Chaparral Energy Acquires Calumet Oil in a $510 Million Cash Deal
Chaparral Energy has entered into an agreement to acquire Calumet Oil Company and certain affiliates for approximately $510 million in cash. Calumet owns properties principally located in Oklahoma and Texas, areas which are complementary to Chaparral's existing core areas of operations. Calumet operates the single largest oilfield in the State of Oklahoma, the North Burbank Unit, with cumulative oil recovery to date in excess of 315 million barrels of oil (Mmbo). Calumet's current working interest in the Unit is approximately 99%. The transaction is expected to close in the fourth quarter of 2006.
Mark Fischer, Chaparral's Chief Executive Officer, commented, "This acquisition is an excellent fit for Chaparral both geographically and operationally, and comes to us at what we believe is a very attractive price. Calumet's current average net daily production is approximately 28 million cubic feet equivalent (Mmcfe), which should increase Chaparral's current average net daily production to a projected 115 Mmcfe.
"Its two 'prize' properties, the North Burbank Unit and the Fox Deese Sand Unit, will allow Chaparral to take its enhanced oil recovery ("EOR") program and drilling program to the next level," added Fischer. "The North Burbank Unit, the single largest oilfield in the State of Oklahoma with cumulative oil recovery in excess of 315 Mmbo, is in the early phases of an EOR polymer flood which was proven up by Phillips Petroleum through a pilot program in the mid 1980's before being shutdown because of low oil price. We plan to expand the EOR program to include CO2 injection, return up to 400 wells to production, and perform substantial horizontal infill drilling in the tighter portion of the Bartlesville Reservoir. The Fox Deese Sand Unit will be infield drilled down to a five-acre pattern and offers the same low-risk opportunity by the drilling of over 100 wells with the potential of encountering four reservoirs in each well."
Chaparral believes that internally estimated proved reserves in the acquisition are in excess of 309 Bcfe and that proved developed producing reserves are approximately 182 Bcfe, or 59%. Calumet's proved reserves are long-lived, have low production decline rates (the proved developed producing base is projected to decline at approximately 6% per year) and are approximately 93% oil.
A preliminary allocation of Chaparral's acquisition cost of the 309 Bcfe of internally estimated proved reserves will be approximately $1.57 per mcfe. Chaparral currently estimates future drilling and development costs relating to these proved reserves will be approximately $184 million.
As part of the transaction, Chaparral expects to acquire Calumet's hedging arrangements, which currently include hedge swaps of 75,000 barrels of oil per month at $66.10 per barrel during the fourth quarter of 2006, 75,000 barrels of oil per month at $63.00 per barrel during 2007 and 30,000 barrels per month at $68.10 during 2008.
Chaparral intends to finance the acquisition through an increase in its existing line of credit up to approximately $750 million and from the $102 million in proceeds from Chaparral's Common Stock Purchase Agreement with Chesapeake Energy Corporation entered into on September 1, 2006. Chaparral has executed a commitment letter with JPMorgan Chase Bank, N.A. relating to the increase in its existing line of credit subject to customary conditions including final diligence relating to the Calumet acquisition.
Chaparral Energy, Inc. is an independent oil and natural gas production and exploitation company, headquartered in Oklahoma City, Oklahoma. Since its inception in 1988, the company has increased reserves and production primarily by acquiring and enhancing properties in its core areas of the Mid-Continent and the Permian Basin. Beginning in 2000, Chaparral expanded its geographic focus to include East Texas, North Texas, the Gulf Coast and the Rocky Mountains and also increased the percentage of capital expenditures allocated to developmental drilling.
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