accounts receivables: (i) joint interest ~~owners~~receivables; (ii) commodity sales receivables; (iii) derivative settlement receivables and (iv) other receivables. The table below discloses balances related to these four segments and the allowance:

Commodity sales receivables. The Company sells its commodity products primarily to oil and natural gas midstream entities including crude oil refineries and natural gas processing plants. We also sell a small percentage of our natural gas and natural gas liquids to energy marketing entities. Payment is generally due within 30 days of sales and amounts outstanding longer than 90 days are considered past due. Based on 2019 commodity sales, our 10 largest purchasers ~~which~~account for over 75% of our commodity sales. Based on our history of collections from our purchasers, we believe the probability of credit losses from uncollectible receivables to be low. We perform annual credit evaluations on purchasers representing approximately 80% or more of our commodity revenues. The evaluations include (i) an assessment of external credit ratings; (ii) performing internal risk evaluations when external ratings are ~~generally uncollateralized. Accounts receivable consisted~~not available; (iii) assessing the need for guarantor letters or letters of credit. We estimate the ~~following:~~

expected losses on uncollectible receivables by applying a uniform allowance rate on the total outstanding balance taking into consideration general industry conditions and more specifically, factors impacting the midstream energy segment. We may make further adjustments to our allowance for credit losses according to any specific news we may receive regarding individual purchasers.

Successor

Predecessor

September 30,

December 31,

2017

2016

Joint interests

$
25,868

$
13,818

Accrued commodity sales

33,279

31,304

Derivative settlements

3,814

—

Other

1,581

1,657

Allowance for doubtful accounts

(590
)

(553
)

$
63,952

$
46,226

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) ~~– continued~~

(dollars in thousands, except per share amounts)

Joint interest receivables. Our joint interest receivables represent amounts owed to us by other working interest owners on wells that we operate. We have numerous joint interest counterparties which are the result of combining all or portions of multiple oil and gas leases to form units for the drilling of wells under pooling or a joint interest agreements. The counterparties in this segment are diverse, ranging from large public company upstream operators to individual mineral leaseholders. Amounts billed to our joint interest owners generally consist of drilling and completion costs, in the early stages of a well, and lease operating expenses and costs for workovers and remediation work once a well in online. Payment is generally due within 60 days of billing and amount outstanding longer than 90 days are considered past due. Our historical losses on uncollectible receivables have predominantly been attributable to this portfolio segment, although losses in prior years have not been material. In the event of nonpayment, we may be able to mitigate our losses by netting the outstanding amount against any revenues payable to the joint interest owner and if still insufficient, by assuming the joint interest owner’s working interest in the well. The fair value of the working interest, which represents collateral for the outstanding receivable, will depend on the fair value of the remaining oil and natural gas reserves of the well. We monitor the ongoing collectability of these receivables by focusing on past due accounts with material balances. We estimate the expected losses on uncollectible joint interest receivables by applying varying allowance rates to outstanding balances based on aging of the balances. We also factor in current industry conditions, outstanding revenues payable to the accountholder, the fair value of the accountholder’s working interest in the property and the accountholder’s previous loss history in assessing the appropriate allowance. This method is augmented with a specific identification approach that includes directly communicating with certain joint interest owners that have material outstanding balances and consideration of specific information or circumstances regarding the account, such as bankruptcy, litigation or ongoing negotiations.

Derivative settlement receivables. Our derivative receivables relate to net settlements due from counterparties to our derivative contracts. Since derivative settlements fluctuate depending on commodity price changes, which are volatile, the associated amounts can result in a net payable or a net receivable position in any given month. Our derivative contracts generally require payment within 60 days of the fixing date. We have a limited number of counterparties to our derivative contracts, all of whom are large financial institutions and are also lenders under our credit agreement. These financial institution counterparties bear investment grade credit ratings. We have never incurred credit losses from our derivative receivables and believe the probability of such losses to be highly remote. Furthermore, to the extent that a balance is uncollectible, we believe that we have offset rights against amounts owed to the counterparty under our credit facility. Based on these circumstances, we have not recorded any allowance for credit losses related to these receivables. As discussed in “Note 11: Subsequent events,” we terminated all our outstanding derivatives in July 2020.

Other receivables. These receivables are of a nonrecurring discrete nature and generally immaterial with respect to our total receivables. Outstanding amounts may include receivables from taxing authorities and post-closing adjustments from acquisitions and divestitures.

Response to current industry conditions. We are in the midst of an unprecedented decline in crude oil prices brought about by the COVID-19 pandemic and other macroeconomic factors, which has drastically reduced demand for crude oil. The price decline has been exacerbated by episodic storage constraints. We have incorporated the prevailing industry crisis into our forecast of credit losses by increasing the allowance rates that we apply to our receivables, and for certain accounts where we have applied specific identification measures, recognizing an allowance sooner than would be typical under normal conditions.

Accrued interest, discount and premiums. We do not accrue interest on the outstanding balances of our receivables. There are no discounts or premiums associated with our receivables.

Presentation of credit loss expense. Our credit loss expense is included as a component of “General and administrative expenses” on our consolidated statement of operations and is as follows:

Credit quality disclosures. We are exempted under ASU 2016-13 from disclosing credit quality disclosures on our commodity sales receivables. Since all the financial institution counterparties to our derivative contracts bear investment grade credit ratings, we do not believe further decomposition by credit rating is necessary for this segment of receivables. The table below segregates our joint interest receivables based on the amount of revenues payable which can be utilized to offset the receivable balance. We consider this segregation to be a reasonable indicator of credit quality.

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Allowance for credit losses. The table below discloses activity on our receivables allowance account:

Inventories consisted of the following:

During the three and six months ended June 30, 2020, we recorded an adjustment to net realizable value of $310 and $463 on our equipment inventory, which is reflected as “Impairment of other assets” on our consolidated statements of operations.

Property and equipment, net

Major classes of property and equipment are shown in the following:

Held for sale. In an effort to further streamline operations, during the fourth quarter of 2019, the Company began transitioning from an internally staffed and resourced oilfield services function to a third party provider solution. As a result, it began to actively market all related company-owned oilfield services machinery and equipment for eventual disposal. Accounting guidance requires us

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

to reflect the disposal group separately on the balance sheet as “Assets held for sale” at carrying value or fair value less cost to sell, whichever is less. The carrying value of assets held for sale is not included in the table above. Our held for sale assets are as follows:

Oil and natural gas properties

Capitalized Costs. We use the full cost method of accounting for oil and natural gas properties and activities. Accordingly, we capitalize all costs incurred in connection with the exploration for and development of oil and natural gas reserves. Proceeds from the disposition of oil and natural gas properties are accounted for as a reduction in capitalized costs, with no gain or loss generally recognized unless such dispositions involve a significant alteration in the depletion rate. We capitalize internal costs that can be directly identified with exploration and development activities, but do not include any costs related to production, general corporate overhead or similar activities. Capitalized costs include geological and geophysical work, 3D seismic, delay rentals, and drilling completing and equipping oil and natural gas wells, including salaries, benefits, and other internal costs directly attributable to these activities.

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~~Quarterly, 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.~~well. 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 or we may incur ceiling test write-downs 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 on the Prior Effective Date in 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 (see “Note 4—Fresh start accounting”).~~

Focus Areas.

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

~~(1)~~

As of September 30, 2017, this amount reflects the cumulative interest capitalized on the historical acquisition cost of leasehold acreage subsequent to our establishing opening balances under fresh start accounting. Interest is not capitalized on amounts related to the fair value increase to leasehold acreage as a result of applying fresh start accounting.

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 ~~September~~June 30, ~~2017,~~2020, 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. ~~As discussed~~These losses are reflected in ~~“Note 4—Fresh start accounting,” the application~~“Impairment of ~~fresh start accounting to~~oil and gas assets” in our ~~balance sheet on March 21, 2017, resulted~~consolidated statements of operations. The ceiling test impairment we recorded in the ~~carrying value~~current year was driven in part by our impairment of ~~our~~unevaluated leasehold in the amount $216,173 and $218,741 for the three and six month periods ending June 30, 2020, respectively. Impairments of leasehold result in a transfer of amounts from unevaluated oil and natural gas properties ~~being restated~~to the full cost amortization base subsequently impacting the ceiling test.

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)


	Three months ended June 30,					Six months ended June 30,
	2020	2019		2020		2019
Impairment of oil and gas assets	384,639	$	63,593	$	456,010	$	113,315

Producer imbalances. 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 greaterthan our proportionate share of remaining estimated natural gas reserves. Our aggregate imbalance positions at June 30, 2020, and December 31, 2019, were immaterial.

The following table displays the revenue disaggregated and reconciles the disaggregated revenue to the revenue reported:

Please see “Note 16: Revenue recognition” in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of our revenue recognition policy including a description of products and revenue disaggregation criteria, performance obligations, pricing, measurement and contract assets and liabilities.

On March 27, 2020, the President of the U.S. signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 net operating losses (“NOLs”), removing the 80% limitation on the carryback of those NOLs, increasing the Section 163(j) 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerates refunds for minimum tax credit carryforwards, along with a few other provisions. During the three and six months ended June 30, 2020, no material adjustments were made to provision amounts recorded as a result of the enactment of the CARES Act.

The provision for income taxes is based on ~~their fair value.~~

~~Income taxes~~

~~We recorded~~a current estimate of the annual effective income tax ~~expense during the Successor and Predecessor periods in 2017~~rate adjusted to reflect the impact of permanent differences and discrete items. Management judgment is required in estimating operating income in order to determine our ~~obligation~~effective income tax rate. The consistent effective tax rate, as disclosed below, is a result of maintaining a valuation allowance against substantially all of our net deferred tax asset.


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Effective income tax rate	0.0	%	0.0	%	0.0	%	0.0	%

Despite the Company’s net loss for ~~current Texas margin tax on gross revenues less certain deductions. We~~the six month period ended June 30, 2020, we did ~~not~~0t record any net deferred tax benefit indue to the ~~Successor or Predecessor periods in 2017~~Company’s projected taxable loss for the year ending December 31, 2020. Nor did the Company record a net deferred tax benefit, as any deferred tax asset arising from the benefit is reduced by a valuation ~~allowance.~~

~~Chaparral Energy, Inc.~~allowance as utilization of the loss carryforwards and ~~subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

realization of other deferred tax assets cannot be reasonably assured.

A valuation allowance for deferred tax assets, including ~~net operating losses,~~NOLs, 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

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

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.

As of the bankruptcy emergence date of March 21, 2017, we were in a net deferred tax asset position and based on our anticipated operating results in subsequent quarters, we project being in a net deferred tax asset position at December 31, 2017. We believe it is more likely than not that these deferred tax assets will not be realized, and accordingly, recorded a full valuation allowance against our net deferred tax assets as of March 21, 2017, and as of September 30, 2017.

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 some or all of 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~~asset 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 no0 uncertain tax positions at ~~September~~June 30, ~~2017, and~~2020, or December 31, ~~2016.~~

As described in “Note 3—Chapter 11 reorganization,” 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. 2019.

As a result of the ~~market value~~Prior Reorganization Plan and related transactions, the Company experienced an ownership change within the meaning of ~~equity upon emergence from Chapter 11 bankruptcy proceedings,~~Internal Revenue Code (“IRC”) Section 382 on 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~~Prior Effective Date. This ownership change subjected certain of the Company’s tax ~~year subsequent to the date~~attributes, including $760,067 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 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 remainingfederal 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.

~~Joint Venture~~

~~On September 25, 2017, we entered into~~ This limitation has not resulted in a drilling joint venture with BCE Roadrunner LLC, a wholly-owned subsidiary of Bayou City Energy Management, LLC (“BCE”) to fund further development of our 110,000-acre STACK position, which will allow us to accelerate our development plans in both Canadiancurrent tax liability for the six month period ended June 30, 2020, or any intervening period since the Prior Effective Date. Since the Prior Effective Date ownership change, the Company has generated additional NOLs and ~~Garfield counties, Oklahoma. Under the Joint Development Agreement (“JDA”), BCE will fund 100 percent of our drilling, completion and equipping costs associated with 30 joint venture STACK wells,~~other tax attributes that are not currently 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.~~an IRC Section 382 limitation. The ~~JDA wells, which will be drilled and operated by us, include 17 wells in Canadian County and 13 wells in Garfield County. We have the~~Company’s ability to ~~expand~~use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted by a future IRC 382 ownership change. Future transactions involving the partnership to drill additional wells in the future. 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 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 reservesCompany’s stock, including those outside of the ~~wellbore, with~~Company’s control, could cause an IRC 382 ownership change resulting in a limitation on tax attributes currently not limited and a more restrictive limitation on tax attributes currently subject to the previous IRC 382 limitation.

Subleases expense for the three months ended March 31, 2019, consisted of our expense on operating leases for CO₂ compressors that we subleased to another operator in 2019. Please see “Note 1: Nature of operations and summary of significant accounting policies” and “Note 17: Leases” in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of the subleases.

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 resulting from the Prior Chapter 11 Cases and Prior Reorganization Plan. The reorganization items disclosed in our consolidated statement of operations consist of professional fees for continuing legal work to resolve outstanding claims and fees to the U.S. Bankruptcy Trustee, which we will continue to incur until both ~~parties paying their working interest share of lease operating expenses.~~

~~Chaparral Energy, Inc.~~the Prior Chapter 11 Cases and ~~subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~Liability management~~

the Chapter 11 Cases are closed.

Liability management expenses ~~which were incurred in the prior year, include~~

Liability management expense includes third party legal and professional service fees incurred from our activities to restructure our debt and in preparation for our ~~bankruptcy petition. As a result of our~~ Chapter 11 petition, such expenses, to the extent that they are incremental and directly related to our bankruptcy reorganization, are reflected in “Reorganization items” in our consolidated statements of operations.

~~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.~~ Cases.

The expense consists of our estimate of the settlement 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~~the Naylor Farms Case as ~~follows:~~

Successor

Predecessor

Three months

Three months

ended

ended

September 30, 2017

September 30, 2016

One-time severance and termination benefits

$
30

$
89

Professional fees

4

—

Total cost reduction initiatives expense

$
34

$
89

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

September 30, 2017

March 21, 2017

September 30, 2016

One-time severance and termination benefits

$
142

$
608

$
3,125

Professional fees

13

21

103

Total cost reduction initiatives expense

$
155

$
629

$
3,228

~~Recently adopted accounting pronouncements~~

In May 2017, the FASB issued authoritative guidance which provides clarification on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The guidance is effective for fiscal years, including interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted in any interim period. The guidance should be applied prospectively to an award modified on or after the adoption date. We adopted this guidance on July 1, 2017, with no material impact to our financial statements or results of operations.

In March 2016, the FASB issued authoritative guidance with the objective to simplify several aspects of the accounting for share-based payments, including accounting for income taxes when awards vest or are settled, statutory withholdings and accounting for forfeitures. Classification of these aspects on the statement of cash flows is also addressed. We have adopted this guidance, which was effective for fiscal periods beginning after December 15, 2016, and interim periods thereafter, in the current quarter, with no material impact to our financial statements or results of operation. We did not have any previously unrecognized excess tax benefits that required an adjustment to the opening balance of retained earnings under the modified retrospective transition method required by the guidance.

In March 2016, the FASB issued authoritative guidance that clarifies that the assessment of whether an embedded contingent put or call option in a financial instrument is clearly and closely related to the debt host requires only an analysis of the four-step decision sequence described in Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”). We adopted this guidance, which was effective for fiscal periods beginning after December 15, 2016, and interim periods thereafter, in the current quarter, with no material impact to our financial statements or results of operations.

In August 2014, the FASB issued authoritative guidance that required entities to evaluate whether there is substantial doubt about their ability to continue as a going concern and required additional disclosures if certain criteria were met. The guidance was adopted on December 31, 2016, and other than discussions regarding our emergence from bankruptcy and the related exit financingdiscussed in “Note ~~3—Chapter 11 reorganization”~~10: Commitments and ~~“Note 6—Debt”, there were no additional required disclosures as contemplated by this guidance.~~

Contingencies.”

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) ~~– continued~~

(dollars in thousands, except per share amounts)

Recently issued accounting pronouncements

In ~~May 2014,~~December 2019, the FASB issued ~~authoritative~~ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard eliminates certain exceptions in the existing guidance ~~that supersedes previous revenue recognition requirements and requires entities~~related to ~~recognize revenue in a way that depicts~~ the ~~transfer of promised goods or services to customers~~approach for intraperiod tax allocation, the methodology for calculating income taxes in an ~~amount that reflects~~interim period, and the ~~consideration to which~~recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies certain aspects of the ~~entity expects to be entitled in exchange for those goods or services.~~existing guidance, among other things. The ~~updated guidance~~standard is effective for ~~fiscal years beginning after December 15, 2017, including~~ interim ~~periods within that reporting period~~ and it will be adopted by us on January 1, 2018. The new standard allows for either full retrospective adoption, meaning the standard is applied to all periods presented in the financial statements, or modified retrospective adoption, meaning the standard is applied only to the most current period presented. During 2015 and 2016, the FASB released further updates that, among others, provided supplemental guidance and clarification to this topic including clarification on principal vs. agent considerations and identifying performance obligations and licensing. We have completed an assessment of our marketing contracts covering a majority portion of our revenue. Based on this assessment, we do not expect the new guidance to have a material impact on prior and future net income. However, we expect the guidance to impact our classification of certain costs for gathering, transportation and processing of gas as part of the transaction price rather than reported expense. Accordingly, we are continuing to evaluate the effect that the new guidance will have on our consolidated financial statements and related disclosures, with a more focused analysis on these expenses.

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. Early adoption of certain provisions is permitted. We do not expect this guidance to materially impact our financial statements or results of operations.

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 fiscalannual periods beginning after December 15, ~~2018~~2020 and ~~interim periods thereafter, and should~~shall be applied ~~using~~on either a prospective basis, a retrospective basis for all periods presented, or a modified retrospective ~~approach. Early adoption~~basis through a cumulative-effect adjustment to retained earnings depending on which aspects of the new standard are applicable to an entity. The Company is ~~permitted. Based on an assessment of our current operating leases, which are predominantly comprised of leases for CO~~₂ compressors, we do not expect this guidance to materially impact our balance sheet or results of operations. 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 process of evaluating the new ~~guidance~~standard and ~~the potential~~is unable to estimate its financial impact, if any, ~~on our financial statements or results of operations from these arrangements.~~

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 onat 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.

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. The guidance is effective for fiscal years beginning after December 15, 2017, and is required to be adopted using a retrospective approach if practicable. Early adoption is permitted. We do not expect this guidance to have a material impact on our consolidated statement of cash flows.

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. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. We expect that adoption of the new guidance may reduce the likelihood that a future transaction would be accounted for as a business combination although such a determination may require a greater degree of judgment.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

time.

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. 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.

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

Successor

Period from

Three months

March 22, 2017

ended

through

(in thousands, except share and per share data)

September 30, 2017

September 30, 2017

Numerator for basic and diluted earnings per share

Net loss

$
(19,115
)

$
(17,433
)
Denominator for basic earnings per share

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

44,982,142

44,982,142

Denominator for diluted earnings per share

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

44,982,142

44,982,142

Earnings per share

Basic for Class A and Class B

$
(0.42
)

$
(0.39
)
Diluted for Class A and Class B

$
(0.42
)

$
(0.39
)
Participating securities excluded from earnings per share calculations

Unvested restricted stock awards

1,796,943

1,796,943

Antidilutive securities excluded from earnings per share calculations

Warrants (1)

140,023

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.

~~Note 3: Chapter 11 reorganization~~

~~Bankruptcy petition and emergence.~~ ~~On May 9, 2016 (the “Petition Date”), Chaparral Energy, Inc. and its subsidiaries including Chaparral Energy, L.L.C., Chaparral Resources, L.L.C., Chaparral Real Estate, L.L.C., Chaparral CO~~₂ , L.L.C., CEI Pipeline, L.L.C., CEI Acquisition, L.L.C., Green Country Supply, Inc., Chaparral Biofuels, L.L.C., Chaparral Exploration, L.L.C., Roadrunner Drilling, L.L.C. (collectively, the “Chapter 11 Subsidiaries” and, together with Chaparral Energy, Inc., the “Debtors”) filed voluntary petitions seeking relief under Title 11 of the United States Code (the “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 (the “Chapter 11 Cases”).

On March 10, 2017 (the “Confirmation Date”), 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.

~~Debtor-In-Possession.~~ During the pendency of the Chapter 11 Cases, we operated our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court granted all first day motions filed by us which were designed primarily to minimize the impact of the Chapter 11 Cases on our normal day-to-day operations, our customers,

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

regulatory agencies, including taxing authorities, and employees. As a result, we were able to conduct normal business activities and pay all associated obligations for the post-petition period and we were also authorized to pay and have paid (subject to limitations applicable to payments of certain pre-petition obligations) pre-petition employee wages and benefits, pre-petition amounts owed to certain lienholders and critical vendors, amounts due to taxing authorities for production and other related taxes and funds belonging to third parties, including royalty and working interest holders. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of our business required the approval of the Bankruptcy Court.

~~Automatic Stay.~~ Subject to certain exceptions, under the Bankruptcy Code, the filing of the bankruptcy petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or the filing of other actions against us or our property to recover, collect or secure a claim arising prior to the Petition Date. Absent an order from the Bankruptcy Court, substantially all of our pre-petition liabilities were subject to settlement under the Bankruptcy Code.

~~Plan of Reorganization.~~ Pursuant to the terms of the Reorganization Plan, which was supported by us, certain lenders under our Prior Credit Facility (collectively, the “Lenders”) and certain holders of our Senior Notes (collectively, the “Noteholders”), the following transactions occurred on or around the Effective Date:

We issued 44,982,142 shares of common stock of the reorganized company (“New Common Stock”), which were the result of the transactions described below. We also entered into a stockholders agreement and a Registration Rights Agreement and amended our certificate of incorporation and bylaws for the authorization of the New Common Stock and to provide registration rights thereunder, among other corporate governance actions;

presented:

~~Our Predecessor common stock was cancelled, extinguished and discharged and the Predecessor equity holders did not receive any consideration in respect of their equity interests;~~


	Three months ended June 30,						Six months ended June 30,
(in thousands, except share and per share data)	2020		2019		2020		2019
Numerator for basic and diluted loss per share
Net loss	$	(438,726)	$	(45,229)	$	(433,809)	$	(148,769)
Denominator for basic loss per share
Weighted average common shares	45,949,797		45,641,797		45,890,041		45,549,518
Denominator for diluted loss per share
Weighted average common shares	45,949,797		45,641,797		45,890,041		45,549,518
Loss per share
Basic	$	(9.55)	$	(0.99)	$	(9.45)	$	(3.27)
Diluted	$	(9.55)	$	(0.99)	$	(9.45)	$	(3.27)
Participating securities excluded from loss per share calculations
Unvested restricted stock units - stock settled	604,789		81,119		604,789		81,119
Unvested restricted stock awards	1,839,381		706,821		1,839,381		706,821

The $1,267,410 of indebtedness, including accrued interest, attributable to our Senior Notes was exchanged for New Common Stock. In addition, we issued or reserved shares of New Common Stock to be exchanged in settlement of $2,439 of certain general unsecured claims. In aggregate, the shares of New Common Stock issued or to be issued in settlement of the Senior Note and these general unsecured claims represented approximately 90% percent of outstanding Successor common shares;

We completed a rights offering backstopped by certain holders of our Senior Notes (the “Backstop Parties”) which generated $50,031 of gross proceeds. The rights offering resulted in the issuance of New Common Stock, representing approximately nine percent of outstanding Successor common shares, to holders of claims arising under the Senior Notes and to the Backstop Parties;

~~In connection with the rights offering described above, the Backstop Parties received approximately one percent of outstanding Successor common shares as a backstop fee;~~

~~Additional shares, representing seven percent of outstanding Successor common shares on a fully diluted basis, were authorized for issuance under a new management incentive plan;~~

Warrants to purchase 140,023 shares of New Common Stock were issued to Mr. Mark Fischer, our founder and former Chief Executive Officer, with an exercise price of $36.78 per share and expiring on June 30, 2018. The warrants were issued in exchange for consulting services provided by Mr. Fischer;

Our Prior Credit Facility, previously consisting of a senior secured revolving credit facility was restructured into a New Credit Facility consisting of a first-out revolving facility (“New Revolver”) and a second-out term loan (“New Term Loan”). On the Effective Date, the entire balance on the Prior Credit Facility in the amount of $444,440 was repaid while we received gross proceeds representing the opening balances on our New Revolver of $120,000 and a New Term Loan of $150,000. For more information refer to “Note 6—Debt;”

We paid $6,954 for creditor-related professional fees and also funded a $11,000 segregated account for debtor-related professional fees in connection with the reorganization related transactions above;

~~Certain other priority or convenience class claims were paid in full in cash, reinstated or otherwise treated in a manner acceptable to the creditor claimholders;~~

Plaintiffs to one of our royalty owner litigation cases, which were identified as a separate class of creditors (Class 8) in our bankruptcy case, rejected the Reorganization Plan. If the claimants under Class 8 are permitted to file a class of proof claim on behalf of the putative class, certified on a class basis, and the plaintiffs ultimately prevail on the merits of their claims, any liability arising under judgement or settlement of the claims would be satisfied through issuance of Successor common shares.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~Liabilities subject to compromise.~~ In accordance with ASC Topic 852, Reorganizations (“ASC 852”), our financial statements include amounts classified as liabilities subject to compromise which represent estimates of pre-petition obligations that were allowed as claims in our bankruptcy case. These liabilities are reported at the amounts allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. The amounts disclosed below as of March 21, 2017, reflect the liabilities immediately prior to our Reorganization Plan becoming effective. As part of the Reorganization Plan, the Bankruptcy Court approved the settlement of these claims and they were subsequently settled in cash or equity, reinstated or otherwise reserved for at emergence.

Predecessor

March 21, 2017

December 31, 2016

Accounts payable and accrued liabilities

$
6,687

$
9,212

Accrued payroll and benefits payable

3,949

4,048

Revenue distribution payable

3,050

3,474

Senior Notes and associated accrued interest

1,267,410

1,267,410

Liabilities subject to compromise

$
1,281,096

$
1,284,144

~~Note 4~~: ~~Fresh start accounting~~

Upon emergence from bankruptcy, we qualified for and applied fresh start accounting to our financial statements in accordance with the provisions set forth in ASC 852 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.

Adopting fresh start accounting results in a new reporting entity for financial reporting purposes with no beginning retained earnings or deficit. The cancellation of all existing shares outstanding on the Effective Date and issuance of new shares in the reorganized Company caused a related change of control under US GAAP. As a result of the application of fresh start accounting, as well as the effects of the implementation of the Reorganization Plan, the Predecessor and Successor periods may lack comparability, as required in ASC Topic 205, Presentation of Financial Statements (“ASC 205”). ASC 205 states that financial statements are required to be presented comparably from year to year, with any exceptions to comparability clearly disclosed. Therefore, “black-line” financial statements are presented to distinguish between the Predecessor and Successor periods.

~~Enterprise Value and Reorganization Value~~

Reorganization value represents the fair value of the Company’s total assets prior to the consideration of liabilities and is intended to approximate the amount a willing buyer would pay for the Company's assets immediately after restructuring. The reorganization value was allocated to the Company’s individual assets based on their estimated fair values.

The Company’s reorganization value was derived from enterprise value. Enterprise value represents the estimated fair value of an entity's long-term debt and equity. The enterprise value of the Company on the Effective Date, as approved by the Bankruptcy Court in support of the Plan, was estimated to be within a range of $1,050,000 to $1,350,000 with a mid-point value of $1,200,000. Based upon the various estimates and assumptions necessary for fresh start accounting, as further discussed below, the estimated enterprise value was determined to be $1,200,000 before consideration of cash and cash equivalents and outstanding debt at the Effective Date.

~~The following table reconciles the enterprise value to the estimated fair value of the Successor’s common stock as of the Effective Date:~~

Enterprise value

$
1,200,000

Plus: cash and cash equivalents

45,123

Less: fair value of outstanding debt

(296,061
)
Less: fair value of warrants (consideration for previously accrued consulting fees)

(118
)
Fair value of Successor common stock on the Effective Date

$
948,944

Total shares issued under the Reorganization Plan

44,982,142

Per share value (1)

$
21.10

~~(1)~~

~~The per share value shown above is calculated based upon the financial information determined using US GAAP at the Effective Date.~~

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~The following table reconciles the enterprise value to the estimated reorganization value of the Successor’s assets as of the Effective Date:~~

Enterprise value

$
1,200,000

Plus: cash and cash equivalents

45,123

Plus: current liabilities

82,254

Plus: noncurrent liabilities excluding long-term debt

64,735

Reorganization value of Successor assets

$
1,392,112

~~Valuation of oil and gas properties~~

The Company’s principal assets are its oil and gas properties, which are accounted for under the full cost method of accounting. The oil and gas properties include proved reserves and unevaluated leasehold acreage. With the assistance of valuation consultants, the Company estimated the fair value of its oil and gas properties based on the discounted cash flows expected to be generated from these assets. The computations were based on market conditions and reserves in place as of the Effective Date.

The fair value analysis was based on the Company’s estimates of proved, probable and possible reserves developed internally by the Company’s reservoir engineers. Discounted cash flow models were prepared using the estimated future revenues and development and operating costs for all developed wells and undeveloped locations comprising the proved, probable and possible reserves. The value estimated for probable and possible reserves was utilized as an estimate of the fair value of the Company’s unevaluated leasehold acreage, which was further corroborated against comparable market transactions. Future revenues were based upon the forward NYMEX strip for oil and natural gas prices as of the Effective Date, adjusted for differentials realized by the Company. Development and operating cost estimates for the oil and gas properties were adjusted for inflation. The after-tax cash flows were discounted to the Effective Date at discount rate of 8.5%. This discount rate was derived from a weighted average cost of capital computation which utilized a blended expected cost of debt and expected return on equity for similar industry participants. Risk adjustment factors were applied to the values derived for the proved non-producing, proved undeveloped, probable and possible reserve categories based on consideration of the risks associated with geology, drilling success rates, development costs and the timing of development and extraction. The discounted cash flow models also included depletion, depreciation and income tax expense associated with an after-tax valuation analysis.

From this analysis the Company estimated the fair value of its proved reserves and undeveloped leasehold acreage to be $604,065 and $585,574, respectively, as of the Effective Date. These amounts are reflected in the Fresh Start Adjustments item (i) below.

~~Other valuations~~

Our adoption of fresh start accounting also required adjustments to certain other assets and liabilities on our balance sheet including property and equipment, other assets and asset retirement obligations.

~~Property and equipment~~ — consists of real property which includes our headquarters, field offices and pasture land, and personal property which includes vehicles, machinery and equipment, office equipment and fixtures and a natural gas pipeline. These assets were valued using a combination of cost, income and market approaches with the exception of pasture land where we relied on government data to determine fair value.

~~Other assets~~ — includes, among others, an equity investment in a company that operates ethanol plants. The equity investment was valued utilizing a combination of the market approaches such as the guideline public company method and the similar transactions method.

~~Asset retirement obligations~~ — our fresh start updates to these obligations included application of the Successor’s credit adjusted risk free rate, which now incorporates a term structure based on the estimated timing of plugging activity, and resetting all obligations to a single layer.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~Consolidated balance sheet~~

The following consolidated balance sheet is as of March 21, 2017. This consolidated balance sheet includes adjustments that reflect the consummation of the transactions contemplated by the Reorganization Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”) as of the Effective Date:

Reorganization

Fresh Start

Predecessor

Adjustments

Adjustments

Successor

Assets

Current assets:

Cash and cash equivalents

$
180,456

$
(135,333
)
(a)
$
—

$
45,123

Accounts receivable, net

46,837

—

—

46,837

Inventories, net

6,885

—

—

6,885

Prepaid expenses

4,933

(535
)
(b)

—

4,398

Derivative instruments

19,058

—

—

19,058

Total current assets

258,169

(135,868
)

—

122,301

Property and equipment

38,391

—

18,987

(i)

57,378

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

Proved

4,355,576

—

(3,751,511
)
(i)

604,065

Unevaluated (excluded from the amortization base)

26,039

—

559,535

(i)

585,574

Accumulated depreciation, depletion, amortization and impairment

(3,811,326
)

—

3,811,326

(i)

—

Total oil and natural gas properties

570,289

—

619,350

(i)

1,189,639

Derivative instruments

14,295

—

—

14,295

Other assets

5,499

2,410

(c)

590

(i)

8,499

Total assets

$
886,643

$
(133,458
)

$
638,927

$
1,392,112

Liabilities and stockholders’ equity (deficit)

Current liabilities:

Accounts payable and accrued liabilities

$
64,413

$
(2,737
)
(a)(d)
$
—

$
61,676

Accrued payroll and benefits payable

7,366

2,186

(d)

—

9,552

Accrued interest payable

2,095

(2,095
)
(a)

—

—

Revenue distribution payable

7,975

3,050

(d)

—

11,025

Long-term debt and capital leases, classified as current

468,814

(464,182
)
(e)

—

4,632

Total current liabilities

550,663

(463,778
)

—

86,885

Long-term debt and capital leases, less current maturities

—

291,429

(f)

—

291,429

Deferred compensation

—

519

(d)

—

519

Asset retirement obligations

66,973

—

(2,757
)
(i)

64,216

Liabilities subject to compromise

1,281,096

(1,281,096
)
(d)

—

—

Commitments and contingencies

Stockholders’ (deficit) equity:

Predecessor common stock

14

(14
)
(g)

—

—

Predecessor additional paid in capital

425,425

(425,425
)
(g)

—

—

Successor common stock

—

450

(g)

—

450

Successor additional paid in capital

—

948,613

(g)

—

948,613

(Accumulated deficit) retained earnings

(1,437,528
)

795,844

(h)

641,684

(j)

—

Total stockholders' (deficit) equity

(1,012,089
)

1,319,468

641,684

949,063

Total liabilities and stockholders' equity (deficit)

$
886,643

$
(133,458
)

$
638,927

$
1,392,112

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~Reorganization adjustments~~

~~(a)~~

~~Adjustments reflect the following net cash payments recorded as of the Effective Date from implementation of the Plan:~~

Cash proceeds from rights offering

$
50,031

Cash proceeds from New Term Loan

150,000

Cash proceeds from New Revolver

120,000

Fees paid to lender for New Term Loan

(750
)
Fees paid to lender for New Revolver

(1,125
)
Payment in full to extinguish Prior Credit Facility

(444,440
)
Payment of accrued interest on Prior Credit Facility

(2,095
)
Payment of previously accrued creditor-related professional fees

(6,954
)
Net cash used

$
(135,333
)

~~(b)~~

~~Reclassification of previously prepaid professional fees to debt issuance costs associated with the New Credit Facility.~~

~~(c)~~

~~Reflects issuance costs related to the New Credit Facility:~~

Fees paid to lender for New Term Loan

$
750

Fees paid to lender for New Revolver

1,125

Professional fees related to debt issuance costs on the New Credit Facility

535

Total issuance costs on New Credit Facility

$
2,410

~~(d)~~

As part of the Plan, the Bankruptcy Court approved the settlement of certain allowable claims, reported as liabilities subject to compromise in the Company’s historical consolidated balance sheet. As a result, a gain was recognized on the settlement of liabilities subject to compromise calculated as follows:

Senior Notes including interest

$
1,267,410

Accounts payable and accrued liabilities

6,687

Accrued payroll and benefits payable

3,949

Revenue distribution payable

3,050

Total liabilities subject to compromise

1,281,096

Amounts settled in cash, reinstated or otherwise reserved at emergence

(10,089
)
Fair value of equity issued in settlement of Senior Notes and certain general unsecured creditors

(898,914
)
Gain on settlement of liabilities subject to compromise

$
372,093

~~(e)~~

Reflects extinguishment of Prior Credit Facility along with associated unamortized issuance costs, establishment of New Credit Facility and adjustments to reclassify existing debt back to their scheduled maturities:

Reclassification from current to noncurrent, based on scheduled repayment, of debt no longer in default

$
(22,612
)
Establishment of New Term Loan - current portion

1,183

Payment in full to extinguish Prior Credit Facility

(444,440
)
Write-off unamortized issuance costs associated with Prior Credit Facility

1,687

$
(464,182
)

~~(f)~~

~~Reflects establishment of our New Credit Facility pursuant to our Reorganization Plan, net of issuance costs, as well as adjustments to reclassify existing debt back to their scheduled maturities:~~

Origination of the New Term Loan, net of current portion

$
148,817

Origination of the New Revolver

120,000

Reclassification from current to noncurrent, based on scheduled repayment, of debt no longer in default

22,612

$
291,429

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~(g)~~

Adjustment represents (i) the cancellation of Predecessor equity on the Effective Date, (ii) the issuance of 44,982,142 shares of Successor common stock on the Effective Date and (iii) the issuance of 140,023 warrants on the Effective Date (see “Note 3—Chapter 11 reorganization”)

Cancellation of predecessor equity - par value

$
(14
)
Cancellation of predecessor equity - paid in capital

(425,425
)
Issuance of successor common stock in settlement of claims

898,914

Issuance of successor common stock under rights offering

50,031

Issuance of warrants

118

Net impact to common stock-par and additional paid in capital

$
523,624

~~(h)~~

~~Reflects the cumulative impact of the following reorganization adjustments:~~

Gain on settlement of liabilities subject to compromise

$
372,093

Cancellation of predecessor equity

425,438

Write-off unamortized issuance costs associated with Prior Credit Facility

(1,687
)
Net impact to retained earnings

$
795,844

~~Fresh start adjustments~~

~~(i)~~

Represents fresh start accounting adjustments primarily to (i) remove accumulated depreciation, depletion, amortization and impairment, (ii) increase the value of proved oil and gas properties, (iii) increase the value of unevaluated oil and gas properties primarily to capture the value of our acreage in the STACK, (iv) increase other property and equipment primarily due to increases to land, vehicles, machinery and equipment and (v) decrease asset retirement obligations. These fair value measurements giving rise to these adjustments are primarily based on Level 3 inputs under the fair value hierarchy (See “Note 8—Fair value measurements”).

~~(j)~~

~~Reflects the cumulative impact of the fresh start adjustments discussed herein.~~

~~Reorganization items~~

We use this category to reflect, where applicable, post-petition revenues, expenses, gains and losses that are direct and incremental as a result of the reorganization of the business. Reorganization items are as follows:

Successor

Predecessor

Three months

Three months

ended

ended

September 30, 2017

September 30, 2016

Professional fees

$
858

$
4,268

Claims for non-performance of executory contract

—

1,236

Total reorganization items

$
858

$
5,504

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

September 30, 2017

March 21, 2017

September 30, 2016

Gains on the settlement of liabilities subject to compromise

$
—

$
(372,093
)

$
—

Fresh start accounting adjustments

—

(641,684
)

—

Professional fees

2,548

18,790

9,623

Claims for non-performance of executory contract

—

—

1,236

Rejection of employment contracts

—

4,573

—

Write off unamortized issuance costs on Prior Credit Facility

—

1,687

—

Total reorganization items

$
2,548

$
(988,727
)

$
10,859

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

Note 5:3: Supplemental disclosures to the consolidated statements of cash flows

~~Supplemental disclosures to the consolidated statements of cash flows are presented below:~~

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

September 30, 2017

March 21, 2017

September 30, 2016

Net cash provided by operating activities included:

Cash payments for interest

$
13,196

$
4,105

$
19,899

Interest capitalized

(1,245
)

(248
)

(1,741
)
Cash payments for interest, net of amounts capitalized

$
11,951

$
3,857

$
18,158

Cash payments for income taxes

$
150

$
—

$
250

Cash payments for reorganization items

$
16,930

$
11,405

$
4,255

Non-cash financing activities included:

Repayment of Prior Credit Facility with proceeds from early termination of derivative contracts (See Note 7)

$
—

$
—

$
103,560

Non-cash investing activities included:

Asset retirement obligation additions and revisions

$
2,746

$
716

$
4,015

Change in accrued oil and gas capital expenditures

$
10,598

$
5,387

$
(22,543
)

~~Note 6: Debt~~

~~As of the dates indicated, debt consisted of the following:~~

Successor

Predecessor

September 30,

December 31,

2017

2016 (2)

New Revolver

$
153,000

$
—

New Term Loan, net of discount of $651 and $0, respectively

148,541

—

Prior Credit Facility

—

444,440

Real estate mortgage note

9,328

9,595

Installment notes payable

10

434

Capital lease obligations

15,016

16,946

Unamortized debt issuance costs (1)

(1,441
)

(2,303
)
Total debt, net

324,454

469,112

Less current portion

4,758

469,112

Total long-term debt, net

$
319,696

$
—

~~(1)~~

Debt issuance costs are presented as a direct deduction from debt rather than an asset pursuant to recent accounting guidance. The balance on September 30, 2017, was related to the New Revolver while the balance on December 31, 2016, was related to the Prior Credit Facility.

~~(2)~~

~~Senior Notes have not been included in this table as they were classified as “Liabilities subject to compromise.”~~


	Six months ended June 30,
	2020		2019
Net cash provided by operating activities included:
Cash payments for interest	$	16,942	$	16,328
Interest capitalized	(3,900)		(6,613)
Cash payments for reorganization items	1,189		857
Non-cash investing activities included:
Asset retirement obligation additions and revisions	133		386
Financing lease right of use asset additions (see Note 5: Leases)	—		1,387
Change in accrued oil and gas capital expenditures	(22,418)		7,024

Prior to our emergence from bankruptcy, our debt primarily consisted of the Prior Credit Facility and our Senior Notes. On the Effective Date, our obligations under the Senior Notes which included principal and accrued interest, and previously classified as liabilities subject to compromise, were fully extinguished in exchange for equity in the Successor. In addition, our Prior Credit Facility, previously consisting of a senior secured revolving credit facility, was restructured into the New Credit Facility consisting of the New Revolver and the New Term Loan. On the Effective Date, the entire balance on the Prior Credit Facility in the amount of $444,440 was repaid while we received gross proceeds, before lender fees, representing the opening balances on our New Revolver of $120,000 and a New Term Loan of $150,000. See “Note 6—~~Debt” in Item 8. Financial Statement and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2016, for further details on our pre-emergence debt facilities.~~

~~New Term Loan~~

The New Term Loan, which is collateralized by our oil and natural gas properties, is scheduled to mature on March 21, 2021. Interest on the outstanding amount of the New Term Loan will accrue at an interest rate equal to either: (a) the Alternate Base Rate (as

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) ~~– continued~~

(dollars in thousands, except per share amounts)

~~defined~~

Note 4: Debt

As of the dates indicated, long-term debt and financing leases consisted of the following:


	June 30, 2020		December 31, 2019
8.75% Senior Notes due 2023	$	300,000	$	300,000
Credit facility	225,000		130,000
Installment note payable	—		371
Financing lease obligations	1,442		1,653
Unamortized debt issuance costs	(4,154)		(10,038)
Total debt, net	522,288		421,986
Less current portion	521,292		594
Total long-term debt, net	$	996	$	421,392

Chapter 11 Cases and Effect of Automatic Stay.On August 16, 2020, 2020, the Debtors filed for relief under the Bankruptcy Code. The commencement, through the Chapter 11 Cases, of a voluntary proceeding in bankruptcy constituted an immediate event of default under the ~~New~~ Credit ~~Facility) plus~~Agreement and the Indenture, resulting in immediate acceleration of outstanding amounts under these financing arrangements. Any efforts to enforce payment obligations related to the Company’s debt, including the acceleration thereof, have been automatically stayed as a ~~6.75% margin or (b)~~result of the ~~Adjusted LIBO Rate (as defined in~~Chapter 11 Cases, and the ~~New~~creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. As a result of the acceleration, we have classified the amounts outstanding under the Credit ~~Facility), plus a 7.75% margin with a 1.00% floor~~Agreement and Senior Notes as current liabilities on our condensed consolidated balance sheet as of June 30, 2020. For more information on the ~~Adjusted LIBO Rate. As of September 30, 2017, our outstanding borrowings were accruing interest at the Adjusted LIBO Rate which resulted in an interest rate of 9.03%.~~

~~We are required to make scheduled, mandatory principal payments in respect of the New Term Loan according~~Chapter 11 Cases and related matters, refer to the ~~schedule below,~~“Note 1: Nature of operations and summary of significant accounting policies” and “Note 11: Subsequent events.”

Credit Agreement

Pursuant to our Credit Agreement with Royal Bank of Canada, as administrative agent and issuing bank, and the ~~remaining outstanding balance due upon maturity:~~

Total payments remaining for 2017

$
375

Total payments for 2018

1,500

Total payments for 2019

3,750

Total payments for 2020

6,750

Total mandatory payments

$
12,375

~~New Revolver~~

~~The New Revolver~~additional lenders party thereto, we have a $750,000 credit facility that is ~~a $400,000 facility~~ collateralized by our oil and natural gas properties and is scheduled to mature on ~~March~~December 21, ~~2021.~~2022. Availability under our ~~New Revolver~~credit facility is subject to the financial covenants discussed below and a borrowing base based on the value of our oil and natural gas properties and set by the banks semi-annually on or around May 1 and November 1 of each year. ~~In addition, the lenders may request an additional~~Our borrowing base redetermination once between each scheduled redetermination or upon the occurrence of certain specified events. The banks establish a borrowing base by making an estimate of the collateral value of our oil and natural gas properties. If oil and natural gas prices decrease from the amounts used in estimating the collateral value of our oil and natural gas properties, the borrowing base may be reduced, thus reducing funds available under the ~~borrowing base. The initial borrowing base on the Effective Date was $225,000 and the first borrowing base redetermination has been set for on or about May 1, 2018. Availability on the New Revolver~~credit facility as of ~~September~~June 30, ~~2017, after taking into account outstanding borrowings and letters~~2020, was $175,000 with no availability (see discussion of ~~credit on that date, was $71,172.~~

~~Interest on the outstanding amounts under the New Revolver will accrue at an interest rate equal to either (i) the Alternate~~Borrowing Base Rate plus a margin that ranges between 2.00% to 3.00% depending on utilization or (ii) the Adjusted LIBO Rate applicable to one, two, three or six month borrowings plus a margin that ranges between 3.00% to 4.00% depending on utilization. In the case that an Event of Default (as defined under the New Credit Facility) occurs, the applicable rate while in default will be the Alternate Base Rate plus an additional 2.00% and plus the applicable margin. Deficiency below).

As of ~~September~~June 30, ~~2017,~~2020, our outstanding borrowings were accruing interest at the Adjusted LIBO Rate (as defined in the Credit Agreement, as defined below), plus the Applicable Margin (as defined in the Credit Agreement), which resulted in a weighted average interest rate of ~~4.78%~~3.19%.

~~Commitment fees~~

The Credit Agreement contains financial covenants that require, for each fiscal quarter, us to maintain: (1) a Current Ratio (as defined in the Credit Agreement) of ~~0.50% accrue~~no less than 1.0 to 1.0, and (2) a Ratio of Total Debt to EBITDAX (as defined in the Credit Agreement) of no greater than 4.0 to 1.0 calculated on ~~the unused portion of the borrowing base amount, based on the utilization percentage, and are included as~~ a component of interest expense. We generally have the right to make prepayments of the borrowings at any time without penalty or premium. Letter of credit fees will accrue at 0.125% plus the margin used to determine the interest rate applicable to New Revolver borrowings that are based on Adjusted LIBO Rate.

~~Covenants~~

trailing 4-quarter basis.

The ~~New~~ Credit ~~Facility~~Agreement contains covenants and events of default customary for oil and natural gas reserve-based lending ~~facilities including restrictions on additional debt, guarantees, liens, restricted payments, investments~~facilities. Our Credit Agreement and ~~hedging activity. Additionally, our New Credit Facility specifies events of~~Senior Notes include cross default ~~including non-payment, breach of warranty, non-performance of covenants,~~provisions wherein a default on ~~other indebtedness or swap agreements, certain adverse judgments, bankruptcy events~~one instrument may cause default on the other. Please see “Note 8: Debt” in “Item 8. Financial Statements and ~~change~~Supplementary Data” of ~~control, among others.~~

our Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of the material provisions of our Credit Agreement.

On April 1, 2020, we borrowed $15,000, and on April 2, 2020, we provided notice to our lenders to borrow an additional $90,000 (the latter herein referred to as the “Borrowing”) which increased the total amount outstanding under the Credit Agreement to $250,000. The ~~financial covenants require that we maintain: (1)~~Borrowing was made by the Company as a ~~Current Ratio (as defined~~precautionary measure in order to increase its cash position and thereby provide for flexibility in the ~~New Credit Facility)~~current challenging business environment and associated uncertainties. Subsequent to the Borrowing, we were notified that our lenders had exercised their right to make an interim redetermination of ~~no less than 1.00~~the Company’s borrowing base. The lenders’ redetermination notice stated that the Company’s borrowing base was decreased from $325,000 to ~~1.00, (2) an Asset Coverage Ratio (as defined~~$175,000, effective April 3, 2020. Our lenders subsequently reaffirmed the borrowing base at the same level on May 5, 2020, in conjunction with our scheduled semi-annual redetermination process. As a result of the April 3, 2020 borrowing base redetermination, the Borrowing, once funded, created a borrowing base deficiency in the ~~New~~amount of $75,000 under the Credit ~~Facility)~~Agreement (the “Borrowing Base Deficiency”). In accordance with the Credit Agreement the Company is allowed to eliminate such Borrowing Base Deficiency by repaying the amount of ~~no less than 1.35 to 1.00, (3) Liquidity (as defined in~~ the New Credit Facility) of at least $25,000 and (4) a Ratio of Total Debt to EBITDAX (as defined in the New Credit Facility) of no greater than 3.5 to 1.0 calculated on a trailing four-quarter basis. We are required to comply with these covenants for each fiscal quarter ending on and after March 31, 2017, except for the Asset Coverage Ratio, for which compliance is required semiannually as of January 1 and July 1 of each year. We were in compliance with these financials covenants as of September 30, 2017.

Borrowing

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited) ~~– continued~~

(dollars in thousands, except per share amounts)

~~Write-off~~

Base Deficiency in 6 equal monthly installments. During the second quarter, we made 2 such payments totaling $25,000 plus interest between May 1 to June 1, 2020. A third payment of $12,500 was made in early July 2020. No premium or penalty was charged with respect to those repayments. We did not make the fourth installment payment of $12,500 that was due on August 3, 2020 (the “August Deficiency Payment”), which subsequently resulted in an event of default under the Credit Agreement and under the Indenture, as discussed further below.

On July 15, 2020, the Company entered into a Limited Forbearance Agreement with the lenders under its Credit Agreement (the “Lenders”). The Limited Forbearance Agreement included, among other things, a requirement that the Company terminate all of its outstanding commodity hedges and to apply a certain portion of the proceeds thereof toward partial repayment of the outstanding amount under the Credit Agreement. The Limited Forbearance Agreement was amended effective as of July 24, 2020, by the First Amendment to Limited Forbearance Agreement (the “First Amendment”) and was further amended effective July 29, 2020 by a Second Amendment (the “Second Amendment” and, as amended, such Limited Forbearance Agreement, the “Lender Forbearance Agreement”).

The forbearance period under the Lender Forbearance Agreement began on July 15, 2020 and was scheduled to expire on July 29, 2020, unless terminated earlier in accordance with the terms thereof. The Second Amendment extended the scheduled termination date to August 9, 2020, unless terminated earlier in accordance with the terms of the Forbearance Agreement. However, the Second Amendment permitted an extension of the scheduled termination date by mutual agreement of the Administrative Agent and the Company to any date up to and including August 14, 2020. The Administrative Agent and the Company agreed to extend the termination date to August 14, 2020.Subsequently, on August 14, 2020, the Lender Forbearance Agreement was further amended by a Third Amendment (the “Third Amendment” and, as amended, such Lender Forbearance Agreement, the “Final Lender Forbearance Agreement”), which, among other things, extended the scheduled termination date to August 17, 2020, unless terminated earlier in accordance with the terms of the Final Lender Forbearance Agreement.

Pursuant to the Final Lender Forbearance Agreement, the Lenders agreed, during the forbearance period, to forbear from exercising any remedies under the Credit Agreement for any default or event of default resulting from any failure by the Company or any of its subsidiaries to make all or any part of the required interest payment due on July 15, 2020 with respect to the Company’s Senior ~~Note~~Notes (including the failure to make such payment during the 30-day grace period therefor), as discussed further below. Even though the indenture for the Senior Notes provides for a 30-day grace period before an event of default occurs under the indenture, the failure to make the interest payment on the due date constituted an event of default under the cross-default provisions of the Credit Agreement. The Company did not make the required interest payment of $13,125 on the due date or within the 30-day grace period. The Final Lender Forbearance Agreement also includes forbearance for the Company’s failure to timely pay the August Deficiency Payment under the Credit Agreement and the failure to timely deliver the quarterly financial statements for the period ended June 30, 2020 and the required accompanying officer’s certificate.

Pursuant to the Limited Forbearance Agreement with the lenders under our Credit Agreement, we terminated all our outstanding derivatives contracts on July 27, 2020 and applied a certain portion of the proceeds thereof toward partial repayment of the outstanding amount under the Credit Agreement, which we discuss in “Note 11: Subsequent events.”

Senior Notes

On June 29, 2018, we completed the issuance ~~costs, discount~~ and ~~premium~~

~~In March 2016, we wrote off the remaining unamortized issuance costs, premium and discount related to~~sale at par of $300,000 in aggregate principal amount of our Senior Notes in a private placement under Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Senior Notes bear interest at a rate of 8.75% per year beginning June 29, 2018 (payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2019) and will mature on July 15, 2023.

The Senior Notes are the Company’s senior unsecured obligations and rank equal in right of payment with all of the Company’s existing and future senior indebtedness, senior to all of the Company’s existing and future subordinated indebtedness and effectively subordinated to all of the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

The Indenture contains customary covenants, certain mandatory redemption provisions and events of default. Please see “Note 8: Debt” in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2019, for a ~~net charge of $16,970. These deferred items are typically amortized over the life~~discussion of the ~~corresponding bond.~~material provisions of our Senior Notes.

On July 15, 2020, the Company elected not to make the $13,125 interest payment on the Senior Notes due on that day. Under the Indenture, the Company has a 30-day grace period to make the interest payment before that non-payment constitutes an event of default. The 30-day grace period expires on August 14, 2020. However, as ~~a result of not paying~~discussed above, the failure to make that interest ~~due~~payment on ~~our 2021~~the Senior Notes constituted an event of default under cross-default provisions of the Credit Agreement.

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Effective as of July 30, 2020, the Company and the holders of at least 75% of the principal amount of outstanding Senior Notes (the “Initial Consenting Noteholders”) entered into a Forbearance and Waiver Agreement (the “Noteholder Forbearance Agreement”). Pursuant to the Noteholder Forbearance Agreement, the Initial Consenting Noteholders agreed, during the forbearance period, to forbear from exercising certain remedies under the Indenture (including acceleration) for any default or event of default resulting from any failure by the ~~end~~Company to pay the August Deficiency Payment under the Credit Agreement on or before August 3, 2020. In addition, under the Noteholder Forbearance Agreement, subject to the occurrence of ~~our~~such an event of default, the Initial Consenting Noteholders have waived any such event of default and the consequences thereof under the Indenture. The forbearance period under the Noteholder Forbearance Agreement began on July 30, 2020 and was scheduled to expire on August 14, 2020. On August 14, 2020, the Company and the Initial Consenting Noteholders amended and restated the Noteholder Forbearance Agreement (such amendment and restatement, the “Amended and Restated Noteholder Forbearance Agreement”). Pursuant to the Amended and Restated Noteholder Forbearance Agreement, the Initial Consenting Noteholders agreed to extend the forbearance period to August 17, 2020 and to additionally forbear from exercising certain remedies under the Indenture (including acceleration) for any default or event of default resulting from any failure by the Company to make the required interest payment of $13,125 within the 30-day grace period ~~on March 31, 2016, we~~described above.

Please see “Note 11: Subsequent events” for a discussion of the restructuring support agreement and the related proposed plan of reorganization.

As discussed above, our filing of the Chapter 11 Cases triggered an ~~Event~~event of ~~Default~~default on our Senior Notes. ~~While uncured, the Event~~The event of ~~Default~~default effectively ~~allowed~~allows the lender to demand immediate repayment, thus shortening the life of our Senior ~~Notes.~~Notes to the current period. As a result, we wrote off the remaining balance of unamortized issuance costs ~~premium~~in the amount of $4,420.

Chaparral Energy, Inc. and ~~discount~~subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Note 5: Leases

We currently have financing leases that consist of fleet trucks and office equipment and an operating lease for the office space housing our headquarters. Please see “Note 17: Leases” in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on ~~March~~Form 10-K for the year ended December 31, ~~2016, as follows:~~

Non-cash expense for write-off of debt issuance costs on Senior Notes

$
17,756

Non-cash expense for write-off of debt discount costs on Senior Notes

4,014

Non-cash gain for write-off of debt premium on Senior Notes

(4,800
)
Total

$
16,970

~~Capital Leases~~

~~During 2013, we entered into lease financing agreements with U.S. Bank National Association~~2019, for ~~$24,500 through the sale and subsequent leaseback of existing compressors owned by us. The carrying value~~a discussion of these leases. We also have short term leases, which are those with lease terms of 12 months or less, and generally consist of wellhead compressors and drilling rigs with terms ranging from one month to six months. We do not recognize right of use assets or lease liabilities for leases with durations of 12 months or less.

Lease assets and liabilities

Our operating lease and financing lease assets and liabilities are recorded on our balance sheet as of June 30, 2020 as:


	As of June 30, 2020
	Operating leases		Financing leases
Right of use asset:
Right of use assets from operating leases	$	1,744	$	—
Plant, property and equipment, net	—		1,428
Total lease assets	$	1,744	$	1,428
Lease liability:
Account payable and accrued liabilities	$	1,331	$	—
Long-term debt and financing leases, classified as current	—		446
Long-term debt and financing leases, less current maturities	—		996
Noncurrent operating lease obligations	234		—
Total lease liabilities	$	1,565	$	1,442

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Our income, expenses and cash flows related to our leases is ~~included in our~~as follows:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	114	$	749	$	231	$	1,442
Interest on lease liabilities	26		117		53		230
Operating lease cost	389		308		779		616
Short-term lease cost	92		154		310		283
Variable lease cost	—		95		—		190
Sublease income	—		(1,198)		—		(2,396)
Total lease cost	$	621	$	225	$	1,373	$	365

Capitalized operating lease cost (1)	$	—	$	3,371	$	—	$	6,706

Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for finance leases	$	(26)	$	(117)	$	(53)	$	(230)
Operating cash flows for operating leases	(344)		(308)		(689)		(616)
Investing cash flows for operating leases	—		(2,965)		—		(3,988)
Financing cash flows for finance leases	(107)		(746)		(212)		(1,445)
Right-of-use assets obtained in exchange for new finance lease liabilities	—		717		—		1,387

(1)The operating lease cost is related to drilling rigs with terms longer than 30 days and is capitalized as part of oil and natural gas full cost pool. The lease financing obligations are for 84-month terms and include the option to purchase the equipment for a specified price at 72 months as well as an option to purchase the equipment at the end of the lease term for its then-current fair market value. Lease payments related to the equipment are recognized as principal and interest expense basedproperties on ~~a weighted average implicit interest rate of 3.8%. Minimum lease payments are approximately $3,181 annually.~~

our balance sheets.

Note 7:6: Derivative instruments

~~Overview~~

Our results of operations, financial condition and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil, natural gas and natural gas liquids. These commodity prices are subject to wide fluctuations and market uncertainties. To mitigate a portion of this exposure, we enter into various types of derivative instruments, including commodity price swaps, collars, ~~put options, enhanced swaps~~ and basis protection swaps. See “Note 7—Derivative Instruments” in Item 8. Financial Statement and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2016, for a description of the various kinds of derivatives we may enter into.

The following table summarizes our crude oil derivatives outstanding as of ~~September~~June 30, ~~2017:~~

2020:

Weighted average fixed price per Bbl

Period and type of contract

Volume
MBbls

Swaps

Purchased puts

Sold calls

2017

Swaps

883

$
54.97

$
—

$
—

2018

Swaps

2,116

$
54.92

$
—

$
—

Collars

183

$
—

$
50.00

$
60.50

2019

Swaps

1,312

$
54.26

$
—

$
—

2020

Swaps

120

$
50.50

$
—

$
—


		Weighted average fixed price per Bbl
Period and type of contract	Volume MBbls	Swaps
2020
Oil swaps	1,026	$	50.56
Oil roll swaps	180	$	0.30
2021
Oil swaps	689	$	46.24
Oil roll swaps	150	$	0.30

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

The following table summarizes our natural gas derivatives outstanding as of ~~September~~June 30, ~~2017:~~

2020:

Period and type of contract

Volume
BBtu

Weighted
average
fixed price
per MMBtu

2017

Swaps

2,250

$
3.33

2018

Swaps

5,861

$
3.03

2019

Swaps

3,322

$
2.86


Period and type of contract	Volume BBtu	Weighted average fixed price per MMBtu
2020
Natural gas swaps	3,000	$	2.75
Natural gas basis swaps	3,000	$	(0.46)

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

Effect of derivative instruments on the consolidated balance sheets

All derivative financial instruments are recorded on the balance sheet at fair value. See “Note 8—7: Fair value measurements” for additional information regarding fair value measurements. The estimated fair values of derivative instruments are provided below. The carrying amounts of these instruments are equal to the estimated fair values.


	As of June 30, 2020										As of December 31, 2019
	Assets		Liabilities		Net value		Assets		Liabilities		Net value
Natural gas derivative contracts	$	2,288	$	(500)	$	1,788	$	3,552	$	(1)	$	3,551
Crude oil derivative contracts	15,399		—		15,399		391		(22,196)		(21,805)
NGL derivative contracts	—		—		—		2,868		(699)		2,169
Total derivative instruments	17,687		(500)		17,187		6,811		(22,896)		(16,085)
Less:
Netting adjustments (1)	(500)		500		—		(5,864)		5,864		—
Derivative instruments - current	15,197		—		15,197		947		(11,957)		(11,010)
Derivative instruments - long-term	$	1,990	$	—	$	1,990	$	—	$	(5,075)	$	(5,075)

Successor

Predecessor

September 30, 2017

December 31, 2016

Assets

Liabilities

Net value

Assets

Liabilities

Net value

Natural gas derivative contracts

$
789

$
(358
)

$
431

$
184

$
(3,658
)

$
(3,474
)
Crude oil derivative contracts

13,694

(5
)

13,689

—

(9,895
)

(9,895
)
Total derivative instruments

14,483

(363
)

14,120

184

(13,553
)

(13,369
)
Less:

Netting adjustments (1)

363

(363
)

—

184

(184
)

—

Derivative instruments - current

8,130

—

8,130

—

(7,525
)

(7,525
)
Derivative instruments - long-term

$
5,990

$
—

$
5,990

$
—

$
(5,844
)

$
(5,844
)
(1)Amounts represent the impact of master netting agreements that allow us to net settle positive and negative positions with the same counterparty. Positive and negative positions with counterparties are netted only to the extent that they relate to the same current versus noncurrent classification on the balance sheet.

~~(1)~~

Amounts represent the impact of master netting agreements that allow us to net settle positive and negative positions with the same counterparty. Positive and negative positions with counterparties are netted only to the extent that they relate to the same current versus noncurrent classification on the balance sheet.

Effect of derivative instruments on the consolidated statements of operations

We do not apply hedge accounting to any of our derivative instruments. As a result, all gains and losses associated with our derivative contracts are recognized immediately as “Derivative gains (losses) ~~gains”~~” in the consolidated statements of operations.

“Derivative gains (losses) ~~gains”~~” in the consolidated statements of operations ~~are comprised~~consist of the following:

Successor

Predecessor

Three months

Three months

ended

ended

September 30, 2017

September 30, 2016

Change in fair value of commodity price derivatives

$
(22,236
)

$
—

Settlement gains on commodity price derivatives

6,788

—

Total derivative (losses) gains

$
(15,448
)

$
—


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Change in fair value of commodity price derivatives	$	(35,934)	$	17,596	$	33,272	$	(33,935)
Net settlements received on commodity price derivatives	22,915		138		32,089		653
Total derivative gains (losses)	$	(13,019)	$	17,734	$	65,361	$	(33,282)

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

September 30, 2017

March 21, 2017

September 30, 2016

Change in fair value of commodity price derivatives

$
(19,232
)

$
46,721

$
(163,238
)
Settlement gains on commodity price derivatives

15,143

1,285

62,626

Settlement gains on early terminations of commodity price derivatives

—

—

91,144

Total derivative (losses) gains

$
(4,089
)

$
48,006

$
(9,468
)

~~Derivative terminations~~

~~In May 2016~~

Pursuant to the Limited Forbearance Agreement with the lenders under our Credit Agreement, we terminated all of our outstanding ~~derivative positions were terminated due to defaults~~derivatives contracts on July 27, 2020 and applied a certain portion of the proceeds thereof toward partial repayment of the outstanding amount under the master agreements governing our derivative contracts as a result of our bankruptcy. Proceeds from the early terminations, inclusive of amounts receivable at the time of termination for previous settlements, totaled $119,303. Of this amount,Credit Agreement, which we discuss in ~~the third quarter of 2016, $103,560 was utilized~~“Note 11: Subsequent events.”

Chaparral Energy, Inc. and subsidiaries

Condensed notes to ~~offset outstanding borrowings under our Prior Credit Facility and the remainder was remitted to the Company.~~

consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Note 8:7: Fair value measurements

Fair value is ~~defined by the FASB as~~ the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~Fair~~

We categorize fair value measurements ~~are categorized according to the fair value hierarchy defined by the FASB. The hierarchical levels are~~ based upon the level of judgment associated with the inputs used to measure the fair value of the assets and liabilities as follows:

•Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2 inputs include quoted prices for identical or similar instruments in markets that are not active and inputs other than quoted prices that are observable for the asset or liability.

•Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the asset or liability is categorized based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.

Recurring fair value measurements

As of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, our financial instruments recorded at fair value on a recurring basis consisted of commodity derivative contracts (see “Note 7—6: Derivative instruments”). We had no Level 1 assets or liabilities. Our derivative contracts classified as Level 2 consisted of commodity price swaps and oil roll swaps, which are valued using an income approach. Future cash flows from the commodity price swaps are estimated based on the difference between the fixed contract price and the underlying published forward market price. Our derivative contracts classified as Level 3 during the current year consisted of natural gas basis swaps and collars. The fair value of these contracts is developed by a third-party pricing service using a proprietary valuation model, which we believe incorporates the assumptions that market participants would have made at the end of each period. Observable inputs include contractual terms, published forward pricing curves, and yield curves. Significant unobservable inputs are implied ~~volatilities.~~volatilities and proprietary pricing curves. Significant increases (decreases) in implied volatilities in isolation would result in a significantly higher (lower) fair value measurement. We review these valuations and the changes in the fair value measurements for reasonableness. All derivative instruments are recorded at fair value and include a measure of our own nonperformance risk for derivative liabilities or our counterparty credit risk for derivative assets.

The fair value hierarchy for our financial assets and liabilities is shown by the following table:


	As of June 30, 2020										As of December 31, 2019
	Derivative assets		Derivative liabilities		Net assets (liabilities)		Derivative assets		Derivative liabilities		Net assets (liabilities)
Significant other observable inputs (Level 2)	$	17,687	$	—	$	17,687	$	6,576	$	(22,895)	$	(16,319)
Significant unobservable inputs (Level 3)	—		(500)		(500)		235		(1)		234
Netting adjustments (1)	(500)		500		—		(5,864)		5,864		—
	$	17,187	$	—	17,187		$	947	$	(17,032)	$	(16,085)

Successor

Predecessor

September 30, 2017

December 31, 2016

Derivative
assets

Derivative
liabilities

Net assets
(liabilities)

Derivative
assets

Derivative
liabilities

Net assets
(liabilities)

Significant other observable inputs (Level 2)

$
14,027

$
(363
)

$
13,664

$
184

$
(13,455
)

$
(13,271
)
Significant unobservable inputs (Level 3)

456

—

456

—

(98
)

(98
)
Netting adjustments (1)

(363
)

363

—

(184
)

184

—

$
14,120

$
—

$
14,120

$
—

$
(13,369
)

$
(13,369
)

~~(1)~~

(1)Amounts represent the impact of master netting agreements that allow us to net settle positive and negative positions with the same counterparty. Positive and negative positions with counterparties are netted on the balance sheet only to the extent that they relate to the same current versus noncurrent classification.

~~Chaparral Energy, Inc.~~ and ~~subsidiaries~~

~~Condensed notes~~negative positions with the same counterparty. Positive and negative positions with counterparties are netted on the balance sheet only to ~~consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

the extent that they relate to the same current versus noncurrent classification.

Changes in the fair value of our derivative instruments, classified as Level 3 in the fair value hierarchy, were as follows for the periods presented:

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

Net derivative assets (liabilities)

September 30, 2017

March 21, 2017

September 30, 2016

Beginning balance

$
715

$
(98
)

$
123,068

Realized and unrealized (losses) gains included in derivative (losses) gains

(259
)

813

(9,216
)
Settlements received

—

—

(113,852
)
Ending balance

$
456

$
715

$
—

(Losses) gains relating to instruments still held at the reporting date included in derivative (losses) gains for the period

$
(259
)

$
813

$
—

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)


	Six months ended June 30,
Net derivative assets (liabilities)	2020		2019
Beginning balance	$	234	$	30
Realized and unrealized gains included in derivative losses	1,033		441
Settlements (received) paid	(1,767)		116
Ending balance	$	(500)	$	587
(Losses) gains relating to instruments still held at the reporting date included in derivative gains (losses) for the period	$	(430)	$	742

Nonrecurring fair value measurements

Asset retirement obligations.Additions to the asset and liability associated with our asset retirement obligations are measured at fair value on a nonrecurring basis. Our asset retirement obligations consist of the estimated present value of future costs to plug and abandon or otherwise dispose of our oil and natural gas properties and related facilities. Significant inputs used in determining such obligations include estimates of plugging and abandonment costs, inflation rates, discount rates, and well life, all of which are Level 3 inputs according to the fair value hierarchy. The ~~estimated future costs to dispose of properties added during~~table below discloses the ~~first nine months of 2017~~inflation and 2016 were escalated using an annual inflation rate of 2.30% and 2.42%, respectively. The estimated future costs to dispose of properties added once we emerged from bankruptcy through September 30, 2017, were discounted, depending on the economic remaining estimated life of the property or the expected timing of the plugging and abandonment activity, with a credit-adjusted risk-free rate ranging from 5.13% to 7.63%. The discount rate ~~used~~assumptions for the ~~nine months ended September 30, 2016, was our weighted average credit-adjusted risk-free interest rate of 20.00%.~~ periods presented:


	Six months ended June 30,
	2020		2019
Inflation rate	2.21	%	2.25	%
Credit-adjusted risk-free discount rate (low)	25.00	%	12.35	%
Credit-adjusted risk-free discount rate (high)	25.00	%	14.60	%

These estimates may change based upon future inflation rates and changes in statutory remediation rules. See “Note 9—8: Asset retirement obligations” for additional information regarding our asset retirement obligations.

Fair value of other financial instruments

Our significant financial instruments, other than derivatives, consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and debt. We believe the carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair values due to the short-term maturities of these instruments.

The carrying value and estimated fair value of our debt were as follows:


	June 30, 2020						December 31, 2019
Level 2	Carrying value (1)		Estimated fair value		Carrying value (1)		Estimated fair value
8.75% Senior Notes due 2023	$	300,000	$	30,000	$	300,000	$	133,050
Credit facility	225,000		225,000		130,000		130,000
Other secured debt (2)	—		—		371		371

Successor

Predecessor

September 30, 2017

December 31, 2016

Level 2

Carrying
value (1)

Estimated
fair value

Carrying
value (1)

Estimated
fair value

New Revolver

$
153,000

$
153,000

$
—

$
—

New Term Loan

149,192

149,192

—

—

Other secured debt

9,338

9,338

10,029

10,029

9.875% Senior Notes due 2020

—

—

298,000

268,200

8.25% Senior Notes due 2021

—

—

384,045

344,680

7.625% Senior Notes due 2022

—

—

525,910

470,689

(1)The carrying value excludes deductions for debt issuance costs.

~~(1)~~

~~The carrying value excludes deductions for debt issuance costs and discounts.~~

(2)The balance December 31, 2019, consisted of only equipment installment notes.

The carrying value of our ~~New Revolver, New Term Loan~~credit facility and other secured long-term debt approximates fair value because the rates are comparable to those at which we could currently borrow under similar terms, are variable and incorporate a measure of our credit risk. The fair value of our Senior Notes was estimated based on quoted market prices. We have not disclosed the fair value of outstanding amounts under our Prior Credit Facility as of December 31, 2016, as it was not practicable to obtain a reasonable estimate of such value while the Predecessor was in bankruptcy.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

Counterparty credit risk

Our derivative contracts are executed with institutions, or affiliates of institutions, that are parties to our credit facilities at the time of execution, and we believe the credit risks associated with all of these institutions are acceptable. We do not require collateral or other security from counterparties to support derivative instruments. Master agreements are in place with each of our derivative counterparties which provide for net settlement in the event of default or termination of the contracts under each respective agreement.

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the derivatives. Our loss is further limited as any amounts due from a defaulting counterparty that is a Lender, or an affiliate of a Lender, under our credit facilities can be offset against amounts owed to such counterparty Lender. As of ~~September~~June 30, ~~2017,~~2020, the counterparties to our open derivative contracts consisted of ~~four~~5 financial ~~institutions.~~

institutions, all of which were lenders under our credit facility.

The following table summarizes our derivative assets and liabilities which are offset in the consolidated balance sheets under our master netting agreements. It also reflects the amounts outstanding under our credit facilities that are available to offset our net derivative assets due from counterparties that are lenders under our credit facilities.

	Offset in the consolidated balance sheets									Gross amounts not offset in the consolidated balance sheets
	Gross assets (liabilities)			Offsetting assets (liabilities)			Net assets (liabilities)			Derivatives (1)		Amounts outstanding under credit facilities			Net amount				Offset in the consolidated balance sheets										Gross amounts not offset in the consolidated balance sheets
Successor - September 30, 2017
																			Gross assets (liabilities)		Offsetting assets (liabilities)		Net assets (liabilities)		Derivatives (1)		Amounts outstanding under credit facilities (2)		Net amount
June 30, 2020																		June 30, 2020
Derivative assets	$	14,483		$	(363	)	$	14,120		$	—	$	(14,120	)	$	—		Derivative assets	$	17,687	$	(500)	$	17,187	$	—	$	(17,187)	$	—
Derivative liabilities		(363	)		363			—			—		—			—		Derivative liabilities	(500)		500		—		—		—		—
	$	14,120		$	—		$	14,120		$	—	$	(14,120	)	$	—			$	17,187	$	—	$	17,187	$	—	$	(17,187)	$	—


Predecessor - December 31, 2016
December 31, 2019																		December 31, 2019
Derivative assets	$	184		$	(184	)	$	—		$	—	$	—		$	—		Derivative assets	$	6,811	$	(5,864)	$	947	$	—	$	(947)	$	—
Derivative liabilities		(13,553	)		184			(13,369	)		—		—			(13,369	)	Derivative liabilities	(22,896)		5,864		(17,032)		—		947		(16,085)
	$	(13,369	)	$	—		$	(13,369	)	$	—	$	—		$	(13,369	)		$	(16,085)	$	—	$	(16,085)	$	—	$	—	$	(16,085)

(1)Since positive and negative positions with a counterparty are netted on the balance sheet only to the extent that they relate to the same current versus noncurrent classification, these represent remaining amounts that could have been offset under our master netting agreements.

(2)The amount outstanding under our credit facility that is available to offset our net derivative assets due from counterparties that are lenders under our credit facility.

We did not post additional collateral under any of these contracts as all of our counterparties are secured by the collateral under our credit facilities. Payment on our derivative contracts could be accelerated in the event of a default onunder our ~~New~~ Credit ~~Facility.~~Agreement. The aggregate fair value of our derivative liabilities subject to acceleration in the event of default was ~~$363~~$500 before offsets at ~~September~~June 30, ~~2017.~~

~~Chaparral Energy, Inc.~~2020.

Pursuant to the Limited Forbearance Agreement with the lenders under our Credit Agreement, we terminated all our outstanding derivatives contracts on July 27, 2020 and ~~subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars~~applied a certain portion of the proceeds thereof toward partial repayment of the outstanding amount under the Credit Agreement, which we discuss in ~~thousands, except per share amounts)~~

“Note 11: Subsequent events.”

Note 9:8: Asset retirement obligations

The following table provides a summary of our asset retirement obligation activity:

Liability for asset retirement obligations as of December 31, 2016 (Predecessor)

$
72,137

Liabilities incurred in current period

535

Liabilities settled and disposed in current period

(869
)
Revisions in estimated cash flows

181

Accretion expense

1,249

Liability for asset retirement obligations as of March 21, 2017 (Predecessor)

$
73,233

Fair value fresh-start adjustment

$
(2,757
)
Liability for asset retirement obligations as of March 21, 2017 (Successor)

$
70,476

Liabilities incurred in current period

2,038

Liabilities settled and disposed in current period

(6,649
)
Revisions in estimated cash flows

708

Accretion expense

2,152

Liability for asset retirement obligations as of September 30, 2017 (Successor)

$
68,725

Less current portion included in accounts payable and accrued liabilities

8,111

Asset retirement obligations, long-term

$
60,614


Balance at January 1, 2020	$	23,156
Liabilities incurred in current period	84
Liabilities settled or disposed in current period	(419)
Revisions in estimated cash flows	49
Accretion expense	649
Balance at June 30, 2020	$	23,519
Less current portion included in accounts payable and accrued liabilities	2,107
Asset retirement obligations, long-term	$	21,412

See “Note 8—7: Fair value measurements” for additional information regarding fair value assumptions associated with our asset retirement obligations.

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Note ~~10:~~9: Deferred compensation

~~Restricted Stock Unit Plan~~

~~Prior~~

Our deferred compensation includes cash awards and equity-based awards which are either settled in cash or in stock.

Cash Awards

From time to ~~our emergence from bankruptcy,~~time, we ~~had a Non-Officer Restricted Stock Unit Plan (the “RSU Plan”)~~have granted cash awards with long term vesting requirements. Our cash awards, which are generally service-based, vest either in ~~effect as an incentive plan for nonexecutive employees. The provisions under our RSU Plan are discussed~~one year, in “Note 11 — Deferred compensation” in Item 8. Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2016. As of January 1, 2017, there were 98,596 unvested and outstanding Restricted Stock Units with a weighted average grant date fair value of $7.18 per unit.

Due to the severe decline in commodity pricing, which has resulted in a steep decline in our estimated proved reserves, the estimated fair value per RSU as of January 1, 2017, was $0.00. All remaining unvested awards were cancelled upon our emergence from bankruptcy on the Effective Date.

~~2015 Cash Incentive Plan~~

We adopted the Long-Term Cash Incentive Plan (the “2015 Cash LTIP”) on August 7, 2015. The 2015 Cash LTIP provides additional cash compensation to certain employees of the Company in the form of awards that generally vest in equal annual increments over a ~~four~~three year period or in annual increments over a four-year period. ~~Since the awards do not vary according to the value of the Company’s equity, the awards are not considered “stock-based compensation” under accounting guidance.~~ We accrue for the cost of each annual increment over the period that service is required to vest.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

A summary of compensation expense for ~~the 2015 Cash LTIP~~our cash awards is presented below:

Successor

Predecessor

Three months

Three months

ended

ended

September 30, 2017

September 30, 2016

2015 Cash LTIP expense (net of amounts capitalized)

$
493

$
201

2015 Cash LTIP payments

1,285

624


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Cash LTIP expense (net of amounts capitalized)	$	187	$	67	$	354	$	158

Successor

Predecessor

Period from

Period from

March 22, 2017

January 1, 2017

Nine months

through

through

ended

September 30, 2017

March 21, 2017

September 30, 2016

2015 Cash LTIP expense (net of amounts capitalized)

$
1,100

$
5

$
586

2015 Cash LTIP payments

1,285

42

666

~~During 2017, the Company awarded an additional $5,637 under the 2015 Cash LTIP.~~

As of ~~September~~June 30, ~~2017,~~2020, the outstanding liability accrued for our ~~2015~~ Cash LTIP, based on requisite service provided, was ~~$1,224.~~

~~2010~~ $1,366.

Equity ~~Incentive Plan~~

~~We adopted the Chaparral Energy, Inc. 2010 Equity Incentive Plan (the “2010 Plan”) on April 12, 2010.~~ Awards

The ~~2010 Plan reserved a total of 86,301 shares of our class A common stock for~~Company’s outstanding equity based awards ~~issued under the 2010 Plan. All of our or our affiliates’ employees, officers, directors, and consultants, as defined in the 2010 Plan, were eligible to participate in the 2010 Plan.~~

~~The awards~~have been granted under the 2010 Plan consisted of shares that were subject to service vesting conditions (the “Time Vested” awards) and shares that are subject to market and performance vested conditions (the “Performance Vested” awards). The material provisions under the 2010 Plan are discussed in “Note 11—Deferred compensation” in Item 8. Financial Statement and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2016.

As of result of our bankruptcy, the estimated fair value of our Time Vested restricted awards was $0.00 per share since the Petition Date. Furthermore, during the third quarter of 2016, we recorded a cumulative catch up adjustment of to reverse the aggregate compensation cost associated with our Performance Vested awards in order to reflect a decrease in the probability that requisite service would be achieved for these awards. Pursuant to our Reorganization Plan, all outstanding restricted shares were cancelled. As this cancellation was not accompanied by the concurrent grant of (or offer to grant) a replacement award or other valuable consideration, it was accounted for as a repurchase for no consideration. Accordingly, any previously unrecognized compensation cost was recognized at the cancellation date.

~~A summary of our restricted stock activity for the Predecessor period in~~ 2017 ~~is presented below:~~

Time Vested

Performance Vested

Weighted
average
grant date
fair value

Restricted
shares

Vest
date
fair
value

Weighted
average
grant date
fair value

Restricted
shares

($ per share)

($ per share)

Unvested and outstanding at January 1, 2017 - Predecessor

$
790.91

6,667

$
277.33

21,475

Granted

$
—

—

$
—

—

Vested

$
812.91

(2,602
)

$
—

$
—

—

Forfeited

$
785.70

(468
)

$
195.75

(986
)
Cancelled

$
775.66

(3,597
)

$
281.26

(20,489
)
Unvested and outstanding at March 21, 2017 - Predecessor

$
—

—

$
—

—

~~2017 Management Incentive Plan~~

As discussed in “Note 3—Chapter 11 reorganization,” our Reorganization Plan authorized the issuance of seven percent of outstanding Successor common shares on a fully diluted basis toward a new management incentive plan. On August 9, 2017, we adopted the Chaparral Energy, Inc. Management Incentive Plan (the “MIP”) and the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan (the “LTIP”), which replaced the MIP in June 2019. Our equity grants have been in the form or restricted stock awards (“restricted shares”) and restricted stock units (“RSUs”). In December 2019, we also granted restricted shares to our recently appointed chief executive officer under an inducement equity grant that is exempted from the general requirement of the NYSE rules that require equity-based compensation plans and arrangements to be approved by stockholders. The ~~MIP~~LTIP provides for the following types of awards:

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other incentive awards. The aggregate number of shares of Class A common stock, par value $0.01 per share, reserved for issuance pursuant to the ~~MIP was initially~~LTIP is set at ~~3,388,832 subject to changes~~3,500,000. Please see “Note 13: Deferred Compensation” in ~~the event additional shares~~“Item 8. Financial Statements and Supplementary Data” of ~~common stock are issued under~~ our ~~Reorganization Plan. The MIP contemplates that any award granted under the plan may provide~~Annual Report on Form 10-K for the ~~earlier termination of restrictions and acceleration of vesting in the event of a Change in Control, as may be described in the particular award agreement.~~

~~Pursuant to~~year ended December 31, 2019, for further details on the MIP, ~~in August 2017, 1,796,943 shares of restricted stock were granted to employees and members of our Board of Directors (the “Board”). Of~~ the grants awarded to employees, 75% were comprised of shares that are subject to service vesting conditions (the “Time Shares”) and 25% were comprised of shares that are subject to performance vested conditions (the “Performance Shares”). All grants toLTIP as well as the ~~Board were Time shares.~~

Upon evaluating the provisions of both Time and Performance Shares, we classified both awards as equity-based awards. Compensation cost will be recognized and measured according to the grant date fair value of the awards which are based on the market price of our common stock currently trading on the OTCQB tier of the OTC Markets Group, Inc.

The Time Shares vest in equal annual installments over the three -year vesting period beginning on April 1, 2018 and each anniversary thereafter. The Performance Shares vest in three tranches over each of the next three years beginning on December 31, 2017, and each anniversary thereafter, according to performance conditions established each year. The performance conditions for a given year are unique to that yearnature and vesting ~~with respect to performance conditions~~requirements for a given year is independent of the vesting with respect to other years. As a result, the requisite service period for each of the three tranches of Performance Shares relate to the individual year for which performance is measuredour restricted shares and do not overlap. Performance conditions have not been established for 2018 and 2019 and hence a grant date has not been established for accounting purposes. Furthermore, since the requisite service period for Performance Shares related to 2018 and 2019 performance conditions will not commence until fiscal 2018 and 2019, no expense will be recognized in connection with those awards in 2017. Performance Shares related to 2017 performance conditions will vest based on accomplishment of multiple conditions that generally relate to drilling results and strategic goals. The accomplishment of an individual condition will result in vesting of shares that is independent of vesting with respect to the other conditions (i.e. simultaneous accomplishment of multiple conditions is not required for vesting). The number of shares vesting with respect to certain 2017 performance conditions is primarily at the discretion of the Board; hence a grant date for the related shares has not been established for accounting purposes. Requisite service on Performance Shares subject to these discretionary 2017 performance conditions is being rendered in 2017 and therefore expense is recognized in the current fiscal year.

RSUs.

A summary of our restricted ~~stock~~share activity ~~pursuant to our MIP for the Successor period in 2017~~ is presented below:

Time Shares
Performance Shares

Weighted
average
grant date
fair value

Restricted
shares

Weighted
average
grant date
fair value

Restricted
shares

($ per share)

($ per share)

Unvested and outstanding at March 21, 2017 - Successor

$
—

—

$
—

—

Granted (1)

$
20.05

1,376,481

$
20.05

420,462

Unvested and outstanding at September 30, 2017 - Successor

$
20.05

1,376,481

$
20.05

420,462


	Time Shares								Performance Shares
	Weighted average award date fair value		Restricted shares	Vest date fair value		Weighted average award date fair value		Restricted shares
	($ per share)					($ per share)
Unvested and outstanding at January 1, 2020	$	5.41	1,069,505			$	1.53	1,089,343
Granted	$	—	—			$	—	—
Vested	$	15.71	(203,888)	$	130	$	—	—
Forfeited	$	8.87	(82,658)			$	6.94	(20,833)
Cancelled	$	20.05	(12,088)			$	—	—
Unvested and outstanding at June 30, 2020	$	2.09	770,871			$	1.33	1,068,510

~~(1)~~

Includes 280,308 Performance Shares attributable to 2018 and 2019 performance conditions and 70,077 Performance Shares attributable to 2017 conditions where determination of accomplishment is discretionary. Under accounting guidance, a grant date has not been established for all these awards.

~~As none~~

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

A summary of the MIP awards have vested to date, there have been no repurchases of vested shares in 2017. We have the ability to repurchase shares for tax withholding or pursuant to certain share repurchase provisions in our ~~MIP award agreements. However, our employees also have the ability to sell shares on the open market to cover employee tax withholdings.~~

RSU activity is presented below:


	Equity classified RSUs
	Service-condition RSUs							Market condition RSUs
	Weighted average award date fair value		Restricted units	Vest date fair value		Weighted average award date fair value		Restricted units
	($ per share)					($ per share)
Unvested and outstanding at January 1, 2020	$	2.41	638,383			$	1.36	390,000
Granted	$	1.95	4,500			$	—	—
Vested	$	—	—	$	—	$	—	—
Forfeited	$	1.56	(228,094)			$	1.36	(200,000)
Unvested and outstanding at June 30, 2020	$	2.87	414,789			$	1.36	190,000


	Liability classified RSUs
	Weighted average award date fair value		Restricted units	Vest date fair value
	($ per share)
Unvested and outstanding at January 1, 2020	$	4.57	75,779
Granted	$	—	—
Vested	$	1.33	(60,000)	$	41
Forfeited	$	17.66	(1,515)
Unvested and outstanding at June 30, 2020	$	16.83	14,264

Stock-based compensation cost

Compensation cost is calculated net of forfeitures. ~~As allowed by recent accounting guidance, we will~~We recognize the impact of forfeitures due to employee terminations onin expense as ~~they~~those forfeitures occur instead of incorporating an estimate of such forfeitures. For awards with performance conditions, we will assess the probability that a performance condition will be achieved at each reporting period to determine whether and when to recognize compensation cost.

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

For awards with market conditions, expense is recognized on the entire value of the award regardless of the vesting outcome so long as the participant remains employed.

A portion of stock-based compensation cost associated with employees involved in our acquisition, exploration, and development activities has been capitalized as part of our oil and natural gas properties. The remaining cost is reflected in lease operating and general and administrative expenses in the consolidated statements of operations. Stock-based compensation expense is as follows for the periods indicated:

	Successor			Predecessor
	Three months ended September 30, 2017			Three months ended September 30, 2016				Three months ended June 30,						Six months ended June 30,
Stock-based compensation cost (credit)	$	3,577		$	(5,705	)
								2020		2019		2020		2019
Stock-based compensation cost							Stock-based compensation cost	$	101	$	1,260	$	771	$	2,720
Less: stock-based compensation cost capitalized		(801	)		1,167		Less: stock-based compensation cost capitalized	(7)		(399)		(281)		(1,025)
Stock-based compensation expense (credit)	$	2,776		$	(4,538	)
Stock-based compensation expense							Stock-based compensation expense	$	94	$	861	$	490	$	1,695
Number of vested shares repurchased or settled in cash							Number of vested shares repurchased or settled in cash	92,649		126,231		96,505		206,653
Payments for stock-based compensation	$	—		$	—		Payments for stock-based compensation	53		708		59		1,171

Successor

Predecessor

Period from
March 22, 2017
through
September 30, 2017

Period from
January 1, 2017
through
March 21, 2017

Nine months
ended
September 30, 2016

Stock-based compensation cost (credit)

$
3,577

$
194

$
(6,220
)
Less: stock-based compensation cost capitalized

(801
)

(39
)

965

Stock-based compensation expense (credit)

$
2,776

$
155

$
(5,255
)
Payments for stock-based compensation

$
—

$
—

$
49

Based on a quarter end market price of ~~$23.25~~$0.65 per share of our Class A common stock, the aggregate intrinsic value of all restricted shares and RSUs outstanding was ~~$41,779~~$1,593 as of ~~September~~June 30, ~~2017.~~2020. Payments for restricted shares and the associated number of shares repurchased are reflected as treasury stock transactions in our consolidated statements of equity. As of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, accrued payroll and benefits payable included ~~$0 and $0, respectively,~~ for stock-based compensation costs expected to be settled within the next

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)

Note ~~11:~~10: Commitments and contingencies

Standby letters of credit (“Letters”) available under our ~~New Credit Facility are~~credit facility may be used in lieu of surety bonds with various organizations for liabilities relating to the operation of oil and natural gas properties. We had Letters outstanding totaling ~~$828~~NaN as of ~~September~~June 30, ~~2017,~~2020 and NaN as of December 31, ~~2016.~~2019. When amounts under the Letters are paid by the lenders, interest accrues on the amount paid at the same interest rate applicable to borrowings under the ~~New Credit Facility. No~~credit facility. NaN amounts were paid by the lenders under the Letters; therefore, we paid no0 interest on the Letters during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 or ~~2016.~~

2019.

Surety bonds totaling $2,121 were posted on our behalf as of June 30, 2020. We pay premiums for such bonds and, under normal circumstances, are not required to post collateral of any kind to support their issuance. However, as a result of the current extraordinary macroeconomic situation and the Borrowing Base Deficiency discussed above, we have been required to post cash collateral in respect of the bonds totaling $950.

Litigation and Claims

Prior Chapter 11 ~~Proceedings.~~Cases. Commencement of the Prior Chapter 11 Cases automatically stayed many of the proceedings and actions against us noted below as well as other claims and actions that were or could have been brought prior to May 9, 2016 (the “Prior Petition Date”), and the claims remain subject to ~~bankruptcy court~~Bankruptcy Court jurisdiction. ~~In connection with~~With respect to the proofs of claim asserted ~~during bankruptcy~~in the Prior Chapter 11 Cases arising from the proceedings or actions below that were initiated prior to the Prior Petition Date, we are unable to estimate the ~~amounts~~amount of such claims that will be allowed ~~through~~by the Bankruptcy ~~proceedings~~Court due to, among other things, the complexity and number of legal and factual issues ~~presented by~~which are necessary to determine the ~~matters~~amount of such claims and uncertainties ~~with respect~~related to ~~amongst other things,~~ the nature of defenses asserted in connection with the claims, ~~and defenses,~~ the potential size of the putative classes, and the ~~scope and~~ types of the properties and scope of agreements ~~involved, and the ultimate potential outcomes of the matters.~~related to such claims. As a result, no reserves were established ~~within our liabilities~~ in ~~connection with~~respect of such proofs of claims or any of the proceedings ~~and~~or actions described below. To the extent that any of ~~these~~the legal proceedings were filed that relate to one or more claims accruing prior to the Prior Petition Date and that result in a claim being allowed against us, pursuant to the terms of the Prior Reorganization Plan, such claims ~~will~~would be satisfied through the issuance of new stock in the Company or, if the amount isof such claim is below the convenience class threshold, through cash ~~settlement.~~

settlement, in each case subject to their further treatment prescribed by the Plan of Reorganization, assuming its ultimate approval.

Naylor Farms, Inc., individually and as class representative on behalf of all similarly situated persons v. Chaparral Energy, L.L.C. (the “Naylor Farms case”). On June 7, 2011, an alleged class action was filed against us in the United States District Court for the Western District of Oklahoma (“Naylor Trial Court”) alleging that we improperly deducted post-production costs from royalties paid to plaintiffs and other ~~royalty interest~~non-governmental Royalty Interest owners ~~as categorized in the petition~~ from crude ~~oil and natural gas wells located in Oklahoma (“Naylor Farms~~

~~Chaparral Energy, Inc. and subsidiaries~~

~~Condensed notes to consolidated financial statements (unaudited) – continued~~

~~(dollars in thousands, except per share amounts)~~

~~Case”). Plaintiffs indicated they seek damages in excess of $5,000, the majority of which would be comprised of interest and may increase with the passage of time. The purported class includes non-governmental royalty interest owners in~~ oil and natural gas wells we operate in Oklahoma. The plaintiffs have alleged a number of claims, including breach of contract, fraud, breach of fiduciary duty, unjust enrichment, and other claims and seek termination of leases, recovery of compensatory damages, interest, punitive damages and attorney fees on behalf of the alleged class. Plaintiffs indicated they seek damages in excess of $5,000, the majority of which consist of interest and may increase with the passage of time. We ~~have~~ responded to the Naylor Farms petition, denied the allegations and raised arguments and defenses. Plaintiffs filed a motion for class certification in October 2015. In addition, the plaintiffs filed a motion for summary judgment asking the ~~court~~Naylor Trial Court to determine as a matter of law that natural gas is not marketable until it is in the condition and location to enter an interstate pipeline. On May 20, 2016, we filed a Notice of Suggestion of Bankruptcy with the Naylor Trial Court.

Subsequently the bankruptcy stay was lifted for the limited purpose of determining the class certification issue.

On January 17, 2017, the Naylor Trial Court certified a modified class of plaintiffs with oil and gas leases containing specific language. The modified class constitutes less than 60% of the leases the plaintiffs originally sought to certify. After additional briefing on the subject, on April 18, 2017, the Naylor Trial Court issued an order certifying the class to include only claims relating back to June 1, 2006. On May ~~1, 2017, we filed a Petition for Permission to Appeal Class Certification Order with~~3, 2019, our appeal of that class certification was denied by the Tenth Circuit Court of ~~Appeals (the “Tenth Circuit”), which was granted. We filed our appellate brief on September 14, 2017, to which the plaintiffs must respond by November 16, 2017.~~

Appeals.

In addition to filing claims on behalf of the named ~~plaintiffs~~ and ~~associated parties,~~putative plaintiffs, on August 15, 2016, plaintiffs’ attorneys filed a proof of claim on behalf of the putative class claiming damages in excess of $150,000 in our Prior Chapter 11 Cases. The Company objected to treatment of the claim on a class basis, asserting the claim should be addressed on an individual basis. On April 20, 2017, plaintiffs filed an amended proof of claim reducing the claim to an amount in excess of $90,000 inclusive of actual and punitive damages, statutory interest and attorney fees. On May 24, 2017, the Bankruptcy Court denied the Company’s objection, ruling the plaintiffs

Chaparral Energy, Inc. and subsidiaries

Condensed notes to consolidated financial statements (unaudited)

(dollars in thousands, except per share amounts)


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)~~ Code)


Title of class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value, $0.01 per share	CHAP	The New York Stock Exchange

	~~Page~~
		Page

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			7 8
Consolidated Balance Sheets			7 8
Consolidated Statements of Operations			9
Consolidated ~~Statements~~Statement of ~~Stockholders'~~Stockholders’ Equity ~~(Deficit)~~			11 10
Consolidated Statements of Cash Flows			12 11
Condensed Notes to Consolidated Financial Statements			13 12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			39 36
Overview			39 36
Results of Operations			43 41
Liquidity and Capital Resources			53 37
Non-GAAP Financial Measure and Reconciliation			58 50
Critical Accounting Policies			59 51
Recent Accounting Pronouncements			60 51
Item 3. Quantitative and Qualitative Disclosures about Market Risk			60 51
Item 4. Controls and Procedures			62 53
Part II. OTHER INFORMATION
Item 1. Legal Proceedings			62 53
Item 1A. Risk Factors			63 53
Item ~~3. Defaults Upon Senior~~2. Unregistered Sales of Equity Securities and Use of Proceeds			63 59
Item 5. Other Information			63 59
Item 6. Exhibits			63 60
Signatures			64 63


~~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.
NYSE
~~New Credit Facility~~	Ninth Restated Credit Agreement, dated as of March 21, 2017, by and among, Chaparral Energy, Inc., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent and The Lenders and Prepetition Borrowers Party thereto.
~~New Revolver~~	~~A first-out revolving facility under the New Credit Facility.~~


(dollars in thousands, except share data)	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	56,137	$	22,595
Accounts receivable:
Accounts receivable, gross	43,197		50,744
Allowance for credit losses	(4,215)		(1,097)
Accounts receivable, net	38,982		49,647
Inventories, net	2,456		3,730
Prepaid expenses	4,034		3,471
Derivative instruments	15,197		947
Total current assets	116,806		80,390
Property and equipment, net	7,948		9,217
Right of use assets from operating leases	1,744		2,444
Oil and natural gas properties, using the full cost method:
Proved	1,569,627		1,276,036
Unevaluated (excluded from the amortization base)	142,295		371,229
Accumulated depreciation, depletion, amortization and impairment	(1,246,703)		(754,379)
Total oil and natural gas properties	465,219		892,886
Held for sale assets	111		2,860
Derivative instruments	1,990		—
Other assets	1,349		635
Total assets	$	595,167	$	988,432
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	39,272	$	64,558
Accrued payroll and benefits payable	5,970		10,963
Accrued interest payable	12,309		12,227
Revenue distribution payable	9,322		22,370
Long-term debt and financing leases, classified as current	521,292		594
Derivative instruments	—		11,957
Total current liabilities	588,165		122,669
Long-term debt and financing leases, less current maturities	996		421,392
Derivative instruments	—		5,075
Noncurrent operating lease obligations	234		917
Deferred compensation	419		165
Asset retirement obligations	21,412		21,073

Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, 5,000,000 shares authorized, NaN issued and outstanding	—		—
Common stock, $0.01 par value, 192,130,071 shares authorized; 48,297,606 issued and 47,790,146 outstanding at June 30, 2020 and 48,413,185 issued and 47,942,230 outstanding at December 31, 2019	483		485
Additional paid in capital	977,957		977,174
Treasury stock, at cost, 507,460 and 470,955 shares as of June 30, 2020, and December 31, 2019	(6,128)		(6,110)
Accumulated deficit	(988,371)		(554,408)
Total stockholders’ equity	(16,059)		417,141
Total liabilities and stockholders’ equity	$	595,167	$	988,432

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

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

	Successor			Predecessor
	September 30,			December 31,
(dollars in thousands, except share data)	2017			2016
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	22,395		$	186,480
Accounts receivable, net		63,952			46,226
Inventories, net		4,207			7,351
Prepaid expenses		2,161			3,886
Derivative instruments		8,130			—
Total current assets		100,845			243,943
Property and equipment, net		52,766			41,347
Oil and natural gas properties, using the full cost method:
Proved		707,938			4,323,964
Unevaluated (excluded from the amortization base)		599,885			20,353
Accumulated depreciation, depletion, amortization and impairment		(59,157	)		(3,789,133	)
Total oil and natural gas properties		1,248,666			555,184
Derivative instruments		5,990			—
Other assets		3,082			5,513
Total assets	$	1,411,349		$	845,987


	Three months ended						Six months ended
(in thousands, except share and per share data)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenues:
Net commodity sales	$	15,880	$	66,707	$	64,731	$	115,326
Sublease revenue	—		1,198		—		2,396
Total revenues	15,880		67,905		64,731		117,722
Costs and expenses:
Lease operating	5,971		13,371		16,059		25,665
Production taxes	823		3,802		3,573		6,682
Depreciation, depletion and amortization	14,821		30,282		37,833		53,997
Impairment of oil and gas assets	384,639		63,593		456,010		113,315
Impairment of other assets	310		6,407		463		6,407
General and administrative	9,488		7,315		17,556		15,628
Liability management	8,047		—		8,047		—
Litigation loss	4,359		—		4,359		—
Subleases	—		403		—		806
Total costs and expenses	428,458		125,173		543,900		222,500
Operating loss	(412,578)		(57,268)		(479,169)		(104,778)
Non-operating income (expense):
Interest expense	(8,047)		(5,571)		(14,683)		(10,135)
Write-off of Senior Note issuance costs	(4,420)		—		(4,420)		—
Derivative (losses) gains	(13,019)		17,734		65,361		(33,282)
(Loss) gain on sale of assets	(261)		491		(159)		490
Other income (expense), net	35		(302)		281		(288)
Net non-operating income (expense)	(25,712)		12,352		46,380		(43,215)
Reorganization items, net	(436)		(313)		(1,020)		(776)
Loss before income taxes	(438,726)		(45,229)		(433,809)		(148,769)
Income tax expense	—		—		—		—
Net loss	$	(438,726)	$	(45,229)	$	(433,809)	$	(148,769)
Loss per share:
Basic	$	(9.55)	$	(0.99)	$	(9.45)	$	(3.27)
Diluted	$	(9.55)	$	(0.99)	$	(9.45)	$	(3.27)
Weighted average shares used to compute earnings per share:
Basic	45,949,797		45,641,797		45,890,041		45,549,518
Diluted	45,949,797		45,641,797		45,890,041		45,549,518

	Successor			Predecessor
	Three months			Three months
	ended			ended
(in thousands, except share and per share data)	September 30, 2017			September 30, 2016
Revenues - commodity sales	$	75,947		$	65,847
Costs and expenses:
Lease operating		24,209			22,291
Transportation and processing		2,942			2,429
Production taxes		4,536			2,174
Depreciation, depletion and amortization		32,167			29,624
Loss on impairment of other assets		—			202
General and administrative		9,924			1,519
Cost reduction initiatives		34			89
Total costs and expenses		73,812			58,328
Operating income		2,135			7,519
Non-operating (expense) income:
Interest expense		(5,283	)		(7,436	)
Derivative (losses) gains		(15,448	)		—
Other income (expense), net		376			(129	)
Net non-operating (expense) income		(20,355	)		(7,565	)
Reorganization items, net		(858	)		(5,504	)
Loss before income taxes		(19,078	)		(5,550	)
Income tax expense (benefit)		37			(59	)
Net loss	$	(19,115	)	$	(5,491	)
Earnings per share:
Basic for Class A and Class B	$	(0.42	)	*
Diluted for Class A and Class B	$	(0.42	)	*
Weighted average shares used to compute earnings per share:
Basic for Class A and Class B		44,982,142		*
Diluted for Class A and Class B		44,982,142		*


	Common stock
(dollars in thousands)	Shares outstanding	Amount		Additional paid in capital		Treasury stock		Accumulated deficit		Total
As of December 31, 2018	46,390,513	$	467	$	974,616	$	(4,936)	$	(85,460)	$	884,687
Stock-based compensation	94,078	1		1,423		—		—		1,424
Restricted stock forfeited	(97,113)	(1)		—		—		—		(1)
Repurchase of common stock	(80,422)	—		—		(463)		—		(463)
Net loss	—	—		—		—		(103,540)		(103,540)
Balance at March 31, 2019	46,307,056	$	467	$	976,039	$	(5,399)	$	(189,000)	$	782,107
Stock-based compensation	160,400	1		1,249		—		—		1,250

Repurchase of common stock	(126,231)	—		—		(708)		—		(708)
Issuance of common stock - litigation settlement	76,217	1		323		—		—		324
Net loss	—	—		—		—		(45,229)		(45,229)
Balance at June 30, 2019	46,417,442	$	469	$	977,611	$	(6,107)	$	(234,229)	$	737,744

	Successor			Predecessor
	Period from			Period from
	March 22, 2017			January 1, 2017			Nine months
	through			through			ended
(in thousands, except share and per share data)	September 30, 2017			March 21, 2017			September 30, 2016
Revenues - commodity sales	$	157,803		$	66,531		$	180,076
Costs and expenses:
Lease operating		51,527			19,941			68,462
Transportation and processing		6,370			2,034			6,493
Production taxes		8,235			2,417			6,812
Depreciation, depletion and amortization		66,432			24,915			94,396
Loss on impairment of oil and gas assets		—			—			281,079
Loss on impairment of other assets		—			—			1,461
General and administrative		24,641			6,843			14,812
Liability management		—			—			9,396
Cost reduction initiatives		155			629			3,228
Total costs and expenses		157,360			56,779			486,139
Operating income (loss)		443			9,752			(306,063	)
Non-operating (expense) income:
Interest expense		(10,984	)		(5,862	)		(57,243	)
Derivative (losses) gains		(4,089	)		48,006			(9,468	)
Write-off of Senior Note issuance costs, discount and premium		—			—			(16,970	)
Other (expense) income, net		(180	)		1,373			217
Net non-operating (expense) income		(15,253	)		43,517			(83,464	)
Reorganization items, net		(2,548	)		988,727			(10,859	)
(Loss) income before income taxes		(17,358	)		1,041,996			(400,386	)
Income tax expense		75			37			165
Net (loss) income	$	(17,433	)	$	1,041,959		$	(400,551	)
Earnings per share:
Basic for Class A and Class B	$	(0.39	)	*			*
Diluted for Class A and Class B	$	(0.39	)	*			*
Weighted average shares used to compute earnings per share:
Basic for Class A and Class B		44,982,142		*			*
Diluted for Class A and Class B		44,982,142		*			*


	Six months ended
(in thousands)	June 30, 2020		June 30, 2019
Cash flows from operating activities
Net loss	$	(433,809)	$	(148,769)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation, depletion and amortization	37,833		53,997
Derivative (gains) losses	(65,361)		33,282
Impairment of oil and gas assets	456,010		113,315
Impairment of other assets	463		6,407
Write-off of Senior Note issuance costs	4,420		—
Loss (gain) on sale of assets	159		(490)
Other	4,612		1,621
Change in assets and liabilities
Accounts receivable	6,206		13,584
Inventories	747		40
Prepaid expenses and other assets	(1,277)		1,055
Accounts payable and accrued liabilities	(7,217)		(18,389)
Revenue distribution payable	(13,049)		600
Deferred compensation	844		1,852
Net cash (used in) provided by operating activities	(9,419)		58,105
Cash flows from investing activities
Expenditures for property, plant, and equipment and oil and natural gas properties	(86,862)		(146,434)
Proceeds from asset dispositions	3,370		857
Proceeds from derivative instruments, net	32,089		653
Net cash used in investing activities	(51,403)		(144,924)
Cash flows from financing activities
Proceeds from long-term debt	120,000		85,000
Repayment of long-term debt	(25,313)		(343)
Principal payments under financing lease obligations	(212)		(1,445)
Payment of debt issuance costs and other financing fees	(93)		(20)
Treasury stock purchased	(18)		(1,171)
Net cash provided by financing activities	94,364		82,021
Net increase (decrease) in cash and cash equivalents	33,542		(4,798)
Cash and cash equivalents, at beginning of period	22,595		37,446
Cash and cash equivalents, at end of period	$	56,137	$	32,648

							Additional
	Common stock						paid in			Accumulated
(dollars in thousands)	Shares			Amount			capital			deficit			Total
Balance at December 31, 2016 - Predecessor		1,392,706		$	14		$	425,231		$	(1,467,398	)	$	(1,042,153	)
Restricted stock forfeited		(1,454	)		—			—			—			—
Restricted stock cancelled		(8,964	)		—			—			—			—
Stock-based compensation		—			—			194			—			194
Net income		—			—			—			1,041,959			1,041,959
Balance at March 21, 2017 - Predecessor		1,382,288			14			425,425			(425,439	)		—
Cancellation of Predecessor equity		(1,382,288	)		(14	)		(425,425	)		425,439			—
Balance at March 21, 2017 - Predecessor		—		$	—		$	—		$	—		$	—


Issuance of Successor common stock - rights offering		4,197,210		$	42		$	49,985		$	—		$	50,027
Issuance of Successor common stock - backstop premium		367,030			4		—				—			4
Issuance of Successor common stock - settlement of claims		40,417,902			404			898,510			—			898,914
Issuance of Successor warrants	—				—			118			—			118
Balance at March 21, 2017 - Successor		44,982,142			450			948,613			—			949,063
Stock-based compensation		1,796,943			18			3,559			—			3,577
Net income		—			—			—			(17,433	)		(17,433	)
Balance at September 30, 2017 - Successor		46,779,085		$	468		$	952,172		$	(17,433	)	$	935,207


	June 30, 2020		December 31, 2019
Joint interests	$	9,992	$	16,664
Commodity sales	14,416		30,819
Derivative settlements	15,540		717
Other	3,249		2,544
Allowance for credit losses	(4,215)		(1,097)
	$	38,982	$	49,647


~~Large accelerated filer~~	☐	~~Accelerated filer~~	☐


Joint interest receivables, gross	June 30, 2020
Accounts which have sufficient related revenue distributions payable to offset entire receivable balance	$	258
Accounts which have related revenue distributions payable but not sufficient to offset entire receivable balance	3,711
Accounts without related revenue distributions payable	6,023
Total	$	9,992


	Six months ended June 30, 2020
	Commodity sales		Joint interest		Derivatives		Other		Total
Balance at January 1, 2020	$	—	$	1,097	$	—	$	—	$	1,097
Cumulative effect of accounting standard adoption	154		—		—		—		154
Credit losses	59		2,905		—		—		2,964
Write-offs	—		—		—		—		—
Recoveries	—		—		—		—		—
Balance at June 30, 2020	$	213	$	4,002	$	—	$	—	$	4,215


	June 30, 2020		December 31, 2019
Machinery and equipment	$	3,229	$	3,543
Office and computer equipment	3,606		3,363
Automobiles and trucks	2,469		3,071
Building and improvements	664		693
Furniture and fixtures	8		8
	9,976		10,678
Less accumulated depreciation, amortization and impairment	3,963		3,459
	6,013		7,219
Land	1,935		1,998
	$	7,948	$	9,217


	Carrying value at
	June 30, 2020		December 31, 2019
Equipment	$	—	$	1,572
Vehicles	111		488
Real estate	—		800
Total held for sale	$	111	$	2,860

	Predecessor
	March 21, 2017		December 31, 2016
Accounts payable and accrued liabilities	$	6,687	$	9,212
Accrued payroll and benefits payable		3,949		4,048
Revenue distribution payable		3,050		3,474
Senior Notes and associated accrued interest		1,267,410		1,267,410
Liabilities subject to compromise	$	1,281,096	$	1,284,144

Enterprise value	$	1,200,000
Plus: cash and cash equivalents		45,123
Less: fair value of outstanding debt		(296,061	)
Less: fair value of warrants (consideration for previously accrued consulting fees)		(118	)
Fair value of Successor common stock on the Effective Date	$	948,944
Total shares issued under the Reorganization Plan		44,982,142
Per share value (1)	$	21.10

				Reorganization				Fresh Start
	Predecessor			Adjustments				Adjustments				Successor
Assets
Current assets:
Cash and cash equivalents	$	180,456		$	(135,333	)	(a)	$	—			$	45,123
Accounts receivable, net		46,837			—				—				46,837
Inventories, net		6,885			—				—				6,885
Prepaid expenses		4,933			(535	)	(b)		—				4,398
Derivative instruments		19,058			—				—				19,058
Total current assets		258,169			(135,868	)			—				122,301
Property and equipment		38,391			—				18,987		(i)		57,378
Oil and natural gas properties, using the full cost method:
Proved		4,355,576			—				(3,751,511	)	(i)		604,065
Unevaluated (excluded from the amortization base)		26,039			—				559,535		(i)		585,574
Accumulated depreciation, depletion, amortization and impairment		(3,811,326	)		—				3,811,326		(i)		—
Total oil and natural gas properties		570,289			—				619,350		(i)		1,189,639
Derivative instruments		14,295			—				—				14,295
Other assets		5,499			2,410		(c)		590		(i)		8,499
Total assets	$	886,643		$	(133,458	)		$	638,927			$	1,392,112
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable and accrued liabilities	$	64,413		$	(2,737	)	(a)(d)	$	—			$	61,676
Accrued payroll and benefits payable		7,366			2,186		(d)		—				9,552
Accrued interest payable		2,095			(2,095	)	(a)		—				—
Revenue distribution payable		7,975			3,050		(d)		—				11,025
Long-term debt and capital leases, classified as current		468,814			(464,182	)	(e)		—				4,632
Total current liabilities		550,663			(463,778	)			—				86,885
Long-term debt and capital leases, less current maturities		—			291,429		(f)		—				291,429
Deferred compensation		—			519		(d)		—				519
Asset retirement obligations		66,973			—				(2,757	)	(i)		64,216
Liabilities subject to compromise		1,281,096			(1,281,096	)	(d)		—				—
Commitments and contingencies
Stockholders’ (deficit) equity:
Predecessor common stock		14			(14	)	(g)		—				—
Predecessor additional paid in capital		425,425			(425,425	)	(g)		—				—
Successor common stock		—			450		(g)		—				450
Successor additional paid in capital		—			948,613		(g)		—				948,613
(Accumulated deficit) retained earnings		(1,437,528	)		795,844		(h)		641,684		(j)		—
Total stockholders' (deficit) equity		(1,012,089	)		1,319,468				641,684				949,063
Total liabilities and stockholders' equity (deficit)	$	886,643		$	(133,458	)		$	638,927			$	1,392,112

Cash proceeds from rights offering	$	50,031
Cash proceeds from New Term Loan		150,000
Cash proceeds from New Revolver		120,000
Fees paid to lender for New Term Loan		(750	)
Fees paid to lender for New Revolver		(1,125	)
Payment in full to extinguish Prior Credit Facility		(444,440	)
Payment of accrued interest on Prior Credit Facility		(2,095	)
Payment of previously accrued creditor-related professional fees		(6,954	)
Net cash used	$	(135,333	)

Fees paid to lender for New Term Loan	$	750
Fees paid to lender for New Revolver		1,125
Professional fees related to debt issuance costs on the New Credit Facility		535
Total issuance costs on New Credit Facility	$	2,410

Senior Notes including interest	$	1,267,410
Accounts payable and accrued liabilities		6,687
Accrued payroll and benefits payable		3,949
Revenue distribution payable		3,050
Total liabilities subject to compromise		1,281,096
Amounts settled in cash, reinstated or otherwise reserved at emergence		(10,089	)
Fair value of equity issued in settlement of Senior Notes and certain general unsecured creditors		(898,914	)
Gain on settlement of liabilities subject to compromise	$	372,093

Reclassification from current to noncurrent, based on scheduled repayment, of debt no longer in default	$	(22,612	)
Establishment of New Term Loan - current portion		1,183
Payment in full to extinguish Prior Credit Facility		(444,440	)
Write-off unamortized issuance costs associated with Prior Credit Facility		1,687
	$	(464,182	)

Origination of the New Term Loan, net of current portion	$	148,817
Origination of the New Revolver		120,000
Reclassification from current to noncurrent, based on scheduled repayment, of debt no longer in default		22,612
	$	291,429

Cancellation of predecessor equity - par value	$	(14	)
Cancellation of predecessor equity - paid in capital		(425,425	)
Issuance of successor common stock in settlement of claims		898,914
Issuance of successor common stock under rights offering		50,031
Issuance of warrants		118
Net impact to common stock-par and additional paid in capital	$	523,624

Total payments remaining for 2017	$	375
Total payments for 2018		1,500
Total payments for 2019		3,750
Total payments for 2020		6,750
Total mandatory payments	$	12,375

Non-cash expense for write-off of debt issuance costs on Senior Notes	$	17,756
Non-cash expense for write-off of debt discount costs on Senior Notes		4,014
Non-cash gain for write-off of debt premium on Senior Notes		(4,800	)
Total	$	16,970

Period and type of contract	Volume BBtu		Weighted average fixed price per MMBtu
2017
Swaps		2,250	$	3.33
2018
Swaps		5,861	$	3.03
2019
Swaps		3,322	$	2.86

Liability for asset retirement obligations as of December 31, 2016 (Predecessor)	$	72,137
Liabilities incurred in current period		535
Liabilities settled and disposed in current period		(869	)
Revisions in estimated cash flows		181
Accretion expense		1,249
Liability for asset retirement obligations as of March 21, 2017 (Predecessor)	$	73,233
Fair value fresh-start adjustment	$	(2,757	)
Liability for asset retirement obligations as of March 21, 2017 (Successor)	$	70,476
Liabilities incurred in current period		2,038
Liabilities settled and disposed in current period		(6,649	)
Revisions in estimated cash flows		708
Accretion expense		2,152
Liability for asset retirement obligations as of September 30, 2017 (Successor)	$	68,725
Less current portion included in accounts payable and accrued liabilities		8,111
Asset retirement obligations, long-term	$	60,614

	Time Vested							Performance Vested
	Weighted average grant date fair value		Restricted shares			Vest date fair value		Weighted average grant date fair value		Restricted shares
	($ per share)							($ per share)
Unvested and outstanding at January 1, 2017 - Predecessor	$	790.91		6,667				$	277.33		21,475
Granted	$	—		—				$	—		—
Vested	$	812.91		(2,602	)	$	—	$	—		—
Forfeited	$	785.70		(468	)			$	195.75		(986	)
Cancelled	$	775.66		(3,597	)			$	281.26		(20,489	)
Unvested and outstanding at March 21, 2017 - Predecessor	$	—		—				$	—		—

	Successor			Predecessor
	Period from March 22, 2017 through September 30, 2017			Period from January 1, 2017 through March 21, 2017			Nine months ended September 30, 2016
Stock-based compensation cost (credit)	$	3,577		$	194		$	(6,220	)
Less: stock-based compensation cost capitalized		(801	)		(39	)		965
Stock-based compensation expense (credit)	$	2,776		$	155		$	(5,255	)
Payments for stock-based compensation	$	—		$	—		$	49


ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS