UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 2010
CHAPARRAL ENERGY, INC.
(Exact name of registrant as specified in its charter)
| | | | |
| Delaware | | 333-134748 | | 73-1590941 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
| | |
701 Cedar Lake Boulevard Oklahoma City, OK | | 73114 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (405) 478-8770
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure. |
On March 1, 2010, Chaparral Energy, Inc. (“Chaparral”) presented the slide show, attached hereto as Exhibit 99.1 and incorporated herein by reference, at the JP Morgan High Yield Conference in Miami, Florida.
Note Regarding Non-GAAP Financial Measures
The investor presentation attached as an exhibit hereto contains certain references to adjusted EBITDA and PV-10 value, which are non-GAAP financial measures, as defined under Regulation G of the rules and regulations of the SEC.
ADJUSTED EBITDA
Chaparral defines adjusted EBITDA as net income (loss), adjusted to exclude (1) interest expense, including other financing costs, net of capitalized interest, (2) income taxes, (3) depreciation, depletion and amortization, (4) unrealized (gain) loss on ineffective portion of hedges and reclassification adjustments, (5) non-cash change in fair value of non-hedge derivative instruments, (6) interest income, (7) non-cash deferred compensation expense (gain), (8) gain or loss on disposed assets, and (9) impairment charges and other significant, unusual non-cash charges. Any cash proceeds received from the monetization of derivatives with a scheduled maturity date more than 12 months following the date of such monetization are excluded from the calculation of adjusted EBITDA.
Management uses adjusted EBITDA as a supplemental financial measurement to evaluate Chaparral’s operational trends. Items excluded generally represent non-cash adjustments, the timing and amount of which cannot be reasonably estimated and are not considered by management when measuring Chaparral’s overall operating performance. In addition, adjusted EBITDA is the financial measurement that is used in covenant calculations required under Chaparral’s existing credit facility. Chaparral considers compliance with the liquidity and debt covenants included in these agreements to be material. Adjusted EBITDA is used as a supplemental financial measurement in the evaluation of Chaparral’s business and should not be considered as an alternative to net income, as an indicator of Chaparral’s operating performance, as an alternative to cash flows from operating activities, or as a measure of liquidity. Adjusted EBITDA is not defined under GAAP and, accordingly, it may not be a comparable measurement to those used by other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the specified periods.
| | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2007 | | | 2008 | | | 2009E | |
| | | (dollars in thousands) | |
Net income (loss) | | $ | (4,793 | ) | | $ | (54,750 | ) | | (144,318 | ) |
Interest expense | | | 87,656 | | | | 86,038 | | | 90,102 | |
Income tax expense (benefit) | | | (2,745 | ) | | | (34,386 | ) | | (85,936 | ) |
Depreciation, depletion, and amortization | | | 85,842 | | | | 101,973 | | | 104,734 | |
Unrealized (gain) loss on ineffective portion of hedges and reclassification adjustments | | | 8,343 | | | | (12,549 | ) | | (21,752 | ) |
Non-cash change in fair value of non-hedge derivative instruments | | | 23,031 | | | | (89,554 | ) | | 46,754 | |
Interest income | | | (755 | ) | | | (409 | ) | | (283 | ) |
Non-cash deferred compensation expense (gain) | | | 831 | | | | (306 | ) | | 1,145 | |
Gain on disposed assets | | | (712 | ) | | | (177 | ) | | (10,463 | ) |
Loss on impairment of oil and gas properties | | | — | | | | 281,393 | | | 240,790 | |
Loss on impairment of ethanol plant | | | — | | | | 2,900 | | | — | |
Loss on litigation settlement | | | — | | | | — | | | 2,928 | |
| | | | | | | | | | | |
Adjusted EBITDA | | $ | 196,698 | | | $ | 280,173 | | | 223,701 | |
| | | | | | | | | | | |
PV-10 VALUE
PV-10 value is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable GAAP financial measure. PV-10 value is a computation of the standardized measure of discounted future net cash flows on a pre-tax basis. PV-10 value is equal to the standardized measure of discounted future net cash flows at a specified date before deducting future income taxes, discounted at 10%. Chaparral believes that the presentation of the PV-10 value is relevant and useful to investors because it presents the discounted future net cash flows attributable to its proved reserves prior to taking into account corporate future income taxes, and it is a useful measure of evaluating the relative monetary significance of its oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of Chaparral’s reserves to other companies. Chaparral uses this measure when assessing the potential return on investment related to its oil and natural gas properties. However, PV-10 value is not a substitute for the standardized measure of discounted future net cash flows. Chaparral’s PV-10 value measure and the standardized measure of discounted future net cash flows do not purport to present the fair value of its oil and natural gas reserves as of the specified dates.
The following table provides a reconciliation of the standardized measure of discounted future net cash flows to PV-10 value as of December 31, 2009 for Chaparral’s major areas of operation:
| | | | | | | | | |
| | | PV-10
Value | | Present value of
future income tax
discounted at 10% | | Standardized
measure of
discounted
future
net cash flow |
| | | (dollars in millions) |
Mid-Continent | | $ | 1,045.0 | | $ | 256.1 | | $ | 788.9 |
Permian Basin | | | 148.8 | | | 51.0 | | | 97.8 |
Gulf Coast | | | 57.3 | | | 18.6 | | | 38.7 |
Ark-La-Tex | | | 22.4 | | | 8.6 | | | 13.8 |
North Texas | | | 30.9 | | | 10.7 | | | 20.2 |
Rocky Mountains | | | 19.1 | | | 7.1 | | | 12.0 |
| | | | | | | | | |
Total | | $ | 1,323.5 | | $ | 352.1 | | $ | 971.4 |
| | | | | | | | | |
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits.
| | |
Exhibit Number | | Description |
| |
| 99.1 | | Investor Presentation |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| March 1, 2010 | | | | CHAPARRAL ENERGY, INC. |
| | | | |
| | | | | | By: | | /s/ JOSEPH O. EVANS |
| | | | | | Name: | | Joseph O. Evans |
| | | | | | Title: | | Chief Financial Officer and Executive Vice President |
Exhibit Index
| | |
Exhibit Number | | Description |
| |
| 99.1 | | Investor Presentation |
