With its Stack strategy set, Chaparral Energy Inc. said Oct. 13 it will sell its North Burbank and Texas Panhandle EOR assets for $170 million.

The agreement includes contingency payments through December 2020. The amount of the potential payments depends on any production selling at a higher price than any hedged production.

A Chaparral news release did not identify the buyer, though regulatory documents filed with the U.S. Securities and Exchange Commission said the purchaser is Perdure Petroleum LLC, a Delaware company.

Online Delaware Secretary of State records show Perdure was formed Sept. 26 but offer few other details.

Chaparral, based in Oklahoma City, said its EOR assets produce about 5,700 barrels of oil equivalent per day (boe/d)—about 24% of the company’s average second-quarter production of about 23,900 boe/d.

At Hart Energy’s DUG Midcontinent conference in September, Matt Mower, Chaparral’s resource development manager, said the company received multiple bids for the EOR assets. The company is also marketing other noncore assets.

While the company expected growth in its EOR assets, Chaparral’s Stack assets have the potential for much greater growth, Mower said.

“We’ll be a pure play Stack player with approximately 110,000 net acres that includes a strong pipeline of economic opportunities that have solid returns in the current commodity environment,” Mower told conference attendees.

Chaparral CEO Earl Reynolds said the EOR asset sale is a “major milestone” in the company’s transition to a pure-play operator.

“Our teams will now be able to further focus our capital, activity and operational knowledge exclusively on accelerating development of our highly economic Stack inventory,” Reynolds said in a news release. “In addition, the proceeds from this transaction will allow us to further reduce our debt, increase liquidity and strengthen our already strong balance sheet.”

The sale also stands to materially lower the company’s operating cost structure, “which we view as critical in this volatile commodity price environment,” he said.

In 2017 Chaparral budgeted about $180 million capex, with 74% going to its Stack development. The company is largely targeting the Meramec and Osage intervals but will also invest in the Woodford and Oswego. As of September, the company was running two rigs in Oklahoma’s Canadian and Kingfisher counties.

At the end of September, Chaparral added up to $100 million in funding through a DrillCo with a Bayou City Energy subsidiary—at the time nearly doubling its budget in the play.

The agreement partners Chaparral with Bayou City’s BCE Roadrunner LLC to fund 100% of the drilling, completion and equipping costs for 30 Stack wells.

Chaparral, which said it received an $11.9 million performance deposit, expects to close its EOR asset sale in November.

Darren Barbee can be reached at dbarbee@hartenergy.com.

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