Chaparral Energy Begins CO2 Injection at Enhanced Oil Recovery Project in Historic North Burbank Oil Field

Company Views Environmentally Friendly Oil Extraction Technique as Key to Long-Term Growth

OKLAHOMA CITY--(BUSINESS WIRE)--Chaparral Energy Inc., an independent oil and natural gas production and exploration company based in Oklahoma City, started injecting CO₂ into the North Burbank CO₂ Enhanced Oil Recovery (EOR) Project on June 6, 2013. The state-of-the-art project involved the installation of a CO₂ gathering facility at a fertilizer plant in Coffeyville, Kansas, the laying of an 8-inch, 68-mile CO₂ pipeline and the construction of field infrastructure facilities for the injection of CO₂ into the North Burbank Unit (NBU). The project is a key element in the Company's growing CO₂ EOR program and serves to solidify its position as the third largest CO₂ EOR producer in the U.S. based on the number of projects underway.

The largest of ten active CO₂ EOR projects at Chaparral, the NBU represents capital investment to date of nearly $250 million. The Company expects total estimated capital expenditure will eventually exceed $1.4 billion over the projected 30-year lifespan and expects to recover an additional 88 million barrels of oil from the historic NBU in Osage County, Oklahoma, which has already produced in excess of 319 million barrels since its discovery in the 1920s. The NBU is the single largest producing unit in the State of Oklahoma, covering over 23,000 acres.

The pipeline began operation earlier in June and has the capacity to move up to 60 million cubic feet of captured CO₂ daily. A 23,500 horsepower compressor station in Coffeyville, Kansas, captures the CO₂ and then pumps the CO₂ through a 68-mile pipeline to the NBU where it is injected underground into the reservoir. This process uses CO₂ to force previously trapped residual oil reserves to a production wellbore for extraction and will allow additional recovery of approximately 10 to 15 percent of the original oil in place.

This type of process enables producers to increase the ultimate recovery of oil from reservoirs to between 30 and 60 percent of a field’s total oil in place, according to U.S. Department of Energy (DOE) figures. Approximately 120 EOR projects in the U.S. currently account for more than 350,000 barrels of oil per day, or five percent, of total domestic crude production. Since 1986, 1.5 billion barrels of oil have been produced using the CO₂ EOR process and currently there are over 1.0 billion barrels of oil reserves booked as proven reserves associated with CO₂ EOR projects, according to DOE estimates. In the Mid-Continent region, primarily Oklahoma, there are an additional 10.6 billion barrels of oil that are technically recoverable via CO₂ EOR.

Chaparral Chairman, CEO and President Mark Fischer said that he sees long-term, sustainable growth for the Company through its expanding CO₂ EOR program. “U.S. producers have already extracted much of our easily recoverable domestic oil reserves from conventional fields,” Fischer noted. “That’s why EOR techniques, especially those using CO₂, are so important. When you consider that the volume of oil we can recover by applying CO₂ EOR techniques in older fields in the U.S. is in excess of 119 billion barrels, you start to recognize the vastness of the opportunity before us. Over the next 20-25 years, there is no doubt that EOR will play an even more important role in U.S. domestic production. At Chaparral, we intend to build on the expertise we have gained over the years in this area to be the leader in the Mid-Continent region.”

Fischer continued, “Primary recovery through pressure depletion typically extracts about 15 percent of a field’s total oil in place, while secondary recovery operations, which is waterflooding, recovers an additional 15 percent of the oil in place. Therefore, when most fields are deemed no longer economically feasible, 70 percent of the original oil in place remains in the ground. EOR using CO₂ is an effective, environmentally sound method for extending the life of oil fields such as the legendary North Burbank Field in Oklahoma and can allow recovery of an additional 10-15% of the original oil in place. We anticipate a strong return on our investment in the CO₂ EOR project serving the Burbank Unit and believe that it will be a pivotal part of our growing asset portfolio in the future.”

Chaparral currently operates 386 miles of active pipeline to deliver CO₂ to its various fields and has an existing CO₂ supply of approximately 90 million cubic feet per day.

CO₂ EOR is the fastest growing form of EOR in the U.S. Such projects are considered environmentally responsible since they greatly reduce CO₂ emissions into the atmosphere. Chaparral estimates 290 billion cubic feet of CO₂ will be injected into the NBU oil reservoir that otherwise would have been vented to the atmosphere. Other advantages of EOR projects include reduced risk compared to conventional technology projects and a production stream consisting of a period of inclining and level production over a period of years which is then followed by slow stable production decline that facilitate long-term cash flow. DOE estimates predict that advancements in CO₂ EOR techniques, such as injecting larger amounts of CO₂ into a reservoir, could produce more than 60 billion barrels of oil at today’s pricing.

Marland Oil, later to become Conoco, first discovered oil in the North Burbank Field in 1920. During the decade-long boom, Phillips Petroleum Company leased land in Burbank from the Osage Indians and built a refinery in the area. Jack Graves, a geologist, was the first to identify additional recoverable oil reserves in the field while working for Phillips in the 1950s. Graves would go on to found Calumet Oil and acquire the majority stake in the field before selling to Chaparral in 2006.

About Chaparral Energy

Founded in 1988, Chaparral Energy, Inc. is a growing independent oil and natural gas production and exploitation company, headquartered in Oklahoma City. The Company is one of the largest energy producers in the State of Oklahoma. The long-term growth of the Company will come from its development of CO₂ EOR operations, with near-term growth coming from drilling activities in repeatable resource plays. The Company holds a significant acreage position in the liquids-rich Northern Oklahoma Mississippi Play, along with several other developing plays in the Mid-Continent and Permian Basins.