NATCHEZ, Miss., Nov. 6, 2018 /PRNewswire/ -- Callon Petroleum
Company (NYSE: CPE) ("Callon" or the "Company") today reported
results of operations for the three and nine months ended
September 30, 2018.
Presentation slides accompanying this earnings release are
available on the Company's website at www.callon.com located
on the "Presentations" page within the Investors section of the
site.
Financial and operational highlights for the third quarter of
2018 and other recent data points include:
- Increased production to 34.9 MBOE/D (78% oil), an increase of
55% year-over-year
- Generated an operating margin of $41.22 per BOE, an increase of 27%
year-over-year
- Recent multi-well pads at WildHorse outperforming early time
type curve expectations by an average of 29%
- Second "mega-pad" placed on production in October and tracking
early time performance of first "mega-pad" that is outperforming
offset three-well pads by approximately 30%
- Extended preferred vendor agreement for completion services
providing price certainty for the next five quarters
- Initiated delivery of disposal volumes to Goodnight Midstream
saltwater disposal system within the Spur operating area,
complementing recently enhanced recycling and operated saltwater
disposal network
- Completed the previously announced acquisition of properties in
the Delaware Basin
"Callon continued to drive strong operational execution in the
third quarter as evidenced by sustained operating margins in excess
of 80% for a fifth consecutive quarter. I am extremely pleased with
our organization's ability to seamlessly integrate our recent
bolt-on acquisition in the Delaware Basin while continuing to drive
efficiencies across the entire Callon portfolio," commented
Joe Gatto, President and Chief
Executive Officer. He continued, "We have entered a phase of
sustained growth and visibility with the maturing of our business
model, characterized by increased efficiencies from larger scale
developments, strategic partnerships with leading service providers
and tactical development of multiple zones to preserve robust
returns in our inventory for the long run. As stated previously, we
expect to generate solid positive free cash flows at the field
level in the fourth quarter of 2018 as we target corporate level
free cash flow generation by the latter portion of 2019."
Operations Update
At September 30, 2018, we had 453 gross (348.2 net)
horizontal wells producing from eight established flow units in the
Permian Basin. Net daily production for the three months ended
September 30, 2018 grew 55% to 34.9 MBOE/D (78% oil) as
compared to the same period of 2017.
For the three months ended September 30, 2018, we drilled
19 gross (15.2 net) horizontal wells and placed a combined 18 gross
(13.8 net) horizontal wells on production targeting the Wolfcamp A,
Wolfcamp B, and Lower Spraberry intervals.
Midland Basin
During the third quarter, just over 70% of the net wells placed
on production were located in the Midland Basin, with all three of
our primary areas contributing new production during the quarter.
In our WildHorse area, the Wright and Gibson pads were placed on
production in late-July and mid-August and have exceeded early time
oil type curve expectations by roughly 20% and 38%,
respectively. At Monarch, our first "mega-pad", the Casselman
16 pad, oil production is outperforming offsetting, legacy pads by
approximately 30%. We recently placed our second "mega-pad" on
production in October, and these six wells produced at an average
rate of 183 Boepd per 1,000 lateral feet during the first 22 days
online.
Delaware Basin
In the Delaware Basin, wells
which have reached peak production during the third quarter
achieved an average peak IP30 of approximately 150 Boepd per 1,000
lateral feet with an average oil cut of 82%. Our upper and lower
Wolfcamp A pair test at the Rendezvous pad continues to perform
extremely well and has now eclipsed approximately 425,000 Boe
(combined) through the first 200 days of production. Also during
the quarter, the Effie Ponder 33-18 05H well, an upper Wolfcamp A
well that landed approximately 100 feet below offsetting 3rd Bone
Spring production, was completed by the previous operator and
brought on production in the River Tract portion of our newly
acquired acreage. The well has achieved an IP24 of 143 Boepd and
IP30 of 103 Boepd per 1,000 lateral feet (respectively) with an
average oil cut of 91%.
Regional Gas Plant Downtime
Beginning in late September, production from our WildHorse area
was disrupted due to a plant outage at a third party gas processing
facility in Martin County. We expect the plant to return to
full service by mid-December and have successfully managed to
reroute a portion of our base gas and natural gas liquids volumes
through other facilities in the interim. We forecast a net loss of
approximately 7,500 to 9,000 Mcfepd on average for the 4th quarter
due to this outage, but do not expect any impact to our oil
volumes.
Infrastructure and Operational Efficiency
We have continued to realize significant benefits from
infrastructure investments, most of which have recently been
focused on our Spur footprint in the Delaware Basin. The new recycling facilities
are online and we were able to recycle over 600,000 barrels of
water for use in our frac operations in Ward County during the
third quarter. Additionally, the new Goodnight Midstream water
disposal system is now operational and has begun servicing our core
Spur footprint. In the Midland Basin, the company was able to
utilize more than 900,000 barrels of recycled water for completion
operations in the Monarch area during the quarter. These
ongoing initiatives are expected to reduce the future needs for
water sourcing and disposal and will drive cost savings from both
reduced capital and lease operating expenses.
As we have transitioned to larger pad development concepts,
including our recent "mega-pads", our completion efficiency has
improved through the broader application of simultaneous
operations, which we expect will continue to increase in future
periods. Additionally, the Company recently extended its preferred
vendor agreement for completion services related to two dedicated
crews that will provide price certainty for well completion costs
through the 2019 calendar year.
Capital Expenditures
For the nine months ended September 30, 2018, we incurred
$418.2 million in cash operational
capital expenditures (including other items) including $149.5 million in the third quarter, which
represented a $14.0 million decrease
from the second quarter. Total capital expenditures, inclusive of
capitalized expenses, are detailed below on an accrual and cash
basis (in thousands):
|
|
Three Months Ended
September 30, 2018
|
|
|
Operational
|
|
Capitalized
|
|
Capitalized
|
|
Total
Capital
|
|
|
Capital
(a)
|
|
Interest
|
|
G&A
|
|
Expenditures
|
Cash basis
(b)
|
|
$
|
149,454
|
|
|
$
|
560
|
|
|
$
|
6,968
|
|
|
$
|
156,982
|
|
Timing adjustments
(c)
|
|
10,001
|
|
|
15,973
|
|
|
—
|
|
|
25,974
|
|
Non-cash
items
|
|
—
|
|
|
—
|
|
|
1,776
|
|
|
1,776
|
|
Accrual
(GAAP) basis
|
|
$
|
159,455
|
|
|
$
|
16,533
|
|
|
$
|
8,744
|
|
|
$
|
184,732
|
|
|
|
(a)
|
Includes seismic,
land and other items.
|
(b)
|
Cash basis is a
non-GAAP measure that we believe helps users of the financial
information reconcile amounts to the cash flow statement and to
account for timing related operational changes such as our
development pace and rig count.
|
(c)
|
Includes timing
adjustments related to cash disbursements in the current period for
capital expenditures incurred in the prior period.
|
Operating and
Financial Results
|
|
The following table
presents summary information for the periods indicated:
|
|
|
|
Three Months
Ended
|
|
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
Net
production
|
|
|
|
|
|
|
Oil
(MBbls)
|
|
2,521
|
|
|
1,995
|
|
|
1,591
|
|
Natural gas
(MMcf)
|
|
4,144
|
|
|
3,839
|
|
|
2,900
|
|
Total
(MBOE)
|
|
3,212
|
|
|
2,635
|
|
|
2,074
|
|
Average daily
production (BOE/d)
|
|
34,913
|
|
|
28,954
|
|
|
22,543
|
|
% oil
(BOE basis)
|
|
78
|
%
|
|
76
|
%
|
|
77
|
%
|
Oil and natural
gas revenues (in thousands)
|
|
|
|
|
|
|
Oil
revenue
|
|
$
|
142,601
|
|
|
$
|
122,613
|
|
|
$
|
73,349
|
|
Natural
gas revenue (a)
|
|
18,613
|
|
|
14,462
|
|
|
11,265
|
|
Total
revenue
|
|
161,214
|
|
|
137,075
|
|
|
84,614
|
|
Impact
of settled derivatives
|
|
(9,239)
|
|
|
(7,980)
|
|
|
(1,214)
|
|
Adjusted Total Revenue
(i)
|
|
$
|
151,975
|
|
|
$
|
129,095
|
|
|
$
|
83,400
|
|
Average realized
sales price (excluding impact of settled
derivatives)
|
|
|
|
|
|
|
Oil
(Bbl)
|
|
$
|
56.57
|
|
|
$
|
61.46
|
|
|
$
|
46.10
|
|
Natural
gas (Mcf)
|
|
4.49
|
|
|
3.77
|
|
|
3.88
|
|
Total
(BOE)
|
|
50.19
|
|
|
52.02
|
|
|
40.80
|
|
Average realized
sales price (including impact of settled
derivatives)
|
|
|
|
|
|
|
Oil
(Bbl)
|
|
$
|
52.87
|
|
|
$
|
57.38
|
|
|
$
|
45.24
|
|
Natural
gas (Mcf)
|
|
4.51
|
|
|
3.81
|
|
|
3.94
|
|
Total
(BOE)
|
|
47.31
|
|
|
48.99
|
|
|
40.21
|
|
Additional per BOE
data
|
|
|
|
|
|
|
Sales
price (b)
|
|
$
|
50.19
|
|
|
$
|
52.02
|
|
|
$
|
40.80
|
|
Lease operating
expense (c)
|
|
5.77
|
|
|
4.99
|
|
|
5.08
|
|
Gathering and treating
expense (a)
|
|
—
|
|
|
—
|
|
|
0.52
|
|
Production
taxes
|
|
3.20
|
|
|
2.86
|
|
|
2.62
|
|
Operating margin
|
|
$
|
41.22
|
|
|
$
|
44.17
|
|
|
$
|
32.58
|
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization
|
|
$
|
15.02
|
|
|
$
|
14.70
|
|
|
$
|
13.75
|
|
Adjusted
G&A (d)
|
|
|
|
|
|
|
Cash component
(e)
|
|
$
|
2.17
|
|
|
$
|
2.69
|
|
|
$
|
2.50
|
|
Non-cash
component
|
|
0.57
|
|
|
0.64
|
|
|
0.65
|
|
|
|
(a)
|
On January 1, 2018,
the Company adopted the revenue recognition accounting standard.
Consequently, natural gas gathering and treating expenses for the
three and nine months ended September 30, 2018 were accounted
for as a reduction to revenue.
|
(b)
|
Excludes the impact
of settled derivatives.
|
(c)
|
Excludes gathering
and treating expense.
|
(d)
|
Excludes certain
non-recurring expenses and non-cash valuation adjustments. Adjusted
G&A is a non-GAAP financial measure; see the reconciliation
provided within this press release for a reconciliation of G&A
expense on a GAAP basis to Adjusted G&A expense.
|
(e)
|
Excludes the
amortization of equity-settled, share-based incentive awards and
corporate depreciation and amortization.
|
Total Revenue. For the quarter ended
September 30, 2018, Callon reported total revenue of
$161.2 million and total revenue
including settled derivatives ("Adjusted Total Revenue," a non-GAAP
financial measure(i)) of $152.0
million, including the impact of an $9.2 million loss from the settlement of
derivative contracts. The table above reconciles Adjusted Total
Revenue to the related GAAP measure of the Company's revenue.
Average daily production for the quarter was 34.9 MBOE/d compared
to average daily production of 29.0 MBOE/d in the second quarter of
2018. Average realized prices, including and excluding the effects
of hedging, are detailed above.
Hedging impacts. For the quarter ended September 30,
2018, Callon recognized the following hedging-related items (in
thousands, except per unit data):
|
In
Thousands
|
|
Per
Unit
|
Oil
derivatives
|
|
|
|
Net loss on
settlements
|
$
|
(9,306)
|
|
|
$
|
(3.70)
|
|
Net loss on fair
value adjustments
|
(24,476)
|
|
|
|
Total
loss on oil derivatives
|
$
|
(33,782)
|
|
|
|
Natural gas
derivatives
|
|
|
|
Net gain on
settlements
|
$
|
67
|
|
|
$
|
0.02
|
|
Net loss on fair
value adjustments
|
(624)
|
|
|
|
Total
loss on natural gas derivatives
|
$
|
(557)
|
|
|
|
Total oil &
natural gas derivatives
|
|
|
|
Net loss on
settlements
|
$
|
(9,239)
|
|
|
$
|
(2.88)
|
|
Net loss on fair
value adjustments
|
(25,100)
|
|
|
|
Total
loss on total oil & natural gas derivatives
|
$
|
(34,339)
|
|
|
|
Lease Operating Expenses, including workover
("LOE"). LOE per BOE for the three months ended
September 30, 2018 was $5.77 per
BOE, compared to LOE of $4.99 per BOE
in the second quarter of 2018. The increase in this metric was
primarily related to an increase in costs from workover activity on
our properties.
Production Taxes, including ad valorem taxes. Production
taxes were $3.20 per BOE for the
three months ended September 30, 2018, representing
approximately 6.4% of total revenue before the impact of derivative
settlements.
Depreciation, Depletion and Amortization
("DD&A"). DD&A for the three months ended
September 30, 2018 was $15.02
per BOE compared to $14.70 per BOE in
the second quarter of 2018. The increase on a per unit basis was
primarily attributable to greater increases in our depreciable
asset base and assumed future development costs related to
undeveloped proved reserves as compared to the estimated total
proved reserve base.
General and Administrative ("G&A"). G&A,
excluding certain non-cash incentive share-based compensation
valuation adjustments, ("Adjusted G&A", a non-GAAP
measure(i)) was $8.8
million, or $2.74 per BOE, for
the three months ended September 30, 2018 compared to
$8.8 million, or $3.33 per BOE, for the second quarter of 2018.
The cash component of Adjusted G&A was $7.0 million, or $2.17 per BOE, for the three months ended
September 30, 2018 compared to $7.1
million, or $2.69 per BOE, for
the second quarter of 2018.
For the three months ended September 30, 2018, G&A and
Adjusted G&A, which excludes the change in fair value of
liability share-based awards, amortization of equity-settled
share-based incentive awards and corporate depreciation and
amortization, are calculated as follows (in thousands):
|
Three Months
Ended
September 30, 2018
|
Total G&A
expense
|
$
|
9,721
|
|
Plus:
Change in the fair value of liability share-based awards
(non-cash)
|
(921)
|
|
Adjusted G&A –
total
|
8,800
|
|
Less:
Restricted stock share-based compensation (non-cash)
|
(1,730)
|
|
Less:
Corporate depreciation & amortization (non-cash)
|
(102)
|
|
Adjusted G&A –
cash component
|
$
|
6,968
|
|
Income tax expense. Callon provides for income taxes at a
statutory rate of 21% adjusted for permanent differences
expected to be realized, which primarily relate to non-deductible
executive compensation expenses, restricted stock windfalls and
shortfalls, and state income taxes. We recorded an income tax
expense of $1.5 million for the three
months ended September 30, 2018 which relates to deferred
state franchise tax. At September 30, 2018 we had a valuation
allowance of $30.3 million. Adjusted
Income per fully diluted common share, a non-GAAP financial
measure(i), adjusts our income (loss) available to
common stockholders to reflect our theoretical tax provision of
$8.3 million (or $0.04 per diluted share) for the quarter as if
the valuation allowance did not exist.
2018 Guidance
The Company adopted the Revenue from Contracts with
Customers accounting standard on January
1, 2018. Starting with the first quarter of 2018, certain
natural gas gathering and treating expenses were accounted for as a
reduction to revenue. Based upon current levels of operational
efficiency, the impact of a temporary gas plant outage on commodity
mix, and non-operated activity, the Company is updating full year
2018 guidance as follows:
|
|
Third
Quarter
|
|
Year to
Date
|
|
Full
Year
|
|
|
2018
Actual
|
|
2018
Actual
|
|
2018
Guidance
|
Total production
(MBOE/d)
|
|
34.9
|
|
30.2
|
|
32.0 -
33.0
|
% oil
|
|
78%
|
|
77%
|
|
77% - 78%
|
Income statement
expenses (per BOE)
|
|
|
|
|
|
|
LOE, including
workovers
|
|
$5.77
|
|
$5.43
|
|
$5.00 -
$6.00
|
Production taxes,
including ad valorem (% unhedged revenue)
|
|
6%
|
|
6%
|
|
7%
|
Adjusted
G&A: cash component (a)
|
|
$2.17
|
|
$2.50
|
|
$1.75 -
$2.50
|
Adjusted
G&A: non-cash component (b)
|
|
$0.57
|
|
$0.58
|
|
$0.50 -
$1.00
|
Cash
interest expense (c)
|
|
$0.00
|
|
$0.00
|
|
$0.00
|
Effective income tax
rate
|
|
22%
|
|
22%
|
|
22%
|
Capital
expenditures ($MM, accrual basis)
|
|
|
|
|
|
|
Operational
(d)
|
|
$159
|
|
$442
|
|
$560
|
Capitalized
expenses
|
|
$25
|
|
$59
|
|
$75 - $85
|
Net operated
horizontal wells placed on production
|
|
14
|
|
37
|
|
50 - 52
|
|
|
(a)
|
Excludes stock-based
compensation and corporate depreciation and amortization. Adjusted
G&A is a non-GAAP financial measure; see the reconciliation
provided within this press release for a reconciliation of G&A
expense on a GAAP basis to Adjusted G&A expense.
|
(b)
|
Excludes certain
non-recurring expenses and non-cash valuation adjustments. Adjusted
G&A is a non-GAAP financial measure; see the reconciliation
provided within this press release for a reconciliation of G&A
expense on a GAAP basis to Adjusted G&A expense.
|
(c)
|
All cash interest
expense anticipated to be capitalized.
|
(d)
|
Includes seismic,
land and other items. Excludes capitalized expenses.
|
Hedge Portfolio
Summary
|
|
The following tables
summarize our open derivative positions for the periods
indicated:
|
|
|
For the
Remainder
|
|
For the Full
Year
|
|
For the Full
Year
|
Oil contracts
(WTI)
|
of
2018
|
|
of
2019
|
|
of
2020
|
Swap
contracts
|
|
|
|
|
|
Total volume
(Bbls)
|
552,000
|
|
|
—
|
|
|
—
|
|
Weighted average
price per Bbl
|
$
|
52.07
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collar contracts
(two-way collars)
|
|
|
|
|
|
Total volume
(Bbls)
|
92,000
|
|
|
1,095,000
|
|
|
—
|
|
Weighted average
price per Bbl
|
|
|
|
|
|
Ceiling (short
call)
|
$
|
60.50
|
|
|
$
|
80.00
|
|
|
$
|
—
|
|
Floor (long
put)
|
$
|
50.00
|
|
|
$
|
65.00
|
|
|
$
|
—
|
|
Collar contracts
combined with short puts (three-way collars)
|
|
|
|
|
|
Total volume
(Bbls)
|
874,000
|
|
|
3,469,000
|
|
|
—
|
|
Weighted average
price per Bbl
|
|
|
|
|
|
Ceiling (short call
option)
|
$
|
60.86
|
|
|
$
|
63.71
|
|
|
$
|
—
|
|
Floor (long put
option)
|
$
|
48.95
|
|
|
$
|
53.95
|
|
|
$
|
—
|
|
Short put
option
|
$
|
39.21
|
|
|
$
|
43.95
|
|
|
$
|
—
|
|
Puts
|
|
|
|
|
|
Total volume
(Bbls)
|
276,000
|
|
|
1,825,000
|
|
|
—
|
|
Weighted
average price per Bbl
|
$
|
65.00
|
|
|
$
|
65.00
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Oil contracts
(Midland basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total volume
(Bbls)
|
1,518,000
|
|
|
4,746,500
|
|
|
4,024,000
|
|
Weighted average
price per Bbl
|
$
|
(5.30)
|
|
|
$
|
(4.72)
|
|
|
$
|
(1.51)
|
|
|
|
|
|
|
|
Natural gas
contracts (Henry Hub)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (MMBtu)
|
1,380,000
|
|
|
—
|
|
|
—
|
|
Weighted
average price per MMBtu
|
$
|
2.91
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collar contracts
(two-way collars)
|
|
|
|
|
|
Total
volume (MMBtu)
|
552,000
|
|
|
3,727,500
|
|
|
—
|
|
Weighted
average price per MMBtu
|
|
|
|
|
|
Ceiling (short
call)
|
$
|
3.19
|
|
|
$
|
3.13
|
|
|
$
|
—
|
|
Floor (long
put)
|
$
|
2.75
|
|
|
$
|
2.72
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Natural gas
contracts (Waha basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (MMBtu)
|
552,000
|
|
|
9,490,000
|
|
|
2,196,000
|
|
Weighted
average price per MMBtu
|
$
|
(1.14)
|
|
|
$
|
(1.25)
|
|
|
$
|
(1.14)
|
|
Income Available to Common Shareholders. The Company
reported net income available to common shareholders of
$36.1 million for the three months
ended September 30, 2018 and Adjusted Income available to
common shareholders of $48.3 million,
or $0.21 per fully diluted share.
Adjusted Income per fully diluted common share, a non-GAAP
financial measure(i), adjusts our income available to
common stockholders to reflect our theoretical tax provision for
the quarter as if the valuation allowance did not exist. The
following tables reconcile to the related GAAP measure the
Company's income available to common stockholders to Adjusted
Income and the Company's net income to Adjusted
EBITDA(i), a non-GAAP financial measure, (in
thousands):
|
Three Months
Ended
|
Adjusted Income
per fully diluted common share:
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
Income available to
common stockholders
|
$
|
36,108
|
|
|
$
|
48,650
|
|
|
$
|
15,257
|
|
Net loss
on derivatives, net of settlements
|
25,100
|
|
|
8,572
|
|
|
12,947
|
|
Change
in the fair value of share-based awards
|
879
|
|
|
(463)
|
|
|
732
|
|
Tax effect on
adjustments above
|
(5,456)
|
|
|
(1,703)
|
|
|
(4,788)
|
|
Change in valuation
allowance
|
(8,323)
|
|
|
(10,562)
|
|
|
(6,064)
|
|
Adjusted Income
(i)
|
$
|
48,308
|
|
|
$
|
44,494
|
|
|
$
|
18,084
|
|
Adjusted Income per
fully diluted common share (i)
|
$
|
0.21
|
|
|
$
|
0.21
|
|
|
$
|
0.09
|
|
|
|
|
Three Months
Ended
|
Adjusted
EBITDA:
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
Net income
|
$
|
37,931
|
|
|
$
|
50,474
|
|
|
$
|
17,081
|
|
Net loss
on derivatives, net of settlements
|
25,100
|
|
|
8,572
|
|
|
12,947
|
|
Non-cash
stock-based compensation expense
|
2,587
|
|
|
1,164
|
|
|
1,952
|
|
Acquisition expense
|
1,435
|
|
|
1,767
|
|
|
205
|
|
Income
tax expense
|
1,487
|
|
|
481
|
|
|
237
|
|
Interest
expense
|
711
|
|
|
594
|
|
|
444
|
|
Depreciation, depletion and amortization
|
48,977
|
|
|
39,387
|
|
|
29,132
|
|
Accretion expense
|
202
|
|
|
206
|
|
|
131
|
|
Adjusted EBITDA
(i)
|
$
|
118,430
|
|
|
$
|
102,645
|
|
|
$
|
62,129
|
|
Discretionary Cash Flow. Discretionary cash flow, a
non-GAAP measure(i), for the three months ended
September 30, 2018 was $116.9
million and is reconciled to operating cash flow in the
following table (in thousands):
|
Three Months
Ended
|
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
$
|
37,931
|
|
|
$
|
50,474
|
|
|
$
|
17,081
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation, depletion and amortization
|
48,977
|
|
|
39,387
|
|
|
29,132
|
|
Accretion expense
|
202
|
|
|
206
|
|
|
131
|
|
Amortization of non-cash debt related items
|
708
|
|
|
588
|
|
|
441
|
|
Deferred
income tax expense
|
1,487
|
|
|
481
|
|
|
237
|
|
Net loss
on derivatives, net of settlements
|
25,100
|
|
|
8,572
|
|
|
12,947
|
|
(Gain)
loss on sale of other property and equipment
|
(102)
|
|
|
22
|
|
|
—
|
|
Non-cash
expense related to equity share-based awards
|
1,708
|
|
|
1,627
|
|
|
1,219
|
|
Change
in the fair value of liability share-based awards
|
879
|
|
|
(463)
|
|
|
732
|
|
Discretionary cash
flow (i)
|
$
|
116,890
|
|
|
$
|
100,894
|
|
|
$
|
61,920
|
|
Changes
in working capital
|
(347)
|
|
|
8,978
|
|
|
(7,777)
|
|
Payments
to settle asset retirement obligations
|
(507)
|
|
|
(207)
|
|
|
(250)
|
|
Payments
to settle vested liability share-based awards
|
—
|
|
|
(1,901)
|
|
|
—
|
|
Net cash provided by
operating activities
|
$
|
116,036
|
|
|
$
|
107,764
|
|
|
$
|
53,893
|
|
Callon Petroleum
Company
Consolidated
Balance Sheets
(in thousands,
except par and per share values and share data)
|
|
|
|
September 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
Unaudited
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
12,129
|
|
|
$
|
27,995
|
|
Accounts
receivable
|
|
168,753
|
|
|
114,320
|
|
Fair value of
derivatives
|
|
4,289
|
|
|
406
|
|
Other current
assets
|
|
3,804
|
|
|
2,139
|
|
Total current
assets
|
|
188,975
|
|
|
144,860
|
|
Oil and natural gas
properties, full cost accounting method:
|
|
|
|
|
Evaluated
properties
|
|
4,305,189
|
|
|
3,429,570
|
|
Less accumulated
depreciation, depletion, amortization and impairment
|
|
(2,208,066)
|
|
|
(2,084,095)
|
|
Net evaluated oil and
natural gas properties
|
|
2,097,123
|
|
|
1,345,475
|
|
Unevaluated
properties
|
|
1,385,529
|
|
|
1,168,016
|
|
Total oil and natural
gas properties
|
|
3,482,652
|
|
|
2,513,491
|
|
Other property and
equipment, net
|
|
21,738
|
|
|
20,361
|
|
Restricted
investments
|
|
3,413
|
|
|
3,372
|
|
Deferred tax
asset
|
|
—
|
|
|
52
|
|
Deferred financing
costs
|
|
6,406
|
|
|
4,863
|
|
Acquisition
deposit
|
|
—
|
|
|
900
|
|
Other assets,
net
|
|
5,552
|
|
|
5,397
|
|
Total
assets
|
|
$
|
3,708,736
|
|
|
$
|
2,693,296
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
251,754
|
|
|
$
|
162,878
|
|
Accrued
interest
|
|
27,325
|
|
|
9,235
|
|
Cash-settleable
restricted stock unit awards
|
|
2,422
|
|
|
4,621
|
|
Asset retirement
obligations
|
|
4,464
|
|
|
1,295
|
|
Fair value of
derivatives
|
|
47,167
|
|
|
27,744
|
|
Total current
liabilities
|
|
333,132
|
|
|
205,773
|
|
Senior secured
revolving credit facility
|
|
65,000
|
|
|
25,000
|
|
6.125% senior
unsecured notes due 2024, net of unamortized deferred financing
costs
|
|
595,729
|
|
|
595,196
|
|
6.375% senior
unsecured notes due 2026, net of unamortized deferred financing
costs
|
|
392,799
|
|
|
—
|
|
Asset retirement
obligations
|
|
5,428
|
|
|
4,725
|
|
Cash-settleable
restricted stock unit awards
|
|
2,818
|
|
|
3,490
|
|
Deferred tax
liability
|
|
3,917
|
|
|
1,457
|
|
Fair value of
derivatives
|
|
15,440
|
|
|
1,284
|
|
Other long-term
liabilities
|
|
6,165
|
|
|
405
|
|
Total
liabilities
|
|
1,420,428
|
|
|
837,330
|
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Preferred stock,
series A cumulative, $0.01 par value and $50.00 liquidation
preference, 2,500,000 shares authorized; 1,458,948 shares
outstanding
|
|
15
|
|
|
15
|
|
Common stock, $0.01
par value, 300,000,000 shares authorized; 227,567,936 and
201,836,172 shares outstanding, respectively
|
|
2,276
|
|
|
2,018
|
|
Capital in excess of
par value
|
|
2,474,748
|
|
|
2,181,359
|
|
Accumulated
deficit
|
|
(188,731)
|
|
|
(327,426)
|
|
Total stockholders'
equity
|
|
2,288,308
|
|
|
1,855,966
|
|
Total liabilities and
stockholders' equity
|
|
$
|
3,708,736
|
|
|
$
|
2,693,296
|
|
Callon Petroleum
Company
Consolidated
Statements of Operations
(Unaudited; in
thousands, except per share data)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
revenues:
|
|
|
|
|
|
|
|
Oil sales
|
$
|
142,601
|
|
|
$
|
73,349
|
|
|
$
|
380,500
|
|
|
$
|
218,242
|
|
Natural gas
sales
|
18,613
|
|
|
11,265
|
|
|
45,229
|
|
|
30,019
|
|
Total operating
revenues
|
161,214
|
|
|
84,614
|
|
|
425,729
|
|
|
248,261
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Lease operating
expenses
|
18,525
|
|
|
11,624
|
|
|
44,705
|
|
|
36,708
|
|
Production
taxes
|
10,263
|
|
|
5,444
|
|
|
26,265
|
|
|
16,168
|
|
Depreciation,
depletion and amortization
|
48,257
|
|
|
28,525
|
|
|
122,407
|
|
|
79,172
|
|
General and
administrative
|
9,721
|
|
|
7,259
|
|
|
26,779
|
|
|
18,894
|
|
Settled share-based
awards
|
—
|
|
|
—
|
|
|
—
|
|
|
6,351
|
|
Accretion
expense
|
202
|
|
|
131
|
|
|
626
|
|
|
523
|
|
Acquisition
expense
|
1,435
|
|
|
205
|
|
|
3,750
|
|
|
3,027
|
|
Total operating
expenses
|
88,403
|
|
|
53,188
|
|
|
224,532
|
|
|
160,843
|
|
Income from
operations
|
72,811
|
|
|
31,426
|
|
|
201,197
|
|
|
87,418
|
|
Other (income)
expenses:
|
|
|
|
|
|
|
|
Interest expense, net
of capitalized amounts
|
711
|
|
|
444
|
|
|
1,765
|
|
|
1,698
|
|
(Gain) loss on
derivative contracts
|
34,339
|
|
|
14,162
|
|
|
55,374
|
|
|
(11,636)
|
|
Other
income
|
(1,657)
|
|
|
(498)
|
|
|
(2,571)
|
|
|
(1,270)
|
|
Total other (income)
expense
|
33,393
|
|
|
14,108
|
|
|
54,568
|
|
|
(11,208)
|
|
Income before income
taxes
|
39,418
|
|
|
17,318
|
|
|
146,629
|
|
|
98,626
|
|
Income tax
expense
|
1,487
|
|
|
237
|
|
|
2,463
|
|
|
1,026
|
|
Net income
|
37,931
|
|
|
17,081
|
|
|
144,166
|
|
|
97,600
|
|
Preferred stock
dividends
|
(1,823)
|
|
|
(1,824)
|
|
|
(5,471)
|
|
|
(5,471)
|
|
Income available to
common stockholders
|
$
|
36,108
|
|
|
$
|
15,257
|
|
|
$
|
138,695
|
|
|
$
|
92,129
|
|
Income per common
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.16
|
|
|
$
|
0.08
|
|
|
$
|
0.65
|
|
|
$
|
0.46
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.08
|
|
|
$
|
0.65
|
|
|
$
|
0.46
|
|
Shares used in
computing income per common share:
|
|
|
|
|
|
|
|
Basic
|
227,564
|
|
|
201,827
|
|
|
213,409
|
|
|
201,422
|
|
Diluted
|
228,140
|
|
|
202,337
|
|
|
214,079
|
|
|
201,995
|
|
Callon Petroleum
Company
Consolidated
Statements of Cash Flows
(Unaudited; in
thousands)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
37,931
|
|
|
$
|
17,081
|
|
|
$
|
144,166
|
|
|
$
|
97,600
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
48,977
|
|
|
29,132
|
|
|
124,430
|
|
|
80,829
|
|
Accretion
expense
|
202
|
|
|
131
|
|
|
626
|
|
|
523
|
|
Amortization of
non-cash debt related items
|
708
|
|
|
441
|
|
|
1,749
|
|
|
1,695
|
|
Deferred income tax
expense
|
1,487
|
|
|
237
|
|
|
2,463
|
|
|
1,026
|
|
Net (gain) loss on
derivatives, net of settlements
|
25,100
|
|
|
12,947
|
|
|
29,696
|
|
|
(15,608)
|
|
(Gain) loss on sale of
other property and equipment
|
(102)
|
|
|
—
|
|
|
(80)
|
|
|
62
|
|
Non-cash expense
related to equity share-based awards
|
1,708
|
|
|
1,219
|
|
|
4,466
|
|
|
7,014
|
|
Change in the fair
value of liability share-based awards
|
879
|
|
|
732
|
|
|
1,428
|
|
|
2,423
|
|
Payments to settle
asset retirement obligations
|
(507)
|
|
|
(250)
|
|
|
(1,080)
|
|
|
(1,831)
|
|
Changes in current
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(56,764)
|
|
|
(4,338)
|
|
|
(54,384)
|
|
|
(12,148)
|
|
Other current
assets
|
3,885
|
|
|
(38)
|
|
|
(1,665)
|
|
|
(336)
|
|
Current
liabilities
|
47,741
|
|
|
1,854
|
|
|
64,801
|
|
|
7,534
|
|
Other long-term
liabilities
|
5,500
|
|
|
1
|
|
|
5,787
|
|
|
121
|
|
Long-term
prepaid
|
—
|
|
|
(4,650)
|
|
|
—
|
|
|
(4,650)
|
|
Other assets,
net
|
(709)
|
|
|
(606)
|
|
|
(1,398)
|
|
|
(1,376)
|
|
Payments to settle
vested liability share-based awards
|
—
|
|
|
—
|
|
|
(4,990)
|
|
|
(13,173)
|
|
Net cash provided
by operating activities
|
116,036
|
|
|
53,893
|
|
|
316,015
|
|
|
149,705
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
(156,982)
|
|
|
(121,128)
|
|
|
(455,352)
|
|
|
(267,218)
|
|
Acquisitions
|
(550,592)
|
|
|
(8,015)
|
|
|
(595,984)
|
|
|
(714,504)
|
|
Acquisition
deposit
|
27,600
|
|
|
—
|
|
|
—
|
|
|
46,138
|
|
Proceeds from sale of
assets
|
5,249
|
|
|
—
|
|
|
8,326
|
|
|
—
|
|
Net cash used in
investing activities
|
(674,725)
|
|
|
(129,143)
|
|
|
(1,043,010)
|
|
|
(935,584)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Borrowings on senior
secured revolving credit facility
|
105,000
|
|
|
—
|
|
|
270,000
|
|
|
—
|
|
Payments on senior
secured revolving credit facility
|
(40,000)
|
|
|
—
|
|
|
(230,000)
|
|
|
—
|
|
Issuance of 6.125%
senior unsecured notes due 2024
|
—
|
|
|
—
|
|
|
—
|
|
|
200,000
|
|
Premium on the
issuance of 6.125% senior unsecured notes due 2024
|
—
|
|
|
—
|
|
|
—
|
|
|
8,250
|
|
Issuance of 6.375%
senior unsecured notes due 2026
|
—
|
|
|
—
|
|
|
400,000
|
|
|
—
|
|
Issuance of common
stock
|
7
|
|
|
—
|
|
|
288,364
|
|
|
—
|
|
Payment of preferred
stock dividends
|
(1,823)
|
|
|
(1,824)
|
|
|
(5,471)
|
|
|
(5,471)
|
|
Payment of deferred
financing costs
|
(1,296)
|
|
|
(401)
|
|
|
(9,960)
|
|
|
(7,166)
|
|
Tax withholdings
related to restricted stock units
|
(216)
|
|
|
(65)
|
|
|
(1,804)
|
|
|
(1,118)
|
|
Net cash provided
by financing activities
|
61,672
|
|
|
(2,290)
|
|
|
711,129
|
|
|
194,495
|
|
Net change in cash
and cash equivalents
|
(497,017)
|
|
|
(77,540)
|
|
|
(15,866)
|
|
|
(591,384)
|
|
Balance, beginning of
period
|
509,146
|
|
|
139,149
|
|
|
27,995
|
|
|
652,993
|
|
Balance, end of
period
|
$
|
12,129
|
|
|
$
|
61,609
|
|
|
$
|
12,129
|
|
|
$
|
61,609
|
|
Non-GAAP Financial Measures and Reconciliations
This news release refers to non-GAAP financial measures such as
"Discretionary Cash Flow," "Adjusted G&A," "Adjusted Income,"
"Adjusted EBITDA" and "Adjusted Total Revenue." These measures,
detailed below, are provided in addition to, and not as an
alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in
accordance with GAAP (including the notes), included in our SEC
filings and posted on our website.
- Callon believes that the non-GAAP measure of discretionary cash
flow is a comparable metric against other companies in the industry
and is a widely accepted financial indicator of an oil and natural
gas company's ability to generate cash for the use of internally
funding their capital development program and to service or incur
debt. Discretionary cash flow is defined by Callon as net cash
provided by operating activities before changes in working capital
and payments to settle asset retirement obligations and vested
liability share-based awards. Callon has included this information
because changes in operating assets and liabilities relate to the
timing of cash receipts and disbursements, which the company may
not control and the cash flow effect may not be reflected the
period in which the operating activities occurred. Discretionary
cash flow is not a measure of a company's financial performance
under GAAP and should not be considered as an alternative to net
cash provided by operating activities (as defined under GAAP), or
as a measure of liquidity, or as an alternative to net income.
- Adjusted general and administrative expense ("Adjusted
G&A") is a supplemental non-GAAP financial measure that
excludes certain non-recurring expenses and non-cash valuation
adjustments related to incentive compensation plans, as well as
non-cash corporate depreciation and amortization expense. Callon
believes that the non-GAAP measure of Adjusted G&A is useful to
investors because it provides readers with a meaningful measure of
our recurring G&A expense and provides for greater
comparability period-over-period. The table here within details all
adjustments to G&A on a GAAP basis to arrive at Adjusted
G&A.
- Callon believes that the non-GAAP measure of Adjusted Income
available to common shareholders ("Adjusted Income") and Adjusted
Income per diluted share are useful to investors because they
provide readers with a meaningful measure of our profitability
before recording certain items whose timing or amount cannot be
reasonably determined. These measures exclude the net of tax
effects of certain non-recurring items and non-cash valuation
adjustments, which are detailed in the reconciliation provided here
within.
- Callon calculates adjusted earnings before interest, income
taxes, depreciation, depletion and amortization ("Adjusted EBITDA")
as Adjusted Income plus interest expense, income tax expense
(benefit) and depreciation, depletion and amortization expense.
Adjusted EBITDA is not a measure of financial performance under
GAAP. Accordingly, it should not be considered as a substitute for
net income (loss), operating income (loss), cash flow provided by
operating activities or other income or cash flow data prepared in
accordance with GAAP. However, the Company believes that Adjusted
EBITDA provides additional information with respect to our
performance or ability to meet our future debt service, capital
expenditures and working capital requirements. Because Adjusted
EBITDA excludes some, but not all, items that affect net income
(loss) and may vary among companies, the Adjusted EBITDA presented
may not be comparable to similarly titled measures of other
companies.
- Callon believe that the non-GAAP measure of Adjusted Total
Revenue is useful to investors because it provides readers with a
revenue value more comparable to other companies who engage in
price risk management activities through the use of commodity
derivative instruments and reflects the results of derivative
settlements with expected cash flow impacts within total
revenues.
Earnings Call Information
The Company will host a conference call on Wednesday,
November 7, 2018, to discuss third quarter 2018 financial and
operating results.
Please join Callon Petroleum Company via the Internet for a
webcast of the conference call:
Date/Time:
|
Wednesday,
November 7, 2018, at 8:00 a.m. Central Time (9:00 a.m. Eastern
Time)
|
Webcast:
|
Select "IR Calendar"
under the "Investors" section of the website:
www.callon.com.
|
Presentation
Slides:
|
Select
"Presentations" under the "Investors" section of the website:
www.callon.com.
|
Alternatively, you may join by telephone using the following
numbers:
Toll Free:
|
1-888-317-6003
|
Canada Toll
Free:
|
1-866-284-3684
|
International:
|
1-412-317-6061
|
Access
code:
|
5488988
|
An archive of the conference call webcast will be available at
www.callon.com under the "Investors" section of the
website.
About Callon Petroleum Company
Callon Petroleum Company is an independent energy company
focused on the acquisition, development, exploration, and operation
of oil and natural gas properties in the Permian Basin in
West Texas.
This news release is posted on the Company's website at
www.callon.com and will be archived there for subsequent
review under the "News" link on the top of the homepage.
Cautionary Statement Regarding Forward Looking
Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements include all statements regarding wells anticipated to be
drilled and placed on production; future levels of drilling
activity and associated production and cash flow expectations; the
Company's 2018 guidance and capital expenditure forecast; estimated
reserve quantities and the present value thereof; and the
implementation of the Company's business plans and strategy, as
well as statements including the words "believe," "expect," "plans"
and words of similar meaning. These statements reflect the
Company's current views with respect to future events and financial
performance. No assurances can be given, however, that these events
will occur or that these projections will be achieved, and actual
results could differ materially from those projected as a result of
certain factors. Some of the factors which could affect our future
results and could cause results to differ materially from those
expressed in our forward-looking statements include the volatility
of oil and natural gas prices, ability to drill and complete wells,
operational, regulatory and environment risks, our ability to
finance our activities and other risks more fully discussed in our
filings with the Securities and Exchange Commission, including our
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q,
available on our website or the SEC's website
at www.sec.gov.
Contact Information
Mark Brewer
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
1-281-589-5200
i)
|
See "Non-GAAP
Financial Measures and Reconciliations" included within this
release for related disclosures and calculations
|
View original
content:http://www.prnewswire.com/news-releases/callon-petroleum-company-announces-third-quarter-2018-results-300744973.html
SOURCE Callon Petroleum Company