Midcontinent operator Chaparral Energy Inc. plans to accelerate development of its Merge prospects in Oklahoma this year, as production surged in the Sooner Trend of the Anadarko Basin mostly in Canadian and Kingfisher counties, aka the STACK.

The Oklahoma City-based independent also plans to drop one of four rigs in 2Q2019 and spend “significantly less” on acquisitions this year. Other plans include defining optimal well spacing across Garfield County.

CEO Earl Reynolds said the company “remains committed to low-cost operations, as is evident in our cost per lateral drilling foot, efficient frac designs and systematic development approach. This focus will continue to drive our efforts as we move toward partial and full section development, with additional spacing tests throughout the first half of 2019 across Canadian and Kingfisher counties.”

During an earnings call Thursday, Reynolds hinted that the company could drop another rig if commodity prices soured. “Our primary goal, just to be crystal clear, is to take this company to a cash-flow-neutral position,” he said. “It’s an 18-to-24-month window before we get there, but that’s really our primary objective.

“Remember, we will be flexible accordingly depending upon commodity prices. Right now, our plans are to run three rigs from the second quarter through the end of the year. If something were to change and we saw something we didn’t like for whatever reason in the commodity, we could flex that down if need be.”

Management reaffirmed plans to spend $275-300 million on capital expenditures (capex) in 2019, including $228-248 million on drilling and completion (D&C) costs in the STACK. By comparison, it spent $341 million on total capex in 2018, including $311 million on STACK D&C costs. About 60% of operated D&C money is to be spent in Canadian County, with Garfield and Kingfisher counties each receiving a 20% share. The company also plans to complete eight wells remaining in its drilling joint venture (JV) with Bayou City Energy.

Chaparral also reiterated production guidance of 25,000-27,000 boe/d for 2019, including 21,000-23,000 boe/d from the STACK. Production of 20,500-21,500 boe/d is expected in 1Q2019, including STACK production of 15,500-16,500 boe/d. The 1Q2019 production is expected to be impacted by the timing of first sales associated with spacing tests and remaining JV wells.

Only about 10% of the net wells from this year’s program are expected to record first sales in 1Q2019. An 11-well Merge spacing test in Canadian County is scheduled to come online during 2Q2019.

During 4Q2018, Chaparral brought 13 gross operated STACK wells into production, including two JV wells. For the full-year 2018, the company brought 48 gross operated STACK wells online with 20 in Garfield County, 18 in Canadian County and 10 in Kingfisher County. The full-year total included 19 JV wells.

Chaparral reported 21,700 boe/d of production in 4Q2018, up 3.3% from the year-ago quarter. STACK production grew nearly 60% quarter/quarter to 16,600 boe/d. Total full-year production declined about 111% to 20,500 boe/d in 2018, but STACK production increased 52% to 14,500 boe/d.

Production shifted from oil in 2017 to natural gas and natural gas liquids (NGL) in 2018, with oil sliding from 54% to 36%. Gas grew to 39% of production, up from 29%, while NGLs increased to 25% from 17%.

Chaparral reported net income of $79 million ($1.73/share) for 4Q2018, and net income of $33.4 million (73 cents) for the full-year 2018. Chaparral had a net loss of $19.1 million for the period of 2017 that preceded its emergence from bankruptcy in March 2017, and a net loss of $118.9 million (minus $2.64/share) for the remainder of 2017.