Chaparral Energy Inc., Oklahoma City, Okla., has entered into an exclusive oil & gas Concession Agreement with the Osage Minerals Council to lease and potentially develop oil & gas rights (excluding coalbed methane rights) on 138,000 acres in Osage County, Oklahoma. This agreement increases Chaparral's acreage position in the expanding Northern Oklahoma Horizontal Mississippi Play to approximately 244,000 acres.

The recent concession, named the Wildhorse Concession Agreement, provides Chaparral the exclusive right to lease and potentially develop oil & gas rights (excluding coalbed methane rights) in the Concession Area for 3 years, terminating September, 2014. Chaparral paid a $1.5 million Concession Fee to obtain these rights.

The concession agreement further provides for a 20% royalty payment to the Osage Nation and a drilling commitment by Chaparral to drill a minimum number of wells in each year of the Concession Term, for a total of 61 wells over the 3 year period.

At the end of the Concession Term, Chaparral will have an exclusive right to negotiate a new Concession Agreement with the Osage Minerals Council. Chaparral will also have the right to lease any remaining unleased acreage at that time, which would in effect extend any unleased acreage in the concession another two years.

The actual Concession Agreement covers 217,000 acres. This includes 138,000 acres currently available, 77,500 incremental acres currently held by others under existing oil & gas leases which will become available to Chaparral at the expiration of the existing leases, and an additional 1500 acres currently under lease to Chaparral.

Mark A. Fischer, Chaparral's CEO, states "We are excited about the continuing developments in the Northern Oklahoma Mississippi Play, specifically as it moves east of the Nemaha Ridge where producing wells have a higher concentration of oil as a percentage of total production. This agreement more than doubles the size of our acreage holdings and provides us with a very cost effective way of expanding our position into this new and exciting play."

After considering the Concession, Chaparral now holds, or has the rights to acquire, approximately 26,000 acres in the western portion of the play, with the remaining 218,000 acres in the eastern portion. On the eastern side of the play, the Mississippi formation is found between 2,800 and 3,500 feet, which is shallower than on the western side of the play where depths range between 4500 to 6500 feet. Lateral length of wells in the eastern area are expected to be in the 3,500 ft range. Drilling activity in the eastern portion, which is defined as east of the Nemaha Ridge, has been increasing and results to date have been encouraging. Operators are reporting average initial production rates of 200 - 500 BOE/d, with approximately 80% oil, and total well costs between $2.5 million - $3 million. Chaparral is currently completing its fourth horizontal well and has participated in one outside operated well on the Western side of the play in Woods/Alfalfa Counties, and is currently drilling its third well on the eastern side of the play.