NATCHEZ, Miss., Aug. 6, 2018 /PRNewswire/ -- Callon
Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today
reported results of operations for the three and six months ended
June 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 second quarter of
2018 and other recent data points include:
- Increased production to 29.0 MBOE/D (76% oil), an increase of
30% year-over-year
- Reduced lease operating expense by 10% year-over-year to
$4.99 per BOE
- Generated an operating margin of $44.17 per BOE, an increase of 37%
year-over-year
- Recent Wolfcamp A wells in the Fairway area of WildHorse
outperforming oil type curves by approximately 30%
- Successful Wolfcamp A wells at Spur, including the initiation
of pad co-development of the Upper and Lower Wolfcamp A,
significantly outperforming initial operated wells
- Continued outperformance from ten-well downspacing test at
Fairway through more than 200 days of production
- First "mega-pad" placed on production in July and performing
favorably against offset three-well pads
- Announced entry into a definitive agreement and completed
related financings to acquire approximately 28,657 net surface
acres in the Delaware Basin,
providing near-term value contribution from current production as
well as upside potential, with the transaction projected to close
later in the third quarter
- Executed a multi-year firm transportation agreement covering
15,000 barrels of oil per day to Gulf Coast destination points and
corresponding long-term sales agreements for equivalent volumes
based on Gulf Coast and international pricing benchmarks
Joe Gatto, President and Chief
Executive Officer, commented, "Our second quarter results reflect
our continued commitment to maximizing returns while thoughtfully
growing our business with the support of leading internal cash
margins. Halfway through the year, we have drilled and completed
more wells than originally anticipated while still managing our
capital spending within our original expectations. The team's
continued efforts to reduce operating costs have allowed us to
nearly match our operating margins from the first quarter, despite
lower realized commodity prices." He continued, "We have been
preparing for the integration of our recently announced acquisition
into a combined Spur business plan and are looking forward to
contributions from both the production base of acquired properties
as well as incremental drilling and completion activity on the new
footprint later this year, driving an expected combined production
rate of over 40,000 BOE/d in the fourth quarter. Additionally, we
have been preparing for growing production volumes with recent
additions to our hedging program and a new firm transportation
agreement that is a meaningful first step to increasing our
exposure to pricing points outside of the Permian Basin."
Operations Update
At June 30, 2018, we had 267 gross (200.9 net) horizontal
wells producing from eight established flow units in the Permian
Basin. Net daily production for the three months ended
June 30, 2018 grew approximately 30% to 29.0 MBOE/D (76% oil)
as compared to the same period of 2017. The Company expects
production for the month of July to be approximately 31.1 MBOE/D
(78% oil).
For the three months ended June 30, 2018, we drilled 18
gross (13.7 net) horizontal wells and placed a combined 15 gross
(13.7 net) horizontal wells on production.
Midland Basin
During the second quarter, approximately 60% of the net wells
placed on production were located in the Midland Basin, with the
majority of these wells within our WildHorse area. Of the
wells placed on production at WildHorse, over 90% were placed on
production during the month of June. These wells had an
average lateral length of roughly 8,400 feet. The only wells placed
on production in our Monarch area in Midland County were our
Casselman 40 21AH and 14H, a Wolfcamp A and B pair test. These
wells reached a peak thirty day average of 173 BOE (81% oil) and
214 BOE (83% oil) per lateral foot respectively. Through the first
100 days of production, both have outperformed the 5,000 foot oil
type curve for this area.
In the Fairway area of WildHorse, our recent Barclays B Unit pad
and Players three-well pad (06AH, 07AH, and 08AH) have both
outperformed their respective oil type curves by 29% and 33% (on
average) through the initial 40 days of production. Nearby, the
Open A2 #1AH and A3 #3AH wells that comprised our 10-well spacing
test continue to outperform offsetting comparable pads with
eight-well spacing after more than 200 days of production.
Delaware Basin
The Rendezvous A1 #01LA and A2 #09UA, which were placed on
production in April, have collectively produced over 260,000 BOE
(~85% oil) in their first 100 days on production, significantly
outperforming all previous Callon wells at our Spur area. The wells
were completed with approximately 7,500 and 7,800 foot laterals,
respectively. During the middle of the quarter, we placed the Moran
A1 01LA on production with a completed lateral length of just under
5,800 feet. Through the first 75 days of production, the Moran well
has produced approximately 80,000 BOE (~75% oil). In June, the Rag
Run A1 #01LA and 134 South #25CH wells were completed with lateral
lengths of approximately 9,300 and 4,800 feet, respectively, and
placed on production. The A1 #01LA has produced approximately
75,000 BOE (~85% oil) through the first 40 days of production. The
134 South #25CH, our first Wolfcamp C test on our Delaware acreage position, has produced over
23,000 BOE (~80% oil) through 43 days.
Firm Transportation Agreement
Recently, the Company executed a firm transportation agreement
for dedicated capacity on a new pipeline system that will connect
with a regional gathering system which currently transports oil
volumes under long-term agreements from our properties in Howard,
Ward, Reagan and Upton counties to multiple marketing points in the
Permian Basin. Subject to completion of the new pipeline system,
which will have delivery points in several locations along the Gulf
Coast, we will have a commitment of 15,000 Bbls per day for a
multi-year term. Multi-year, firm sales agreements covering all
15,000 barrels have already been agreed upon with established
buyers in the Gulf Coast region.
Infrastructure and Operational Efficiency
During the second quarter, significant progress was made in the
planned infrastructure build out across our operating areas. All
planned work at our Ranger area has been completed. At Spur, our
new recycling facilities and recycling frac pits are complete, the
majority of water transfer line work has been finished, and we have
finished the installation of a new power substation.
Continued focus on operational efficiencies resulted in the
company placing more wells on production during the second quarter
than originally anticipated. Compared to the first quarter, the
company placed nearly double the amount of net lateral feet on
production during the second quarter, with over half of that coming
in June. We have begun to increase our water recycling efforts and
have recycled over a half million barrels of produced water through
the first half of 2018. The company expects to continue ramping
those volumes during the second half of the year. We also recently
renewed the contract on a fifth drilling rig for a term of two
years.
Capital Expenditures
For the three months ended June 30, 2018, we incurred
$163.5 million in cash operational
capital expenditures (including other items) compared to
$105.3 million in the first quarter
of 2018. Total capital expenditures, inclusive of capitalized
expenses, are detailed below on an accrual and cash basis (in
thousands):
|
Three Months Ended
June 30, 2018
|
|
Operational
|
|
Capitalized
|
|
Capitalized
|
|
Total
Capital
|
|
Capital
(a)
|
|
Interest
|
|
G&A
|
|
Expenditures
|
Cash basis
(b)
|
$
|
163,462
|
|
|
$
|
19,189
|
|
|
$
|
4,389
|
|
|
$
|
187,040
|
|
Timing adjustments
(c)
|
2,500
|
|
|
(7,139)
|
|
|
—
|
|
|
(4,639)
|
|
Non-cash
items
|
—
|
|
|
—
|
|
|
427
|
|
|
427
|
|
Accrual
(GAAP) basis
|
$
|
165,962
|
|
|
$
|
12,050
|
|
|
$
|
4,816
|
|
|
$
|
182,828
|
|
|
|
(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
|
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
Net
production
|
|
|
|
|
|
Oil
(MBbls)
|
1,995
|
|
|
1,851
|
|
|
1,596
|
|
Natural gas
(MMcf)
|
3,839
|
|
|
3,240
|
|
|
2,550
|
|
Total
(MBOE)
|
2,635
|
|
|
2,391
|
|
|
2,021
|
|
Average daily
production (BOE/d)
|
28,954
|
|
|
26,567
|
|
|
22,209
|
|
% oil
(BOE basis)
|
76
|
%
|
|
77
|
%
|
|
79
|
%
|
Oil and natural
gas revenues (in thousands)
|
|
|
|
|
|
Oil
revenue
|
$
|
122,613
|
|
|
$
|
115,286
|
|
|
$
|
72,885
|
|
Natural
gas revenue (a)
|
14,462
|
|
|
12,154
|
|
|
9,398
|
|
Total
revenue
|
137,075
|
|
|
127,440
|
|
|
82,283
|
|
Impact
of cash-settled derivatives
|
(7,980)
|
|
|
(8,459)
|
|
|
(267)
|
|
Adjusted Total Revenue
(i)
|
$
|
129,095
|
|
|
$
|
118,981
|
|
|
$
|
82,016
|
|
Average realized
sales price (excluding impact of cash settled
derivatives)
|
|
|
|
|
|
Oil
(Bbl)
|
$
|
61.46
|
|
|
$
|
62.28
|
|
|
$
|
45.67
|
|
Natural
gas (Mcf)
|
3.77
|
|
|
3.75
|
|
|
3.69
|
|
Total
(BOE)
|
52.02
|
|
|
53.30
|
|
|
40.71
|
|
Average realized
sales price (including impact of cash settled
derivatives)
|
|
|
|
|
|
Oil
(Bbl)
|
$
|
57.38
|
|
|
$
|
57.47
|
|
|
$
|
45.47
|
|
Natural
gas (Mcf)
|
3.81
|
|
|
3.89
|
|
|
3.70
|
|
Total
(BOE)
|
48.99
|
|
|
49.76
|
|
|
40.58
|
|
Additional per BOE
data
|
|
|
|
|
|
Sales
price (b)
|
$
|
52.02
|
|
|
$
|
53.30
|
|
|
$
|
40.71
|
|
Lease operating
expense (c)
|
4.99
|
|
|
5.45
|
|
|
5.56
|
|
Gathering and treating
expense (a)
|
—
|
|
|
—
|
|
|
0.45
|
|
Production
taxes
|
2.86
|
|
|
3.54
|
|
|
2.38
|
|
Operating margin
|
$
|
44.17
|
|
|
$
|
44.31
|
|
|
$
|
32.32
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization
|
$
|
14.70
|
|
|
$
|
14.81
|
|
|
$
|
12.97
|
|
Adjusted
G&A (d)
|
|
|
|
|
|
Cash component
(e)
|
$
|
2.69
|
|
|
$
|
2.74
|
|
|
$
|
2.67
|
|
Non-cash
component
|
0.64
|
|
|
0.51
|
|
|
0.53
|
|
|
|
(a)
|
On January 1, 2018,
the Company adopted the revenue recognition accounting standard.
Consequently, natural gas gathering and treating expenses for the
three and six months ended June 30, 2018 were accounted for as
a reduction to revenue.
|
(b)
|
Excludes the impact
of cash-settled derivatives.
|
(c)
|
Excludes gathering
and treating expense.
|
(d)
|
Excludes certain
non-recurring expenses and non-cash valuation adjustments. 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 June 30,
2018, Callon reported total revenue of $137.1 million and total revenue including
cash-settled derivatives ("Adjusted Total Revenue," a non-GAAP
financial measure(i)) of $129.1
million, including the impact of an $8.0 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 29.0 MBOE/d compared
to average daily production of 26.6 MBOE/d in the first quarter of
2018. Average realized prices, including and excluding the effects
of hedging, are detailed above.
Hedging impacts. For the quarter ended June 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
|
$
|
(8,131)
|
|
|
$
|
(4.08)
|
|
Net loss on fair
value adjustments
|
(8,311)
|
|
|
|
Total
loss on oil derivatives
|
$
|
(16,442)
|
|
|
|
Natural gas
derivatives
|
|
|
|
Net gain on
settlements
|
$
|
151
|
|
|
$
|
0.04
|
|
Net loss on fair
value adjustments
|
(263)
|
|
|
|
Total
loss on natural gas derivatives
|
$
|
(112)
|
|
|
|
Total oil &
natural gas derivatives
|
|
|
|
Net loss on
settlements
|
$
|
(7,980)
|
|
|
$
|
(3.03)
|
|
Net loss on fair
value adjustments
|
(8,574)
|
|
|
|
Total
loss on total oil & natural gas derivatives
|
$
|
(16,554)
|
|
|
|
Lease Operating Expenses, including workover
("LOE"). LOE per BOE for the three months ended
June 30, 2018 was $4.99 per BOE,
compared to LOE of $5.45 per BOE in
the first quarter of 2018. The decrease in this metric resulted
primarily from a decrease in saltwater disposal costs and an
increase in production volumes period over period.
Production Taxes, including ad valorem taxes. Production
taxes were $2.86 per BOE for the
three months ended June 30, 2018, representing approximately
5.5% of total revenue before the impact of derivative
settlements.
Depreciation, Depletion and Amortization
("DD&A"). DD&A for the three months ended
June 30, 2018 was $14.70 per BOE
compared to $14.81 per BOE in the
first quarter of 2018. The decrease is attributable to our
increased estimated proved reserves relative to our depreciable
base and assumed future development costs related to undeveloped
proved reserves as a result of additions made through our
horizontal drilling efforts and acquisitions.
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 $3.33 per BOE, for
the three months ended June 30, 2018 compared to $7.8 million, or $3.25 per BOE, for the first quarter of 2018. The
cash component of Adjusted G&A was $7.1
million, or $2.69 per BOE, for
the three months ended June 30, 2018 compared to $6.5 million, or $2.74 per BOE, for the first quarter of 2018.
For the three months ended June 30, 2018, G&A and
Adjusted G&A, which excludes the amortization of
equity-settled, share-based incentive awards and corporate
depreciation and amortization, are calculated as follows (in
thousands):
|
Three Months
Ended
June 30, 2018
|
Total G&A
expense
|
$
|
8,289
|
|
Plus:
Change in the fair value of liability share-based awards
(non-cash)
|
484
|
|
Adjusted G&A –
total
|
8,773
|
|
Less:
Restricted stock share-based compensation (non-cash)
|
(1,587)
|
|
Less:
Corporate depreciation & amortization (non-cash)
|
(109)
|
|
Adjusted G&A –
cash component
|
$
|
7,077
|
|
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 $0.5 million for the three
months ended June 30, 2018 which relates to deferred state
franchise tax. At June 30, 2018 we had a valuation allowance
of $38.6 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
$10.6 million (or $0.05 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. The Company expects to provide updated
guidance upon the closing of the previous announced acquisition of
assets in the Delaware Basin for
$570 million.
|
Second
Quarter
|
|
First
Half
|
|
Full
Year
|
|
2018
Actual
|
|
2018
Actual
|
|
2018
Guidance
|
Total production
(MBOE/d)
|
29.0
|
|
27.8
|
|
29.5 -
32.0
|
% oil
|
76%
|
|
77%
|
|
77%
|
Income statement
expenses (per BOE)
|
|
|
|
|
|
LOE, including
workovers
|
$4.99
|
|
$5.21
|
|
$5.25 -
$6.25
|
Production taxes,
including ad valorem (% unhedged revenue)
|
5%
|
|
6%
|
|
6%
|
Adjusted
G&A: cash component (a)
|
$2.69
|
|
$2.71
|
|
$1.75 -
$2.50
|
Adjusted
G&A: non-cash component (b)
|
$0.64
|
|
$0.58
|
|
$0.50 -
$1.00
|
Interest
expense (c)
|
$0.00
|
|
$0.00
|
|
$0.00
|
Effective income tax
rate
|
22%
|
|
22%
|
|
22%
|
Capital
expenditures ($MM, accrual basis)
|
|
|
|
|
|
Operational
(d)
|
$166
|
|
$283
|
|
$500 -
$540
|
Capitalized
expenses
|
$17
|
|
$33
|
|
$60 - $70
|
Net operated
horizontal wells placed on production
|
14
|
|
23
|
|
43 - 46
|
|
|
(a)
|
Excludes stock-based
compensation and corporate depreciation and
amortization.
|
(b)
|
Excludes certain
non-recurring expenses and non-cash valuation
adjustments.
|
(c)
|
All 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)
|
1,104,000
|
|
|
—
|
|
|
—
|
|
Weighted average
price per Bbl
|
$
|
52.07
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collar contracts
(two-way collars)
|
|
|
|
|
|
Total volume
(Bbls)
|
184,000
|
|
|
—
|
|
|
—
|
|
Weighted average
price per Bbl
|
|
|
|
|
|
Ceiling (short
call)
|
$
|
60.50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Floor (long
put)
|
$
|
50.00
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collar contracts
combined with short puts (three-way collars)
|
|
|
|
|
|
Total volume
(Bbls)
|
1,748,000
|
|
|
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)
|
552,000
|
|
|
1,825,000
|
|
|
—
|
|
Weighted
average price per Bbl
|
$
|
65.00
|
|
|
$
|
65.00
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Oil contracts
(Midland basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total volume
(Bbls)
|
2,208,000
|
|
|
4,380,000
|
|
|
3,660,000
|
|
Weighted average
price per Bbl
|
$
|
(4.26)
|
|
|
$
|
(4.77)
|
|
|
$
|
(1.47)
|
|
|
|
|
|
|
|
Natural gas
contracts (Henry Hub)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (MMBtu)
|
2,760,000
|
|
|
—
|
|
|
—
|
|
Weighted
average price per MMBtu
|
$
|
2.91
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collar contracts
(two-way collars)
|
|
|
|
|
|
Total
volume (MMBtu)
|
1,104,000
|
|
|
2,372,500
|
|
|
—
|
|
Weighted
average price per MMBtu
|
|
|
|
|
|
Ceiling (short
call)
|
$
|
3.19
|
|
|
$
|
2.95
|
|
|
$
|
—
|
|
Floor (long
put)
|
$
|
2.75
|
|
|
$
|
2.65
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Natural gas
contracts (Waha basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (MMBtu)
|
1,104,000
|
|
|
2,190,000
|
|
|
2,196,000
|
|
Weighted
average price per MMBtu
|
$
|
(1.14)
|
|
|
$
|
(1.14)
|
|
|
$
|
(1.14)
|
|
Income Available to Common Shareholders. The Company
reported net income available to common shareholders of
$48.7 million for the three months
ended June 30, 2018 and Adjusted Income available to common
shareholders of $44.5 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, a non-GAAP
financial measure, (in thousands):
|
Three Months
Ended
|
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
Income available to
common stockholders
|
$
|
48,650
|
|
|
$
|
53,937
|
|
|
$
|
31,566
|
|
Change
in valuation allowance
|
(10,562)
|
|
|
(11,753)
|
|
|
(11,194)
|
|
Net
(gain) loss on derivatives, net of settlements
|
6,772
|
|
|
(3,143)
|
|
|
(6,995)
|
|
Change
in the fair value of share-based awards
|
(366)
|
|
|
799
|
|
|
(315)
|
|
Settled
share-based awards
|
—
|
|
|
—
|
|
|
4,128
|
|
Adjusted
Income
|
$
|
44,494
|
|
|
$
|
39,840
|
|
|
$
|
17,190
|
|
Adjusted Income per
fully diluted common share
|
$
|
0.21
|
|
|
$
|
0.20
|
|
|
$
|
0.09
|
|
|
|
Three Months
Ended
|
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
Net income
|
$
|
50,474
|
|
|
$
|
55,761
|
|
|
$
|
33,390
|
|
Net
(gain) loss on derivatives, net of settlements
|
8,572
|
|
|
(3,978)
|
|
|
(10,761)
|
|
Non-cash
stock-based compensation expense
|
1,164
|
|
|
2,143
|
|
|
499
|
|
Settled
share-based awards
|
—
|
|
|
—
|
|
|
6,351
|
|
Acquisition expense
|
1,767
|
|
|
548
|
|
|
2,373
|
|
Income
tax expense
|
481
|
|
|
495
|
|
|
322
|
|
Interest
expense
|
594
|
|
|
460
|
|
|
589
|
|
Depreciation, depletion and amortization
|
39,387
|
|
|
36,066
|
|
|
26,765
|
|
Accretion expense
|
206
|
|
|
218
|
|
|
208
|
|
Adjusted
EBITDA
|
$
|
102,645
|
|
|
$
|
91,713
|
|
|
$
|
59,736
|
|
Discretionary Cash Flow. Discretionary cash flow, a
non-GAAP measure(i), for the three months ended
June 30, 2018 was $100.9 million
and is reconciled to operating cash flow in the following table (in
thousands):
|
Three Months
Ended
|
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
$
|
50,474
|
|
|
$
|
55,761
|
|
|
$
|
33,390
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation, depletion and amortization
|
39,387
|
|
|
36,066
|
|
|
26,765
|
|
Accretion expense
|
206
|
|
|
218
|
|
|
208
|
|
Amortization of non-cash debt related items
|
588
|
|
|
453
|
|
|
589
|
|
Deferred
income tax expense
|
481
|
|
|
495
|
|
|
323
|
|
Net
(gain) loss on derivatives, net of settlements
|
8,572
|
|
|
(3,978)
|
|
|
(10,761)
|
|
Loss on
sale of other property and equipment
|
22
|
|
|
—
|
|
|
62
|
|
Non-cash
expense related to equity share-based awards
|
1,627
|
|
|
1,131
|
|
|
4,865
|
|
Change
in the fair value of liability share-based awards
|
(463)
|
|
|
1,012
|
|
|
1,982
|
|
Discretionary cash
flow
|
$
|
100,894
|
|
|
$
|
91,158
|
|
|
$
|
57,423
|
|
Changes
in working capital
|
8,978
|
|
|
4,512
|
|
|
(8,968)
|
|
Payments
to settle asset retirement obligations
|
(207)
|
|
|
(366)
|
|
|
(816)
|
|
Payments
to settle vested liability share-based awards
|
(1,901)
|
|
|
(3,089)
|
|
|
(4,511)
|
|
Net cash provided by
operating activities
|
$
|
107,764
|
|
|
$
|
92,215
|
|
|
$
|
43,128
|
|
Callon Petroleum
Company
|
Consolidated
Balance Sheets
|
(in thousands,
except par and per share values and share data)
|
|
|
June 30,
2018
|
|
December 31,
2017
|
ASSETS
|
Unaudited
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
509,146
|
|
|
$
|
27,995
|
|
Accounts
receivable
|
111,964
|
|
|
114,320
|
|
Fair value of
derivatives
|
11,569
|
|
|
406
|
|
Other current
assets
|
7,689
|
|
|
2,139
|
|
Total current
assets
|
640,368
|
|
|
144,860
|
|
Oil and natural gas
properties, full cost accounting method:
|
|
|
|
Evaluated
properties
|
3,814,242
|
|
|
3,429,570
|
|
Less accumulated
depreciation, depletion, amortization and impairment
|
(2,158,225)
|
|
|
(2,084,095)
|
|
Net evaluated oil and
natural gas properties
|
1,656,017
|
|
|
1,345,475
|
|
Unevaluated
properties
|
1,144,138
|
|
|
1,168,016
|
|
Total oil and natural
gas properties
|
2,800,155
|
|
|
2,513,491
|
|
Other property and
equipment, net
|
21,514
|
|
|
20,361
|
|
Restricted
investments
|
3,393
|
|
|
3,372
|
|
Deferred tax
asset
|
26
|
|
|
52
|
|
Deferred financing
costs
|
5,749
|
|
|
4,863
|
|
Fair value of
derivatives
|
2,299
|
|
|
—
|
|
Acquisition
deposit
|
28,500
|
|
|
900
|
|
Other assets,
net
|
5,322
|
|
|
5,397
|
|
Total
assets
|
$
|
3,507,326
|
|
|
$
|
2,693,296
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
193,981
|
|
|
$
|
162,878
|
|
Accrued
interest
|
11,351
|
|
|
9,235
|
|
Cash-settleable
restricted stock unit awards
|
1,781
|
|
|
4,621
|
|
Asset retirement
obligations
|
2,284
|
|
|
1,295
|
|
Fair value of
derivatives
|
35,948
|
|
|
27,744
|
|
Total current
liabilities
|
245,345
|
|
|
205,773
|
|
Senior secured
revolving credit facility
|
—
|
|
|
25,000
|
|
6.125% senior
unsecured notes due 2024, net of unamortized deferred financing
costs
|
595,552
|
|
|
595,196
|
|
6.375% senior
unsecured notes due 2026, net of unamortized deferred financing
costs
|
392,907
|
|
|
—
|
|
Asset retirement
obligations
|
7,782
|
|
|
4,725
|
|
Cash-settleable
restricted stock unit awards
|
1,900
|
|
|
3,490
|
|
Deferred tax
liability
|
2,431
|
|
|
1,457
|
|
Fair value of
derivatives
|
11,136
|
|
|
1,284
|
|
Other long-term
liabilities
|
665
|
|
|
405
|
|
Total
liabilities
|
1,257,718
|
|
|
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; 227,507,031 and
201,836,172 shares outstanding, respectively
|
2,275
|
|
|
2,018
|
|
Capital in excess of
par value
|
2,472,155
|
|
|
2,181,359
|
|
Accumulated
deficit
|
(224,837)
|
|
|
(327,426)
|
|
Total stockholders'
equity
|
2,249,608
|
|
|
1,855,966
|
|
Total liabilities and
stockholders' equity
|
$
|
3,507,326
|
|
|
$
|
2,693,296
|
|
Callon Petroleum
Company
|
Consolidated
Statements of Operations
|
(Unaudited; in
thousands, except per share data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
revenues:
|
|
|
|
|
|
|
|
Oil sales
|
$
|
122,613
|
|
|
$
|
72,885
|
|
|
$
|
237,898
|
|
|
$
|
144,893
|
|
Natural gas
sales
|
14,462
|
|
|
9,398
|
|
|
26,617
|
|
|
18,754
|
|
Total operating
revenues
|
137,075
|
|
|
82,283
|
|
|
264,515
|
|
|
163,647
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Lease operating
expenses
|
13,141
|
|
|
12,145
|
|
|
26,179
|
|
|
25,084
|
|
Production
taxes
|
7,539
|
|
|
4,820
|
|
|
16,002
|
|
|
10,723
|
|
Depreciation,
depletion and amortization
|
38,733
|
|
|
26,213
|
|
|
74,151
|
|
|
50,646
|
|
General and
administrative
|
8,289
|
|
|
6,430
|
|
|
17,057
|
|
|
11,636
|
|
Settled share-based
awards
|
—
|
|
|
6,351
|
|
|
—
|
|
|
6,351
|
|
Accretion
expense
|
206
|
|
|
208
|
|
|
424
|
|
|
392
|
|
Acquisition
expense
|
1,767
|
|
|
2,373
|
|
|
2,315
|
|
|
2,822
|
|
Total operating
expenses
|
69,675
|
|
|
58,540
|
|
|
136,128
|
|
|
107,654
|
|
Income from
operations
|
67,400
|
|
|
23,743
|
|
|
128,387
|
|
|
55,993
|
|
Other (income)
expenses:
|
|
|
|
|
|
|
|
Interest expense, net
of capitalized amounts
|
594
|
|
|
589
|
|
|
1,053
|
|
|
1,254
|
|
(Gain) loss on
derivative contracts
|
16,554
|
|
|
(10,494)
|
|
|
21,036
|
|
|
(25,797)
|
|
Other
income
|
(703)
|
|
|
(64)
|
|
|
(914)
|
|
|
(772)
|
|
Total other (income)
expense
|
16,445
|
|
|
(9,969)
|
|
|
21,175
|
|
|
(25,315)
|
|
Income before income
taxes
|
50,955
|
|
|
33,712
|
|
|
107,212
|
|
|
81,308
|
|
Income tax
expense
|
481
|
|
|
322
|
|
|
976
|
|
|
789
|
|
Net income
|
50,474
|
|
|
33,390
|
|
|
106,236
|
|
|
80,519
|
|
Preferred stock
dividends
|
(1,824)
|
|
|
(1,824)
|
|
|
(3,647)
|
|
|
(3,647)
|
|
Income available to
common stockholders
|
$
|
48,650
|
|
|
$
|
31,566
|
|
|
$
|
102,589
|
|
|
$
|
76,872
|
|
Income per common
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.23
|
|
|
$
|
0.16
|
|
|
$
|
0.50
|
|
|
$
|
0.38
|
|
Diluted
|
$
|
0.23
|
|
|
$
|
0.16
|
|
|
$
|
0.50
|
|
|
$
|
0.38
|
|
Shares used in
computing income per common share:
|
|
|
|
|
|
|
|
Basic
|
210,698
|
|
|
201,386
|
|
|
206,309
|
|
|
201,220
|
|
Diluted
|
211,465
|
|
|
201,905
|
|
|
207,027
|
|
|
201,823
|
|
Callon Petroleum
Company
|
Consolidated
Statements of Cash Flows
|
(Unaudited; in
thousands)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
50,474
|
|
|
$
|
33,390
|
|
|
$
|
106,236
|
|
|
$
|
80,519
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
39,387
|
|
|
26,765
|
|
|
75,453
|
|
|
51,697
|
|
Accretion
expense
|
206
|
|
|
208
|
|
|
424
|
|
|
392
|
|
Amortization of
non-cash debt related items
|
588
|
|
|
589
|
|
|
1,041
|
|
|
1,254
|
|
Deferred income tax
expense
|
481
|
|
|
323
|
|
|
976
|
|
|
789
|
|
Net (gain) loss on
derivatives, net of settlements
|
8,572
|
|
|
(10,761)
|
|
|
4,594
|
|
|
(28,555)
|
|
Loss on sale of other
property and equipment
|
22
|
|
|
62
|
|
|
22
|
|
|
62
|
|
Non-cash expense
related to equity share-based awards
|
1,627
|
|
|
4,865
|
|
|
2,758
|
|
|
5,795
|
|
Change in the fair
value of liability share-based awards
|
(463)
|
|
|
1,982
|
|
|
549
|
|
|
1,691
|
|
Payments to settle
asset retirement obligations
|
(207)
|
|
|
(816)
|
|
|
(573)
|
|
|
(1,581)
|
|
Changes in current
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
10,447
|
|
|
(3,744)
|
|
|
2,380
|
|
|
(7,810)
|
|
Other current
assets
|
(5,611)
|
|
|
(874)
|
|
|
(5,550)
|
|
|
(298)
|
|
Current
liabilities
|
4,123
|
|
|
(4,223)
|
|
|
17,061
|
|
|
5,680
|
|
Other long-term
liabilities
|
200
|
|
|
120
|
|
|
287
|
|
|
120
|
|
Other assets,
net
|
(181)
|
|
|
(247)
|
|
|
(689)
|
|
|
(770)
|
|
Payments to settle
vested liability share-based awards
|
(1,901)
|
|
|
(4,511)
|
|
|
(4,990)
|
|
|
(13,173)
|
|
Net cash provided by
operating activities
|
107,764
|
|
|
43,128
|
|
|
199,979
|
|
|
95,812
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
(187,040)
|
|
|
(79,936)
|
|
|
(298,370)
|
|
|
(146,090)
|
|
Acquisitions
|
(6,469)
|
|
|
(58,004)
|
|
|
(45,392)
|
|
|
(706,489)
|
|
Acquisition
deposit
|
(28,500)
|
|
|
—
|
|
|
(27,600)
|
|
|
46,138
|
|
Proceeds from sale of
assets
|
3,077
|
|
|
—
|
|
|
3,077
|
|
|
—
|
|
Net cash used in
investing activities
|
(218,932)
|
|
|
(137,940)
|
|
|
(368,285)
|
|
|
(806,441)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Borrowings on senior
secured revolving credit facility
|
85,000
|
|
|
—
|
|
|
165,000
|
|
|
—
|
|
Payments on senior
secured revolving credit facility
|
(160,000)
|
|
|
—
|
|
|
(190,000)
|
|
|
—
|
|
Issuance of 6.125%
senior unsecured notes due 2024
|
—
|
|
|
200,000
|
|
|
—
|
|
|
200,000
|
|
Premium on the
issuance of 6.125% senior unsecured notes due 2024
|
—
|
|
|
8,250
|
|
|
—
|
|
|
8,250
|
|
Issuance of 6.375%
senior unsecured notes due 2026
|
400,000
|
|
|
—
|
|
|
400,000
|
|
|
—
|
|
Issuance of common
stock
|
288,357
|
|
|
—
|
|
|
288,357
|
|
|
—
|
|
Payment of preferred
stock dividends
|
(1,824)
|
|
|
(1,823)
|
|
|
(3,647)
|
|
|
(3,647)
|
|
Payment of deferred
financing costs
|
(8,664)
|
|
|
(6,765)
|
|
|
(8,664)
|
|
|
(6,765)
|
|
Tax withholdings
related to restricted stock units
|
(1,028)
|
|
|
(974)
|
|
|
(1,589)
|
|
|
(1,053)
|
|
Net cash provided by
financing activities
|
601,841
|
|
|
198,688
|
|
|
649,457
|
|
|
196,785
|
|
Net change in cash
and cash equivalents
|
490,673
|
|
|
103,876
|
|
|
481,151
|
|
|
(513,844)
|
|
Balance, beginning of
period
|
18,473
|
|
|
35,273
|
|
|
27,995
|
|
|
652,993
|
|
Balance, end of
period
|
$
|
509,146
|
|
|
$
|
139,149
|
|
|
$
|
509,146
|
|
|
$
|
139,149
|
|
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 useful as an indicator of an oil and natural gas
exploration and production company's ability to internally fund
exploration and development activities and to service or incur
additional debt. The Company also 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 may not relate to the period in which the operating
activities occurred. Discretionary cash flow is calculated using
net income (loss) adjusted for certain items including
depreciation, depletion and amortization, the impact of financial
derivatives (including the mark-to-market effects, net of cash
settlements and premiums paid or received related to our financial
derivatives), accretion expense, restructuring and other
non-recurring costs, deferred income taxes and other non-cash
income items.
- 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 above
details all adjustments to G&A on a GAAP basis to arrive at
Adjusted G&A.
- We believe 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
above. Prior to being tax-effected and excluded, the amounts
reflected in the determination of Adjusted Income and Adjusted
Income per diluted share above were computed in accordance with
GAAP.
- We calculate 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, we believe 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 we present may not be
comparable to similarly titled measures of other companies.
- We 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 account for derivative
contracts and hedges and include their effects in revenue. We
believe Adjusted Total Revenue is also useful to investors as a
measure of the actual cash inflows generated during the
period.
Earnings Call Information
The Company will host a conference call on Tuesday,
August 7, 2018, to discuss second quarter 2018 financial and
operating results.
Please join Callon Petroleum Company via the Internet for a
webcast of the conference call:
Date/Time:
|
Tuesday,
August 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:
|
8210968
|
An archive of the conference call webcast will be available at
www.callon.com under the "Investors" section of the
website.
About Callon Petroleum
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-second-quarter-2018-results-300692576.html
SOURCE Callon Petroleum Company