Item 1.01 Entry Into a Material Definitive Agreement.
Credit Agreement
On December 21, 2017, Chaparral Energy, Inc. (the “
Company
”) entered into a Tenth Restated Credit Agreement (the “
Credit Agreement
”) with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (collectively, the “
Lenders
”), which amended, restated and supersedes the Company’s existing Ninth Restated Credit Agreement. The Credit Agreement has a scheduled maturity date of December 21, 2022.
The Credit Agreement provides for a $400,000,000 reserve-based revolving credit facility. The Company’s initial borrowing base under the Credit Agreement has been set at $285,000,000 with available borrowings thereunder of up to $285,000,000 until the first borrowing base redetermination in May 2018. Interest on the revolving loans under the Credit Agreement (the “
Loans
”) is calculated using London Interbank Offering Rate (“
LIBOR
”) or the base rate, at the election of the Company, plus, in each case, an applicable margin. The applicable margin for the Loans is determined based on borrowing base utilization and ranges from 2.50% to 3.50% per annum for LIBOR loans and 1.5% to 2.5% per annum for base rate loans. The borrowing base under the Credit Agreement is redetermined semi-annually, in May and November, by the Lenders, in accordance with the Lenders’ customary practices for oil and gas loans.
The Credit Agreement is secured by a lien on substantially all of the Company’s and its subsidiaries’ tangible and intangible assets, including their oil and gas properties. The Loans are guaranteed by the Company’s direct and indirect subsidiaries.
The Credit Agreement contains customary representations, warranties, covenants and events of default, including a change of control event of default and limitations on incurrence of liens, new lines of business, mergers, transactions with affiliates and restrictive agreements. The Credit Agreement also requires maintenance of certain financial covenants, including (a) a ratio of Total Debt to EBITDAX (each as defined in the Credit Agreement) of not more than 4.00 to 1.00, and (b) a ratio of consolidated current assets to consolidated current liabilities of not less than 1.00 to 1.00. During the continuance of an event of default, the Lenders may take a number of actions, including declaring the entire amount then outstanding under the Credit Agreement due and payable.
Certain of the Lenders that are a party to the Credit Agreement have in the past performed, and may in the future from time to time perform, investment banking, financial advisory, lending or commercial banking services for the Company and its subsidiaries, for which they have received, and may in the future receive, customary compensation and reimbursement of expenses.
This description of the Credit Agreement is qualified in its entirety by reference to the full text of the Credit Agreement, which is attached hereto as Exhibit 10.1 and incorporated by reference herein.
Asset Purchase Agreements
On December 22, 2017, the Company, through its wholly-owned subsidiary Chaparral Energy, L.L.C. (“
Buyer
”), entered into a Purchase and Sale Agreement with a private seller (“
Seller I
”) to acquire oil and gas leases, interests, properties and related assets in Kingfisher County, Oklahoma (“
Acquisition I
”) for total consideration of approximately $34.7 million in cash, subject to normal and customary closing adjustments (“
Purchase Agreement I
”). Buyer has made a payment of approximately $3.5 million as an earnest money deposit, which Seller I may receive as liquidated damages, in lieu of seeking specific performance, if Acquisition I fails to close in certain circumstances. If Acquisition I closes, the earnest money deposit and interest thereon will be credited to Seller I as partial payment of the total consideration.
In a related transaction, on December 22, 2017, the Company, through Buyer, entered into a Purchase and Sale Agreement with another private seller (“
Seller II
”) to acquire oil and gas leases, interests, properties and related assets in Kingfisher County, Oklahoma (“
Acquisition II
” and, together with Acquisition I, the “
Acquisitions
”) for total consideration of approximately $23.8 million in cash, subject to normal and customary closing adjustments (“
Purchase Agreement II
” and, together with Purchase Agreement I, the “
Purchase Agreements
”). Buyer has made a payment of approximately $2.4 million as an earnest money deposit which Seller II may receive as liquidated damages, in lieu of seeking specific performance, if Acquisition II fails to close in certain circumstances. If Acquisition II closes, the earnest money deposit and interest thereon will be credited to Seller II as partial payment of the total consideration.
The Company intends to finance the Acquisitions with borrowings under its credit facility. The effective date of each of the Purchase Agreements is as of 7:00 a.m. (local time at the site of assets) on January 1, 2018. Each of the Purchase Agreements
contains customary representations and warranties by the parties, and the parties have agreed to customary indemnities and termination provisions.
The consummation of the transactions contemplated by each Purchase Agreement is subject to the satisfaction of customary closing conditions, including, among other things, the material performance or compliance by the parties of their respective obligations, agreements and covenants as set forth in the applicable Purchase Agreement and the accuracy, in all material respects, of their respective representations and warranties as set forth in such Purchase Agreement. The transactions contemplated by the Purchase Agreements are expected to close on or before January 5, 2018, subject to satisfaction of the closing conditions. Acquisition I is not contingent upon Acquisition II and Acquisition II is not contingent upon Acquisition I.
The description of each of Purchase Agreement I and Purchase Agreement II is qualified in its entirety by reference to the full text of such agreement, which is attached hereto as Exhibit 2.1 and Exhibit 2.2, respectively, and incorporated by reference herein. The Purchase Agreements are filed herewith to provide investors with information regarding their terms. It is not intended to provide any other factual information about Seller I, Seller II, Buyer or the Company. In particular, the assertions embodied in the representations, warranties and covenants contained in the Purchase Agreements are qualified by information in confidential disclosure schedules provided by Seller I, Seller II and Buyer to each other in connection with the signing of the Purchase Agreements. These disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the Purchase Agreements. Moreover, certain representations, warranties and covenants in the Purchase Agreements were used for the purpose of allocating risk between the parties rather than establishing matters of fact, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, investors should not rely on the representations, warranties and covenants in the Purchase Agreements as characterizations of the actual statements of fact about Seller I, Seller II, Buyer or the Company. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Purchase Agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosures.