HOUSTON, May 4, 2022
/PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or
the "Company") today reported results of operations for the three
months ended March 31, 2022.
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.
First Quarter 2022 and Recent Highlights
- Delivered production of approximately 102.7 MBoe/d (63% oil) in
the first quarter of 2022
- Placed two co-development projects on production in the
Delaware South area with performance exceeding expectations
- Increased drilled, uncompleted well count to 42 wells at
quarter end
- Generated net cash provided by operating activities of
$281.3 million and adjusted free cash
flow of $183.3 million
- Reported net income of $39.7
million, or $0.64 per diluted
share, adjusted EBITDA of $393.7
million, and adjusted income of $212.7 million, or $3.43 per diluted share
- Reduced lease operating expense and gathering, processing &
transportation expense on a sequential basis by $6.2 million and $1.3
million, respectively
- Achieved an operating margin of $58.35 per Boe, including oil price realizations
of over 100% of WTI benchmark
- Reduced trailing twelve-month net debt-to-adjusted EBITDA to
1.97x, calculated pursuant to our credit facility, driven by strong
operating margins and absolute debt reduction during the
quarter
"Callon delivered another outstanding quarter as our results
reflected both strong Permian well performance and increased
overall capital and operating efficiency," said Joe Gatto, President and Chief Executive
Officer. "We took several steps this quarter to help set the stage
for future production growth and sustained free cash flow
generation, including the build-out of a DUC inventory on our newly
acquired Delaware South acreage to accommodate a more efficient
scaled development model going forward. Our initial projects in
this area implementing our scaled development model and completion
designs are performing above expectations, and future activity in
Delaware South will be an important contributor to our targeted 10%
oil production growth by the fourth quarter of this year.
"We are pleased with the rapid transformation of our balance
sheet that has been the product of disciplined capital allocation
and leading cash margins. Our leverage ratio was below 2.0x at the
end of the first quarter and we expect that metric to approach 1.0x
by year-end 2022 providing improved optionality for capital
allocation, including a program of capital returns that accompany
further debt reduction and re-investment in a deep inventory of
low-breakeven projects," concluded Mr. Gatto.
Callon Operations Update
At March 31, 2022, Callon had 1,344 gross (1,204.3 net)
wells producing from established flow units in the Permian and
Eagle Ford. Net daily production for the three months ended
March 31, 2022 was 102.7 MBoe/d (63% oil).
For the three months ended March 31, 2022, Callon drilled
31 gross (26.4 net) wells and placed a combined 17 gross (16.5 net)
wells on production. First quarter completion activity was solely
focused on the Delaware Basin.
Within the Delaware Basin, a
six-well co-development project targeting Wolfcamp A and B zones
was brought online in January and has exceeded production
expectations with average 30-day production rates of 1,312 barrels
of oil equivalent (Boe) per day and an oil cut of approximately
71%. Additionally, a five-well project, targeting the same two
zones, was brought online in February and also has strong
performance with an average 30-day production rates of 1,199 Boe/d
and an oil cut of approximately 70%. As part of a broader
optimization program for producing assets, Callon continues to
convert gas lift systems to electric submersible pumps, positively
impacting the production profile of the existing asset base across
the Delaware position.
In the Eagle Ford, Callon drilled 9 gross (7.2 net) wells during
the quarter but had no completion activity. During the quarter, the
Company expanded its electrification efforts in the area, advancing
sustainability initiatives and improving productivity. The project
has resulted in the removal of another 25 generators, providing a
cleaner and more reliable source of energy for field operations.
Altogether, these efforts are expected to save approximately
$1.5 million annually in lease
operating expenses. Additional field electrification efforts are
progressing and are expected to be completed by year-end.
Credit Facility Redetermination
On May 2, 2022, Callon completed
the spring redetermination for its senior secured credit facility.
The borrowing base and elected commitment were both reaffirmed at
$1.6 billion. As of March 31, 2022, the drawn balance on the facility
was $712.0 million and cash balances
were $4.2 million. The Company
intends to continue its application of organic free cash flow
towards repayment of debt balances related to the credit facility
and other debt instruments.
Second Quarter Activity Outlook and Guidance
Callon is currently running seven rigs, with four rigs in the
Delaware Basin, two rigs in the
Midland Basin and one rig in the Eagle Ford. One rig is expected to
be released in June. The Company plans to utilize two completion
crews for the second quarter, supporting new production across the
Midland, Delaware and Eagle Ford
positions.
For the second quarter, the Company expects to produce between
100 and 102 MBoe/d (64% oil) with between 32 and 35 gross wells (28
- 31 net) placed on production. In addition, Callon projects an
operational capital spending level of between $225 and $240
million on an accrual basis.
Capital Expenditures
For the three months ended March 31, 2022, Callon incurred
$157.4 million in operational capital
expenditures on an accrual basis. Total capital expenditures,
inclusive of capitalized expenses, are detailed below on an accrual
and cash basis:
|
|
Three Months Ended
March 31, 2022
|
|
|
Operational
|
|
Capitalized
|
|
Capitalized
|
|
Total
Capital
|
|
|
Capital
(a)
|
|
Interest
|
|
G&A
|
|
Expenditures
|
|
|
(In
thousands)
|
Cash basis
(b)
|
|
$174,563
|
|
$17,212
|
|
$9,703
|
|
$201,478
|
Timing adjustments
(c)
|
|
(8,883)
|
|
6,293
|
|
—
|
|
(2,590)
|
Non-cash
items
|
|
(8,302)
|
|
2,033
|
|
1,877
|
|
(4,392)
|
Accrual
basis
|
|
$157,378
|
|
$25,538
|
|
$11,580
|
|
$194,496
|
(a)
|
Includes drilling,
completions, facilities and equipment, but excludes land, seismic
and asset retirement costs.
|
(b)
|
Cash basis is presented
here to help users of financial information reconcile amounts from
the cash flow statement to the balance sheet by accounting for
timing related changes in working capital that align with 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.
|
Hedge Portfolio Summary
As of April 29, 2022, Callon had
the following outstanding oil, natural gas and NGL derivative
contracts:
|
For the
Remainder
|
|
For the Full
Year
|
Oil Contracts
(WTI)
|
2022
|
|
2023
|
Swap
Contracts
|
|
|
|
Total volume (Bbls)
|
3,676,000
|
(a)
|
905,000
|
Weighted average price per
Bbl
|
$62.77
|
(a)
|
$71.20
|
Collar
Contracts
|
|
|
|
Total volume (Bbls)
|
4,712,500
|
|
2,096,500
|
Weighted average price per
Bbl
|
|
|
|
Ceiling (short
call)
|
$68.77
|
|
$80.25
|
Floor (long put)
|
$57.83
|
|
$69.48
|
Short Call Swaption Contracts (b)
|
|
|
|
Total volume (Bbls)
|
—
|
|
1,825,000
|
Weighted average price per
Bbl
|
$—
|
|
$72.00
|
|
|
|
|
Oil Contracts
(Midland Basis Differential)
|
|
|
|
Swap
Contracts
|
|
|
|
Total volume (Bbls)
|
1,787,500
|
|
—
|
Weighted average price per
Bbl
|
$0.50
|
|
$—
|
|
|
|
|
Oil Contracts (Argus
Houston MEH)
|
|
|
|
Collar
Contracts
|
|
|
|
Total volume (Bbls)
|
227,500
|
|
—
|
Weighted average price per
Bbl
|
|
|
|
Ceiling (short
call)
|
$63.15
|
|
$—
|
Floor (long
put)
|
$51.25
|
|
$—
|
(a)
|
In March 2022, the
Company entered into certain offsetting WTI swaps at an average
price of $100.87/Bbl for the second quarter of 2022. These
offsetting swaps resulted in a recognized loss of approximately
$39.3 million which will be settled in the second quarter of 2022
as the applicable contracts settle.
|
(b)
|
The 2023 short call
swaption contracts have exercise expiration dates of December 30,
2022.
|
|
For the
Remainder
|
|
For the Full
Year
|
Natural Gas
Contracts (Henry Hub)
|
2022
|
|
2023
|
Swap
Contracts
|
|
|
|
Total volume
(MMBtu)
|
10,700,000
|
|
—
|
Weighted average price
per MMBtu
|
$3.62
|
|
$—
|
Collar
Contracts
|
|
|
|
Total volume
(MMBtu)
|
7,330,000
|
|
6,640,000
|
Weighted average price
per MMBtu
|
|
|
|
Ceiling (short call)
|
$5.49
|
|
$6.60
|
Floor (long put)
|
$3.99
|
|
$4.48
|
|
|
|
|
Natural Gas
Contracts (Waha Basis Differential)
|
|
|
|
Swap
Contracts
|
|
|
|
Total volume
(MMBtu)
|
1,220,000
|
|
6,080,000
|
Weighted average price
per MMBtu
|
($0.75)
|
|
($0.75)
|
Operating and Financial Results
The following table presents summary information for the periods
indicated:
|
|
Three Months
Ended
|
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
Total
production
|
|
|
|
|
|
|
Oil (MBbls)
|
|
|
|
|
|
|
Permian
|
|
4,469
|
|
4,727
|
|
3,088
|
Eagle Ford
|
|
1,377
|
|
1,839
|
|
1,593
|
Total oil
|
|
5,846
|
|
6,566
|
|
4,681
|
|
|
|
|
|
|
|
Natural gas
(MMcf)
|
|
|
|
|
|
|
Permian
|
|
8,590
|
|
9,183
|
|
6,208
|
Eagle Ford
|
|
1,525
|
|
2,090
|
|
1,627
|
Total natural gas
|
|
10,115
|
|
11,273
|
|
7,835
|
|
|
|
|
|
|
|
NGLs (MBbls)
|
|
|
|
|
|
|
Permian
|
|
1,455
|
|
1,549
|
|
1,075
|
Eagle Ford
|
|
252
|
|
344
|
|
224
|
Total NGLs
|
|
1,707
|
|
1,893
|
|
1,299
|
|
|
|
|
|
|
|
Total production
(MBoe)
|
|
|
|
|
|
|
Permian
|
|
7,356
|
|
7,806
|
|
5,198
|
Eagle Ford
|
|
1,883
|
|
2,532
|
|
2,088
|
Total barrels of oil
equivalent
|
|
9,239
|
|
10,338
|
|
7,286
|
|
|
|
|
|
|
|
Total daily
production (Boe/d)
|
|
|
|
|
|
|
Permian
|
|
81,733
|
|
84,848
|
|
57,758
|
Eagle Ford
|
|
20,922
|
|
27,517
|
|
23,199
|
Total barrels of oil
equivalent
|
|
102,655
|
|
112,365
|
|
80,957
|
Oil as % of total daily
production
|
|
63%
|
|
64%
|
|
64%
|
|
|
|
|
|
|
|
Average realized
sales price (excluding impact of settled
derivatives)
|
|
|
|
|
Oil (per
Bbl)
|
|
|
|
|
|
|
Permian
|
|
$94.52
|
|
$76.86
|
|
$56.66
|
Eagle Ford
|
|
95.02
|
|
77.84
|
|
57.80
|
Total oil
|
|
$94.64
|
|
$77.13
|
|
$57.05
|
|
|
|
|
|
|
|
Natural gas (per
Mcf)
|
|
|
|
|
|
|
Permian
|
|
$4.20
|
|
$4.81
|
|
$3.11
|
Eagle Ford
|
|
5.18
|
|
6.00
|
|
3.03
|
Total natural gas
|
|
$4.35
|
|
$5.03
|
|
$3.09
|
|
|
|
|
|
|
|
NGLs (per
Bbl)
|
|
|
|
|
|
|
Permian
|
|
$40.25
|
|
$37.50
|
|
$22.68
|
Eagle Ford
|
|
35.93
|
|
34.00
|
|
22.24
|
Total NGLs
|
|
$39.61
|
|
$36.86
|
|
$22.60
|
|
|
|
|
|
|
|
Average realized sales
price (per Boe)
|
|
|
|
|
|
|
Permian
|
|
$70.29
|
|
$59.64
|
|
$42.06
|
Eagle Ford
|
|
78.50
|
|
66.10
|
|
48.85
|
Total average realized sales
price
|
|
$71.97
|
|
$61.22
|
|
$44.01
|
|
|
|
|
|
|
|
Average realized
sales price (including impact of settled
derivatives)
|
|
|
|
|
Oil (per
Bbl)
|
|
$73.78
|
|
$57.05
|
|
$44.33
|
Natural gas (per
Mcf)
|
|
3.59
|
|
3.81
|
|
2.88
|
NGLs (per
Bbl)
|
|
37.34
|
|
34.56
|
|
21.77
|
Total average realized sales
price (per Boe)
|
|
$57.52
|
|
$46.72
|
|
$35.46
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
Revenues (in
thousands)(a)
|
|
|
|
|
|
|
Oil
|
|
|
|
|
|
|
Permian
|
|
$422,404
|
|
$363,306
|
|
$174,967
|
Eagle Ford
|
|
130,845
|
|
143,139
|
|
92,078
|
Total oil
|
|
$553,249
|
|
$506,445
|
|
$267,045
|
|
|
|
|
|
|
|
Natural gas
|
|
|
|
|
|
|
Permian
|
|
$36,069
|
|
$44,133
|
|
$19,290
|
Eagle Ford
|
|
7,907
|
|
12,541
|
|
4,930
|
Total natural gas
|
|
$43,976
|
|
$56,674
|
|
$24,220
|
|
|
|
|
|
|
|
NGLs
|
|
|
|
|
|
|
Permian
|
|
$58,563
|
|
$58,085
|
|
$24,376
|
Eagle Ford
|
|
9,055
|
|
11,697
|
|
4,981
|
Total NGLs
|
|
$67,618
|
|
$69,782
|
|
$29,357
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
|
|
|
|
Permian
|
|
$517,036
|
|
$465,524
|
|
$218,633
|
Eagle Ford
|
|
147,807
|
|
167,377
|
|
101,989
|
Total revenues
|
|
$664,843
|
|
$632,901
|
|
$320,622
|
|
|
|
|
|
|
|
Additional per Boe
data
|
|
|
|
|
|
|
Sales price
(b)
|
|
|
|
|
|
|
Permian
|
|
$70.29
|
|
$59.64
|
|
$42.06
|
Eagle Ford
|
|
78.50
|
|
66.10
|
|
48.85
|
Total sales price
|
|
$71.97
|
|
$61.22
|
|
$44.01
|
|
|
|
|
|
|
|
Lease operating
expense
|
|
|
|
|
|
|
Permian
|
|
$6.85
|
|
$7.22
|
|
$4.31
|
Eagle Ford
|
|
8.99
|
|
6.77
|
|
8.65
|
Total lease operating
expense
|
|
$7.29
|
|
$7.11
|
|
$5.55
|
|
|
|
|
|
|
|
Production and ad
valorem taxes
|
|
|
|
|
|
|
Permian
|
|
$3.89
|
|
$3.15
|
|
$2.32
|
Eagle Ford
|
|
4.82
|
|
3.60
|
|
3.07
|
Total production and ad valorem
taxes
|
|
$4.08
|
|
$3.26
|
|
$2.53
|
|
|
|
|
|
|
|
Gathering,
transportation and processing
|
|
|
|
|
|
|
Permian
|
|
$2.33
|
|
$2.26
|
|
$2.54
|
Eagle Ford
|
|
1.92
|
|
1.76
|
|
2.29
|
Total gathering, transportation
and processing
|
|
$2.25
|
|
$2.14
|
|
$2.47
|
|
|
|
|
|
|
|
Operating
margin
|
|
|
|
|
|
|
Permian
|
|
$57.22
|
|
$47.01
|
|
$32.89
|
Eagle Ford
|
|
62.77
|
|
53.97
|
|
34.84
|
Total operating
margin
|
|
$58.35
|
|
$48.71
|
|
$33.46
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
$11.15
|
|
$10.89
|
|
$9.74
|
General
and administrative
|
|
$1.85
|
|
$1.27
|
|
$2.31
|
Adjusted
G&A
|
|
|
|
|
|
|
Cash component
(c)
|
|
$1.40
|
|
$1.18
|
|
$1.26
|
Non-cash
component
|
|
$0.14
|
|
$0.12
|
|
$0.23
|
(a)
|
Excludes sales of oil
and gas purchased from third parties.
|
(b)
|
Excludes the impact of
settled derivatives.
|
(c)
|
Excludes the change in
fair value and amortization of share-based incentive
awards.
|
Revenue. For the quarter ended March 31, 2022,
Callon reported revenue of $664.8
million, which excluded revenue from sales of commodities
purchased from a third party of $112.4
million. Revenues including the gain or loss from the
settlement of derivative contracts ("Adjusted Total Revenue") were
$531.4 million, reflecting the impact
of a $133.5 million loss from the
settlement of derivative contracts. Average daily production and
average realized prices, including and excluding the effects of
hedging, are detailed above.
Commodity Derivatives. For the quarter ended
March 31, 2022, the net loss on commodity derivative contracts
includes the following (in thousands):
|
Three Months
Ended
March 31, 2022
|
Loss on oil
derivatives
|
$325,348
|
Loss on natural gas
derivatives
|
28,181
|
Loss on NGL
derivatives
|
4,771
|
Loss on commodity
derivative contracts
|
$358,300
|
For the quarter ended March 31, 2022, the cash paid for
commodity derivative settlements includes the following (in
thousands):
|
Three Months
Ended
March 31, 2022
|
Cash paid on oil
derivatives, net
|
($95,353)
|
Cash paid on natural
gas derivatives, net
|
(4,644)
|
Cash paid on NGL
derivatives, net
|
(1,528)
|
Cash paid for
commodity derivative settlements, net
|
($101,525)
|
Lease Operating Expenses, including workover
("LOE"). LOE per Boe for the three months ended
March 31, 2022 was $67.3
million, or $7.29 per Boe,
compared to LOE of $73.5 million, or
$7.11 per Boe, in the fourth quarter
of 2021. The sequential reduction in LOE was primarily due to
changing service providers and improving the efficiency of
operations. The increase in LOE per Boe was due to the distribution
of fixed costs spread over lower production volumes.
Production and Ad Valorem Taxes. Production and ad
valorem taxes for the three months ended March 31, 2022 were
approximately 5.7% of total revenue excluding revenue from sales of
commodities purchased from a third-party and before the impact of
derivative settlements, or $4.08 per
Boe.
Gathering, Transportation and Processing. Gathering,
transportation and processing expense for the three months ended
March 31, 2022 was $20.8
million, or $2.25 per Boe, as
compared to $22.1 million, or
$2.14 per Boe, in the fourth quarter
of 2021. This decrease in gathering, transportation and processing
expense was primarily due to the 9% decrease in production volumes
between the two periods.
Depreciation, Depletion and Amortization
("DD&A"). DD&A for the three months ended
March 31, 2022 was $11.15 per
Boe compared to $10.89 per Boe in the
fourth quarter of 2021. The increase in DD&A per Boe was
primarily attributable to the larger decrease in production volumes
as compared to the depletion rate of our proved reserves from the
fourth quarter of 2021 to the first quarter of 2022.
General and Administrative Expense
("G&A"). G&A for the three months ended
March 31, 2022 and December 31, 2021 was $17.1 million and $13.1
million, respectively. G&A, excluding certain non-cash
incentive share-based compensation valuation adjustments,
("Adjusted G&A") was $14.3
million for the three months ended March 31, 2022
compared to $13.4 million for the
fourth quarter of 2021. The cash component of Adjusted G&A
increased to $13.0 million for the
three months ended March 31, 2022 compared to $12.2 million for the fourth quarter of 2021
primarily as a result of higher compensation costs during the
quarter.
The following table reconciles total G&A to Adjusted G&A
- cash component and full cash G&A (in thousands):
|
Three Months
Ended
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
Total
G&A
|
$17,121
|
|
$13,116
|
|
$16,799
|
Change in the fair value of liability share-based
awards
(non-cash)
|
(2,851)
|
|
296
|
|
(5,943)
|
Adjusted G&A –
total
|
14,270
|
|
13,412
|
|
10,856
|
Equity-settled, share-based compensation (non-cash) and
other
non-recurring expenses
|
(1,315)
|
|
(1,230)
|
|
(1,665)
|
Adjusted G&A – cash
component
|
$12,955
|
|
$12,182
|
|
$9,191
|
|
|
|
|
|
|
Capitalized cash
G&A
|
9,703
|
|
11,035
|
|
6,913
|
Full cash
G&A
|
$22,658
|
|
$23,217
|
|
$16,104
|
Income Tax. Callon provides for income taxes at the
statutory rate of 21% adjusted for permanent differences
expected to be realized. We recorded income tax expense of
$0.5 million and income tax benefit
of $0.8 million for the three months
ended March 31, 2022 and December 31, 2021, respectively.
Since the second quarter of 2020, we have concluded that it is more
likely than not that the net deferred tax assets will not be
realized and have recorded a full valuation allowance against our
deferred tax assets. As long as we continue to conclude that the
valuation allowance is necessary, we will not have significant
deferred tax expense or benefit.
Adjusted EBITDA. Net income was $39.7 million and adjusted EBITDA was
$393.7 million for the first quarter
of 2022 as compared to net income of $285.4
million and adjusted EBITDA of $339.2
million for the fourth quarter of 2021. The increase in
adjusted EBITDA from the fourth quarter of 2021 was primarily due
to an increase in revenues primarily as a result of the 23%
increase in the price of oil as well as $16.5 million less cash paid for derivative
settlements.
Adjusted Income and Adjusted EBITDA. The following
tables reconcile the Company's net income (loss) to adjusted income
and adjusted EBITDA:
|
Three Months
Ended
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
|
(In thousands,
except per share data)
|
Net income
(loss)
|
$39,737
|
|
$285,351
|
|
($80,407)
|
Loss on derivative contracts
|
358,300
|
|
10,145
|
|
214,523
|
Loss on commodity derivative settlements, net
|
(133,476)
|
|
(149,938)
|
|
(62,280)
|
Non-cash expense related to share-based awards
|
4,166
|
|
939
|
|
7,608
|
Merger, integration and transaction
|
769
|
|
11,271
|
|
—
|
Other (income) expense
|
(782)
|
|
1,072
|
|
(3,306)
|
Loss on extinguishment of debt
|
—
|
|
43,460
|
|
—
|
Tax
effect on adjustments above(a)
|
(48,085)
|
|
17,441
|
|
(32,874)
|
Change in valuation allowance
|
(7,963)
|
|
(60,585)
|
|
26,724
|
Adjusted
income
|
$212,666
|
|
$159,156
|
|
$69,988
|
|
|
|
|
|
|
Net income (loss) per
diluted share
|
$0.64
|
|
$4.78
|
|
($1.89)
|
Adjusted income per
diluted share
|
$3.43
|
|
$2.66
|
|
$1.49
|
|
|
|
|
|
|
Basic weighted average
common shares outstanding
|
61,487
|
|
59,143
|
|
42,590
|
Diluted weighted
average common shares outstanding (GAAP)
|
62,065
|
|
59,737
|
|
42,590
|
Effect of potentially
dilutive instruments
|
—
|
|
—
|
|
4,354
|
Adjusted diluted
weighted average common shares outstanding
|
62,065
|
|
59,737
|
|
46,944
|
(a)
|
Calculated using the
federal statutory rate of 21%.
|
|
Three Months
Ended
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
|
(In
thousands)
|
Net income
(loss)
|
$39,737
|
|
$285,351
|
|
($80,407)
|
Loss on
derivative contracts
|
358,300
|
|
10,145
|
|
214,523
|
Loss on
commodity derivative settlements, net
|
(133,476)
|
|
(149,938)
|
|
(62,280)
|
Non-cash
expense related to share-based awards
|
4,166
|
|
939
|
|
7,608
|
Merger,
integration and transaction
|
769
|
|
11,271
|
|
—
|
Other
(income) expense
|
(782)
|
|
1,072
|
|
(3,306)
|
Income tax
(benefit) expense
|
484
|
|
(837)
|
|
(921)
|
Interest
expense, net
|
21,558
|
|
25,226
|
|
24,416
|
Depreciation, depletion and amortization
|
102,979
|
|
112,551
|
|
70,987
|
Loss on
extinguishment of debt
|
—
|
|
43,460
|
|
—
|
Adjusted
EBITDA
|
$393,735
|
|
$339,240
|
|
$170,620
|
Adjusted Free Cash Flow. The following table
reconciles the Company's net cash provided by operating activities
to adjusted EBITDA and adjusted free cash flow:
|
Three Months
Ended
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
|
(In
thousands)
|
Net cash provided by
operating activities
|
$281,270
|
|
$366,310
|
|
$137,665
|
Changes in working capital and other
|
123,805
|
|
(67,390)
|
|
30,913
|
Change in accrued hedge settlements
|
(31,951)
|
|
6,781
|
|
(20,117)
|
Cash interest expense, net
|
19,842
|
|
22,268
|
|
22,159
|
Merger, integration and transaction
|
769
|
|
11,271
|
|
—
|
Adjusted
EBITDA
|
$393,735
|
|
$339,240
|
|
$170,620
|
Less: Operational capital expenditures (accrual)
|
157,378
|
|
159,786
|
|
95,545
|
Less: Capitalized cash interest
|
23,506
|
|
22,591
|
|
21,817
|
Less: Cash interest expense, net
|
19,842
|
|
22,268
|
|
22,159
|
Less: Capitalized cash G&A
|
9,703
|
|
11,035
|
|
6,913
|
Adjusted free cash
flow
|
$183,306
|
|
$123,560
|
|
$24,186
|
Adjusted Discretionary Cash Flow. The following
table reconciles the Company's net cash provided by operating
activities to adjusted discretionary cash flow:
|
Three Months
Ended
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
|
(In
thousands)
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
(loss)
|
$39,737
|
|
$285,351
|
|
($80,407)
|
Adjustments to
reconcile net income (loss) to cash provided by
operating activities:
|
|
|
|
|
|
Depreciation, depletion and amortization
|
102,979
|
|
112,551
|
|
70,987
|
Amortization of
non-cash debt related items, net
|
1,716
|
|
2,958
|
|
2,256
|
Loss on derivative contracts
|
358,300
|
|
10,145
|
|
214,523
|
Cash paid for commodity derivative settlements,
net
|
(101,525)
|
|
(156,719)
|
|
(42,162)
|
Loss on extinguishment of debt
|
—
|
|
43,460
|
|
—
|
Non-cash expense related to share-based awards
|
4,166
|
|
939
|
|
7,608
|
Merger, integration and transaction
|
769
|
|
11,271
|
|
—
|
Other, net
|
2,894
|
|
31
|
|
1,217
|
Adjusted
discretionary cash flow
|
$409,036
|
|
$309,987
|
|
$174,022
|
Changes in working capital
|
(126,997)
|
|
67,594
|
|
(36,357)
|
Merger, integration and transaction
|
(769)
|
|
(11,271)
|
|
—
|
Net cash provided by
operating activities
|
$281,270
|
|
$366,310
|
|
$137,665
|
Adjusted Total Revenue. Adjusted total revenue is
reconciled to total operating revenues, which excludes revenue from
sales of commodities purchased from a third party, in the following
table:
|
Three Months
Ended
|
|
March 31,
2022
|
|
December 31,
2021
|
|
March 31,
2021
|
|
(In
thousands)
|
Operating
revenues
|
|
|
|
|
|
Oil
|
$553,249
|
|
$506,445
|
|
$267,045
|
Natural gas
|
43,976
|
|
56,674
|
|
24,220
|
NGLs
|
67,618
|
|
69,782
|
|
29,357
|
Total operating
revenues
|
$664,843
|
|
$632,901
|
|
$320,622
|
Impact of settled derivatives
|
(133,476)
|
|
(149,938)
|
|
(62,280)
|
Adjusted total
revenue
|
$531,367
|
|
$482,963
|
|
$258,342
|
Net Debt. The following table reconciles the Company's
total debt to net debt:
|
March 31,
2021
|
|
June 30,
2021
|
|
September 30,
2021
|
|
December 31,
2021
|
|
March 31,
2022
|
|
(In
thousands)
|
Total debt
|
$2,937,239
|
|
$2,865,154
|
|
$2,809,610
|
|
$2,694,115
|
|
$2,623,282
|
Unamortized premiums, discount, and
deferred loan costs, net
|
40,402
|
|
37,487
|
|
48,311
|
|
28,806
|
|
26,639
|
Adjusted total
debt
|
$2,977,641
|
|
$2,902,641
|
|
$2,857,921
|
|
$2,722,921
|
|
$2,649,921
|
Less: Cash and cash equivalents
|
24,350
|
|
3,800
|
|
3,699
|
|
9,882
|
|
4,150
|
Net
debt
|
$2,953,291
|
|
$2,898,841
|
|
$2,854,222
|
|
$2,713,039
|
|
$2,645,771
|
Callon Petroleum
Company Consolidated Balance Sheets (In
thousands, except par and share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
March 31, 2022
|
|
December 31, 2021
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$4,150
|
|
$9,882
|
Accounts receivable, net
|
|
347,593
|
|
232,436
|
Fair value of derivatives
|
|
—
|
|
22,381
|
Other current assets
|
|
33,249
|
|
30,745
|
Total current assets
|
|
384,992
|
|
295,444
|
Oil and natural gas
properties, full cost accounting method:
|
|
|
|
|
Evaluated properties, net
|
|
3,426,156
|
|
3,352,821
|
Unevaluated properties
|
|
1,847,790
|
|
1,812,827
|
Total oil and natural gas properties, net
|
|
5,273,946
|
|
5,165,648
|
Other property and
equipment, net
|
|
28,985
|
|
28,128
|
Deferred financing
costs
|
|
16,543
|
|
18,125
|
Other assets,
net
|
|
41,054
|
|
40,158
|
Total
assets
|
|
$5,745,520
|
|
$5,547,503
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$516,440
|
|
$569,991
|
Fair value of derivatives
|
|
392,928
|
|
185,977
|
Other current liabilities
|
|
163,936
|
|
116,523
|
Total current
liabilities
|
|
1,073,304
|
|
872,491
|
Long-term
debt
|
|
2,623,282
|
|
2,694,115
|
Asset retirement
obligations
|
|
55,160
|
|
54,458
|
Fair value of
derivatives
|
|
34,434
|
|
11,409
|
Other long-term
liabilities
|
|
44,750
|
|
49,262
|
Total
liabilities
|
|
3,830,930
|
|
3,681,735
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock, $0.01 par value, 78,750,000 shares authorized;
61,493,753
and 61,370,684 shares outstanding,
respectively
|
|
615
|
|
614
|
Capital in excess of par value
|
|
4,021,442
|
|
4,012,358
|
Accumulated deficit
|
|
(2,107,467)
|
|
(2,147,204)
|
Total stockholders'
equity
|
|
1,914,590
|
|
1,865,768
|
Total liabilities and stockholders'
equity
|
|
$5,745,520
|
|
$5,547,503
|
Callon Petroleum
Company Consolidated Statements of
Operations (In thousands, except per share
data) (Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2022
|
|
2021
|
Operating Revenues:
|
|
|
|
Oil
|
$553,249
|
|
$267,045
|
Natural gas
|
43,976
|
|
24,220
|
Natural gas liquids
|
67,618
|
|
29,357
|
Sales of purchased oil
and gas
|
112,375
|
|
39,259
|
Total operating
revenues
|
777,218
|
|
359,881
|
|
|
|
|
Operating Expenses:
|
|
|
|
Lease operating
|
67,328
|
|
40,453
|
Production and ad valorem taxes
|
37,678
|
|
18,439
|
Gathering, transportation and processing
|
20,775
|
|
17,981
|
Cost of purchased oil and gas
|
111,271
|
|
40,917
|
Depreciation, depletion and amortization
|
102,979
|
|
70,987
|
General and administrative
|
17,121
|
|
16,799
|
Merger, integration and transaction
|
769
|
|
—
|
Total operating
expenses
|
357,921
|
|
205,576
|
Income From Operations
|
419,297
|
|
154,305
|
|
|
|
|
Other (Income) Expenses:
|
|
|
|
Interest expense, net of capitalized amounts
|
21,558
|
|
24,416
|
Loss on derivative contracts
|
358,300
|
|
214,523
|
Other income
|
(782)
|
|
(3,306)
|
Total other expense
|
379,076
|
|
235,633
|
|
|
|
|
Income (Loss) Before Income
Taxes
|
40,221
|
|
(81,328)
|
Income tax benefit
(expense)
|
(484)
|
|
921
|
Net Income (Loss)
|
$39,737
|
|
($80,407)
|
|
|
|
|
Net Income (Loss) Per Common
Share:
|
|
|
|
Basic
|
$0.65
|
|
($1.89)
|
Diluted
|
$0.64
|
|
($1.89)
|
|
|
|
|
Weighted Average Common Shares
Outstanding:
|
|
|
|
Basic
|
61,487
|
|
42,590
|
Diluted
|
62,065
|
|
42,590
|
Callon Petroleum
Company Consolidated Statements of Cash
Flows (In thousands) (Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2022
|
|
2021
|
Cash flows from operating
activities:
|
|
|
|
Net income
(loss)
|
$39,737
|
|
($80,407)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation, depletion and amortization
|
102,979
|
|
70,987
|
Amortization of non-cash debt related items, net
|
1,716
|
|
2,256
|
Loss on derivative contracts
|
358,300
|
|
214,523
|
Cash paid for commodity derivative settlements,
net
|
(101,525)
|
|
(42,162)
|
Non-cash expense related to share-based awards
|
4,166
|
|
7,608
|
Other, net
|
2,894
|
|
1,217
|
Changes in current assets and liabilities:
|
|
|
|
Accounts receivable
|
(116,322)
|
|
(45,683)
|
Other current assets
|
(4,180)
|
|
(2,856)
|
Accounts payable and accrued
liabilities
|
(12,987)
|
|
12,182
|
Cash received for settlements
of contingent consideration arrangements, net
|
6,492
|
|
—
|
Net
cash provided by operating activities
|
281,270
|
|
137,665
|
Cash flows from investing
activities:
|
|
|
|
Capital
expenditures
|
(201,478)
|
|
(101,341)
|
Acquisition of oil and
gas properties
|
(9,409)
|
|
(768)
|
Proceeds from sales of
assets
|
4,484
|
|
—
|
Cash paid for
settlement of contingent consideration arrangement
|
(19,171)
|
|
—
|
Other, net
|
3,635
|
|
3,595
|
Net
cash used in investing activities
|
(221,939)
|
|
(98,514)
|
Cash flows from financing
activities:
|
|
|
|
Borrowings on Credit
Facility
|
673,000
|
|
303,000
|
Payments on Credit
Facility
|
(746,000)
|
|
(338,000)
|
Cash received for
settlement of contingent consideration arrangement
|
8,512
|
|
—
|
Other, net
|
(575)
|
|
(37)
|
Net
cash used in financing activities
|
(65,063)
|
|
(35,037)
|
Net change in cash and
cash equivalents
|
(5,732)
|
|
4,114
|
Balance, beginning of
period
|
9,882
|
|
20,236
|
Balance, end of
period
|
$4,150
|
|
$24,350
|
Non-GAAP Financial Measures
This news release refers to non-GAAP financial measures such as
"adjusted free cash flow," "adjusted discretionary cash flow,"
"adjusted G&A," "full cash G&A," "adjusted income,"
"adjusted income per diluted share," "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 filings with the U.S. Securities and
Exchange Commission (the "SEC") and posted on our website.
- Adjusted free cash flow is a supplemental non-GAAP measure that
is defined by the Company as adjusted EBITDA less operational
capital expenditures (accrual), capitalized cash interest,
capitalized cash G&A (which excludes capitalized expense
related to share-based awards), and cash interest expense, net. We
believe adjusted free cash flow provides useful information to
investors because it 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. Adjusted free 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, or as a measure of liquidity, or as an alternative to
net income (loss).
- Adjusted discretionary cash flow is a supplemental non-GAAP
measure that Callon believes provides useful information to
investors because it 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. Adjusted discretionary cash flow is defined
by Callon as net cash provided by operating activities before
changes in working capital and merger, integration and transaction
expenses. 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. Adjusted 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, or as a measure of liquidity, or as an
alternative to net income (loss).
- Adjusted G&A is a supplemental non-GAAP financial measure
that excludes certain non-cash incentive share-based compensation
valuation adjustments and adjusted G&A - cash component further
excludes equity-settled, share-based compensation expenses and
non-recurring expenses. Callon believes that the non-GAAP measure
of adjusted G&A and adjusted G&A - cash component are
useful to investors because they provide for greater comparability
period-over-period. In addition, adjusted G&A - cash component
provides a meaningful measure of our recurring G&A
expense.
- Full cash G&A is a supplemental non-GAAP financial measure
that Callon defines as adjusted G&A – cash component plus
capitalized G&A excluding capitalized expense related to
share-based awards. Callon believes that the non-GAAP measure of
full cash G&A is useful to investors because it provides a
meaningful measure of our total recurring cash G&A costs,
whether expensed or capitalized, and provides for greater
comparability on a period-over-period basis.
- Adjusted income and adjusted income per diluted share are
supplemental non-GAAP measures that Callon
believes 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 these
items and non-cash valuation adjustments, which are detailed in the
reconciliation provided. Adjusted income and adjusted income per
diluted share are not measures of financial performance under GAAP.
Accordingly, neither should be considered as a substitute for net
income (loss), operating income (loss), or other income data
prepared in accordance with GAAP. However, the Company believes
that adjusted income and adjusted income per diluted share provide
additional information with respect to our performance. Because
adjusted income and adjusted income per diluted share exclude some,
but not all, items that affect net income (loss) and may vary among
companies, the adjusted income and adjusted income per diluted
share presented above may not be comparable to similarly titled
measures of other companies.
- Adjusted diluted weighted average common shares outstanding is
a non-GAAP financial measure which includes the effect of
potentially dilutive instruments that, under certain circumstances
described below, are excluded from diluted weighted average common
shares outstanding, the most directly comparable GAAP financial
measure. When a net loss exists, all potentially dilutive
instruments are anti-dilutive to the net loss per common share and
therefore excluded from the computation of diluted weighted average
common shares outstanding. The effect of potentially dilutive
instruments are included in the computation of adjusted diluted
weighted average common shares outstanding for purposes of
computing adjusted income per diluted share.
- Callon calculates adjusted EBITDA as net
income (loss) before interest expense, income tax expense
(benefit), depreciation, depletion and amortization, (gains) losses
on derivative instruments excluding net settled derivative
instruments, impairment of evaluated oil and gas properties,
non-cash share-based compensation expense, merger, integration and
transaction expense, (gain) loss on extinguishment of debt, and
certain other expenses. 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
useful information to investors because it 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 above may not
be comparable to similarly titled measures of other companies.
- Callon believes that the non-GAAP measure of
adjusted total revenue (which is revenue including the gain or loss
from the settlement of derivative contracts) 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.
- Callon believes that operating margin is a comparable
metric against other companies in the industry is useful to
investors because it is an indicator of an oil and natural gas
company's operating profitability per unit of production. Operating
margin is a supplemental non-GAAP measure that is
defined by the Company as oil, natural gas, and NGL
revenues sales price less lease operating expense; production
and ad valorem taxes; and gathering, transportation
and processing fees divided by total production for the
period.
- Net debt is a supplemental non-GAAP measure that is
defined by the Company as total debt excluding unamortized
premiums, discount, and deferred loan costs, less cash and
cash equivalents. Net debt should not be considered an alternative
to, or more meaningful than, total debt, the most directly
comparable GAAP measure. Management uses net debt to determine the
Company's outstanding debt obligations that would not be readily
satisfied by its cash and cash equivalents on hand. We believe this
metric is useful to analysts and investors in determining the
Company's leverage position since the Company has the ability to,
and may decide to, use a portion of its cash and cash equivalents
to reduce debt. This metric is sometimes presented as a ratio with
Adjusted EBITDA in order to provide investors with
another means of evaluating the Company's ability to service its
existing debt obligations as well as any future increase in the
amount of such obligations.
Earnings Call Information
The Company will host a conference call on Thursday, May 5,
2022, to discuss first quarter 2022 financial and operating
results, outlook for the remainder of 2022, and current corporate
strategy and initiatives.
Please join Callon Petroleum Company via the Internet for a
webcast of the conference call:
Date/Time:
|
Thursday, May 5, 2022,
at 8:00 a.m. Central Time (9:00 a.m. Eastern Time)
|
Webcast:
|
Select "News and
Events" under the "Investors" section of the Company's website:
www.callon.com.
|
An archive of the conference call webcast will also be available
at www.callon.com under the "Investors" section of the website.
About Callon Petroleum Company
Callon Petroleum Company is an independent oil and natural gas
company focused on the acquisition, exploration and development of
high-quality assets in the leading oil plays of South and
West Texas.
Cautionary Statement Regarding Forward-Looking
Information
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 development
activity and associated production, capital expenditures and cash
flow expectations; the Company's production and expenditure
guidance; estimated reserve quantities and the present value
thereof; future debt levels and leverage; and the implementation of
the Company's business plans and strategy, as well as statements
including the words "believe," "expect," "plans," "may," "will,"
"should," "could," and words of similar meaning. These statements
reflect the Company's current views with respect to future events
and financial performance based on management's experience and
perception of historical trends, current conditions, anticipated
future developments and other factors believed to be appropriate.
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. Any forward-looking statement speaks only as of the date
on which such statement is made and the Company undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law. 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; changes in
the supply of and demand for oil and natural gas, including as a
result of the COVID-19 pandemic and various governmental actions
taken to mitigate its impact or actions by, or disputes among
members of OPEC and other oil and natural gas producing countries
with respect to production levels or other matters related to the
price of oil; our ability to drill and complete wells; operational,
regulatory and environment risks; the cost and availability of
equipment and labor; our ability to finance our development
activities at expected costs or at expected times or at all; our
inability to realize the benefits of recent transactions; currently
unknown risks and liabilities relating to the newly acquired assets
and operations; adverse actions by third parties involved with the
transactions; risks that are not yet known or material to us; and
other risks more fully discussed in our filings with the SEC,
including our most recent Annual Reports on Form 10-K and
subsequent Quarterly Reports on Form 10-Q, available on our website
or the SEC's website at www.sec.gov. Any forward-looking statement
speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to correct or update any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by applicable
law.
Contact Information
Kevin Smith
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200
View original
content:https://www.prnewswire.com/news-releases/callon-petroleum-company-announces-first-quarter-2022-results-301540104.html
SOURCE Callon Petroleum Company