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): February 27, 2012
CHAPARRAL ENERGY, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | | 333-134748 | | 73-1590941 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
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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:
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| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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| Item 2.02. | Results of Operations and Financial Condition |
On February 24, 2012, Chaparral Energy, Inc. (referred to herein as “we”, “us,” and “our”) issued a press release announcing year-end 2011 reserves and 2012 guidance, and reaffirming 2011 production and EBITDA guidance. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
On February 27, 2012, we presented the slide show, attached hereto as Exhibit 99.2 and incorporated herein by reference, at the JP Morgan High Yield Conference in Miami, Florida.
Note Regarding Non-GAAP Financial Measures
The press release and the investor presentation attached as exhibits hereto contain 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
Management uses adjusted EBITDA as a supplemental financial measurement to evaluate our 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 our overall operating performance. In addition, adjusted EBITDA is generally consistent with the Consolidated EBITDAX calculation that is used in the covenant ratio required under our senior secured revolving credit facility. We consider compliance with this covenant to be material. Adjusted EBITDA is used as a supplemental financial measurement in the evaluation of our business and should not be considered as an alternative to net income, as an indicator of our 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.
We define adjusted EBITDA as net income (loss), adjusted to exclude (1) interest and 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) stock-based compensation expense (gain), (8) gain or loss on disposed assets, and (9) impairment charges and other significant, unusual charges.
Through March 31, 2010, our calculation of adjusted EBITDA excluded any cash proceeds received from the monetization of derivatives with a scheduled maturity date more than 12 months following the date of such monetization, in accordance with the terms of our prior credit facility. In July 2010, we amended the definition of Consolidated EBITDAX in our senior secured revolving credit facility to (1) permit cash proceeds received from the monetization of derivatives to be included in the calculation of Consolidated EBITDAX, to the extent that such monetizations, in any period between scheduled redeterminations, do not exceed 5% of the borrowing base then in effect, and (2) permit the exclusion from the calculation of Consolidated EBITDAX of up to $4.5 million in one-time cash expenses associated with our financing transactions that were incurred and paid during the second quarter of 2010. As a result, beginning with the second quarter of 2010, we have changed our calculation of adjusted EBITDA to include cash proceeds received from the monetization of derivatives with a scheduled maturity date more than 12 months following the date of such monetization, to the extent permitted by our senior secured revolving credit facility. However, we have not changed our calculation of adjusted EBITDA to exclude approximately $2.3 million of one-time cash expenses associated with our financing transactions. As a result of the permitted exclusion of these expenses, our Consolidated EBITDAX as calculated for covenant compliance purposes is higher than our adjusted EBITDA for the year ended December 31, 2010.
In April 2011, we amended the definition of Consolidated EBITDAX in our senior secured revolving credit facility to permit the exclusion of our reasonable and customary fees and expenses related to the refinancing of our 8.5% Senior Notes due 2015 from the calculation of Consolidated EBITDAX.
The following table provides a reconciliation of our net income (loss) to adjusted EBITDA for the specified periods:
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| | | Year ended December 31, |
| (dollars in thousands) | | 2008 | | 2009 | | 2010 |
| Net income (loss) | | $ | (54,750 | ) | | $ | (144,318 | ) | | $ | 33,713 |
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| Interest expense | | 86,038 |
| | 90,102 |
| | 81,370 |
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| Income tax expense (benefit) | | (34,386 | ) | | (85,936 | ) | | 23,803 |
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| Depreciation, depletion, and amortization | | 101,973 |
| | 104,734 |
| | 109,503 |
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| Unrealized (gain) loss on ineffective portion of hedges and reclassification adjustments | | (12,549 | ) | | (21,752 | ) | | 23,889 |
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| Non-cash change in fair value of non-hedge derivative instruments | | (89,554 | ) | | 149,106 |
| | (2,523 | ) |
| Proceeds from monetization of derivatives with a scheduled maturity date more than 12 months from the monetization date included in EBITDA | | — |
| | — |
| | 9,418 |
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| Proceeds from monetization of derivatives with a scheduled maturity date more than 12 months from the monetization date excluded from EBITDA | | — |
| | (102,352 | ) | | — |
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| Interest income | | (409 | ) | | (283 | ) | | (144 | ) |
| Stock-based compensation expense (gain) | | (306 | ) | | 1,145 |
| | 2,600 |
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| Gain on disposed assets | | (177 | ) | | (10,463 | ) | | (184 | ) |
| Loss on impairment of oil and natural gas properties | | 281,393 |
| | 240,790 |
| | — |
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| Loss on extinguishment of debt | | — |
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| | 2,241 |
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| Other non-cash charges | | 2,900 |
| | 2,928 |
| | 4,150 |
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| Adjusted EBITDA | | $ | 280,173 |
| | $ | 223,701 |
| | $ | 287,836 |
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PV-10 value
The PV-10 value is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable financial measure computed using generally accepted accounting principles (“GAAP”). 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 the specified dates before deducting future income taxes, discounted at 10%. We believe 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 our proved reserves prior to taking into account future corporate income taxes, and it is a useful measure of evaluating the relative monetary significance of our oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies. We use this measure when assessing the potential return on investment related to our oil and natural gas properties. However, PV-10 value is not a substitute for the standardized measure of discounted future net cash flows. Our PV-10 value measure and the standardized measure of discounted future net cash flows do not purport to present the fair value of our oil and natural gas reserves.
The following table provides a reconciliation of PV-10 value to the standardized measure of discounted future net cash flows for the periods shown:
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| | | As of December 31, |
| (dollars in thousands) | | 2008 | | 2009 | | 2010 |
| PV-10 value | | $ | 932,692 |
| | $ | 1,323,541 |
| | $ | 1,770,061 |
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| Present value of future income tax discounted at 10% | | (177,679 | ) | | (352,177 | ) | | (534,035 | ) |
| Standardized measure of discounted future net cash flows | | $ | 755,013 |
| | $ | 971,364 |
| | $ | 1,236,026 |
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| Item 9.01. | Financial Statements and Exhibits |
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Exhibit Number | | Description |
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| 99.1 | | Press Release Dated February 24, 2012 |
| 99.2 | | 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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| February 27, 2012 | | | | CHAPARRAL ENERGY, INC. |
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| | | | | By: | | /s/ JOSEPH O. EVANS |
| | | | | | | Name: | | Joseph O. Evans |
| | | | | | | Title: | | Chief Financial Officer and Executive Vice President |
Exhibit Index
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Exhibit Number | | Description |
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| 99.1 | | Press Release Dated February 24, 2012 |
| 99.2 | | Investor Presentation |
