CHAPARRAL RESOURCES INC company history: the story so far

History

Chaparral held half of Kazakhstan's Karakuduk Field, survived a lender default and delisting threat, and was bought out by majority owner LUKOIL for $5.80 a share in 2006.

2001-2002: Delisting and the Shell default

Chaparral's main asset was a 50% stake in KKM, the operator of the Karakuduk Field in Kazakhstan. By May 2001 the field had 24 productive wells, and KKM reported a record 8,700 barrels delivered into the pipeline on May 1.

The company's finances were under strain, though. In May 2001 Nasdaq warned that Chaparral's stock could be delisted from the SmallCap Market. It said the company had converted its 8% convertible notes into 11,690,259 shares and issued 1,612,903 more shares without stockholder approval, and had held no annual meeting for fiscal 1999. Chaparral planned to appeal. The filing warned that delisting would be a default on its Shell Capital loan, and that the Karakuduk investment could be lost if the default was not waived.

That risk became real. In January 2002 Shell Capital sent a second default notice, demanded immediate repayment of $37,289,628, and began legal proceedings in the UK and Guernsey. The stock was by then trading on the OTC Bulletin Board. Chaparral also signed a non-binding letter of intent on a possible combination with Burren Energy Plc. The filings do not say how either matter ended, and the record is quiet until 2006.

2006: Taken private by LUKOIL

In March 2006 Chaparral agreed a merger with LUKOIL Overseas Holding, which indirectly owned about 60% of its stock. Minority shareholders would receive $5.80 per share in cash, about $88.646 million in total. In May the company filed its proxy statement, noting the price was about 9% above the March 10 price of $5.30. A special committee and the board recommended a yes vote, and dissenting holders had appraisal rights under Delaware law.

Stockholders approved the deal on September 29, 2006, with 26,829,123 of 38,209,502 eligible shares voting in favour. The merger took effect that day, and Chaparral deregistered its securities. As of October 6, 2006, Chaparral was a private company, wholly owned by Caspian Investments Resources Ltd., itself indirectly owned by LUKOIL Overseas. Non-LUKOIL holders of 15,283,801 shares were entitled to $5.80 in cash, except those who properly exercised appraisal rights. The filings do not report the outcome of any appraisal claims.

Written from the 6 story beats below (2001 to 6 Oct 2006), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2006

6 Oct
The final amendment to the going-private statement reports the LUKOIL merger is complete. Stockholders approved it on September 29, 2006 (26,829,123 of 38,209,502 eligible shares voted in favour) and the merger took effect that day. Non-LUKOIL holders are entitled to $5.80 cash per share (about $88.646 million for 15,283,801 shares), except for LUKOIL-held shares, cancelled treasury shares and shares of holders who properly exercised appraisal rights. Caspian Investments Resources Ltd., indirectly wholly owned by LUKOIL Overseas, is now Chaparral's sole stockholder. This resolves the open vote and merger thread, and a Form 15 was filed the same day, consistent with the earlier deregistration.
business combination
29 Sept
CHAPARRAL RESOURCES INC deregistered its securities, ending its obligation to file reports with the SEC.
listing compliance notice
1 May
Chaparral filed a preliminary proxy statement for the special meeting on the LUKOIL merger. Non-LUKOIL shares would be converted into $5.80 cash, about 9% above the March 10 price of $5.30. LUKOIL's 60% stake is enough to approve it, a special committee and the board recommend a vote in favour, and dissenters have Delaware appraisal rights. The company would cease to be public and become an indirect wholly owned LUKOIL subsidiary. The deal is not yet approved or completed, so the equity outcome remains open.
business combination
14 Mar
Chaparral signed a merger agreement with LUKOIL Overseas Holding, which indirectly owns about 60% of its stock. Minority shareholders would receive $5.80 per share in cash, about $88.646 million in total, subject to a stockholder vote expected in May 2006 and regulatory approvals. It also announced preliminary 2005 results and a proved reserves update, but the figures are in exhibits not shown here.
material agreement

2002

24 Jan
Shell Capital sent a second default notice and demanded immediate repayment of $37,289,628 under the loans, and started legal proceedings in the UK and Guernsey. The filing says remedies could include taking ownership of Chaparral's Karakuduk Field investment. This continues the Shell loan problem flagged after the Nasdaq delisting warning; the stock now trades on the OTC Bulletin Board. Chaparral also signed a non-binding letter of intent on a possible combination with Burren Energy Plc, conditional on resolving the Shell agreements, a definitive agreement and board and shareholder approvals, with no assurance it will happen.
business combination

2001

4 May
Chaparral said Nasdaq told it that its stock is subject to delisting from the SmallCap Market. The stated reasons are that it converted its 8% convertible notes into 11,690,259 shares (Sept 21, 2000) and issued 1,612,903 shares (Oct 30, 2000) without stockholder approval, and held no annual meeting for fiscal 1999. It will appeal at a hearing and the stock keeps trading meanwhile. The filing says delisting would be a default on the Shell Capital loan, and that the Karakuduk Field investment may be lost if the default is not waived. It also reports operating figures for KKM, the 50%-owned Karakuduk operator: a record 8,700 barrels delivered into the pipeline on May 1, about 197,000 barrels of gross April sales, and 24 productive wells.
drilling progress report