HOUSTON, May 11, 2020 /PRNewswire/ -- Callon Petroleum
Company (NYSE: CPE) ("Callon" or the "Company") today reported
results of operations for the three months ended March 31,
2020.
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.
Recent Actions
In response to the recent commodity price collapse and the
global impact of the novel coronavirus pandemic (COVID-19), Callon
has taken a number of steps to ensure the safety of our team
members, their families, and our service providers, as well as
preserve the integrity and value of our business. Some of these
recent actions include:
- Instituted updated safety procedures for all field employees
and enhanced communication with our current vendors to ensure safe
social distancing.
- Material reductions in general and administrative costs
including: 35% compensation reduction for board members, 35%
reduction in CEO target cash compensation, and at least 25%
reduction in target cash compensation by all other officers. This
is in addition to previously planned staff reductions and a
suspension of hiring activity, contributing to an incremental 15%
reduction from post-merger integration targets.
- The Company also announced today that it has further reduced
activity, including the suspension of all completion activity in
April and moving to one active drilling rig by mid-May. Callon
currently forecasts total operational capital expenditures of
approximately $250 - $325 million over the remaining three quarters of
2020, assuming resumption of completion activities in the second
half of the year. The ultimate timing and level of activity will
continue to be based on maximizing free cash flow in 2020 and
2021.
Recent Highlights
- Delivered production of approximately 101 Mboe/d (64% oil),
above the high end of guidance, for the first quarter of 2020
- Realized fully diluted earnings per share of $0.55, adjusted income per share of $0.12, net income of $216.6 million, and adjusted EBITDA of
$217.5 million(1) for the
first quarter of 2020
- Achieved lease operating expense ("LOE") per Boe of
$5.70 for the first quarter of 2020,
an improvement of nearly 14% over the comparable three month period
ended March 31, 2019
- Enhanced corporate liquidity position through incremental
hedging and conversion of previous instruments to NYMEX oil swaps,
basis hedges, and incremental gas hedges resulting in a mark-to
market value of $245 million as of
May 1, 2020
- Achieved new peak efficiency gains with recent Eagle Ford and
Midland Basin projects delivering average daily completion rates of
more than 2,000 lateral feet per day with completion costs of
approximately $250 per lateral
foot
- On May 7, completed the spring
borrowing base redetermination for Callon's senior secured credit
facility resulting in a facility commitment and elected borrowing
base of $1.7 billion along with a new
secured leverage ratio covenant to temporarily replace the previous
total leverage ratio covenant until March
31, 2022
Joe Gatto, President and Chief
Executive Officer commented, "Beginning in early March, our team
began taking decisive action to align our activity levels with the
current economic environment. We also quickly moved to enhance our
cash flow protection through strategic hedging initiatives which
provide support as we transition the business to lower levels of
activity. Additionally, the leadership team, along with our Board,
has made the decision to pare costs through voluntary G&A
reductions."
He continued, "Our operational and financial performance since
the beginning of the year clearly demonstrates the collective
effort of our organization to execute on our post-merger
integration plan and drive the synergies that will position us to
manage through a challenging time for our industry. We have
developed numerous scenarios that support returning to a modest
level of completion activity in the next few months, and our
decisions will be based on our outlook for sustainable, unhedged
returns on capital that generate incremental value. These scenarios
will also be governed by the optimization of free cash
flow(2) for debt reduction over the balance of the year
while preparing ourselves for a solid foundation into 2021."
Credit Facility and Liquidity
Callon recently completed the spring redetermination for its
senior secured credit facility. The borrowing base and elected
commitment were both set at $1.7
billion, relative to a previous elected commitment of
$2.0 billion. As of March 31, the drawn balance on the facility was
$1.35 billion. Other key elements of
the credit facility following the redetermination process
include:
- Suspension of the total leverage ratio test until March 31, 2022
- Addition of a secured leverage ratio test of 3.0x
- Temporary waiver of the current ratio test
- Allowance for $400 million of
junior secured debt without any reduction to the borrowing
base
Operations Update
At March 31, 2020, Callon had 1,439 gross (1,268 net)
horizontal wells producing from established flow units in the
Permian Basin and Eagle Ford Shale. Net daily production for the
three months ended March 31, 2020 grew 150% to 101.0 Mboe/d
(64% oil), as compared to the same period of 2019.
For the three months ended March 31, 2020, Callon drilled
40 gross (39.4 net) horizontal wells and placed a combined 36 gross
(30.8 net) horizontal wells on production. Of the wells placed on
production, 61% were in the Eagle Ford Shale with the
remaining 39% in the Permian Basin.
Callon continued to post meaningful gains in efficiency driven
by the significant shift to simultaneous operations across the
entirety of the asset base. Some of the operational highlights
include:
- An improvement of more than 80% in lateral feet completed per
crew per day in the Midland Basin (as compared to the first quarter
of 2019) with recent projects exceeding 2,000 lateral feet per
day
- Recent completion costs in the Midland Basin and Eagle Ford
Shale approaching roughly $250 per
lateral foot in both areas, representing year over year
improvements of roughly 50% and 33% respectively
- A reduction in average drilling days in the Delaware West area
(legacy Carrizo properties) of more than 10%
- An increase in drilled footage per day in the Delaware East
area (Ward County) of roughly 24%
compared to 2019
- Results from recent mega-pad development in the Delaware East
region are exceeding estimates for early time oil production while
maintaining higher pressures from both the Lower and Upper Wolfcamp
A utilizing restricted choke management techniques
The Company recently reduced development activity, relative to
the plan previous communicated in the update provided on
March 17, in response to further
weakness in the commodity prices. All completion activity was
suspended in April after the completion of recent projects in the
Delaware and Midland Basins.
Operations has also reduced drilling activity and expects to be
transitioning to a single rig by mid-May.
Recently, Callon entered into additional marketing arrangements
to ensure placement of its production volumes. Currently,
approximately 60,000 gross barrels of oil per day ("Bbl/d") are
covered by term sales agreements with an agreement for an
additional 20,000 to 25,000 barrels currently under negotiation.
Additionally, the Company holds 15,000 Bbls/d of firm transport
capacity and will add another 10,000 Bbls/d during the third
quarter to support movement of oil volumes from the Permian Basin
to Gulf Coast markets.
Callon has been closely monitoring field level economics to make
decisions regarding voluntary production curtailment decisions. The
Company has shut-in approximately 1,500 Bbl/d (gross) through April
and expects to reach over 3,000 Bbl/d (gross) during May. June
volumes are currently under evaluation. In addition, Callon has
deferred the flowback of a recently completed project in the
WildHorse area until expected netbacks improve.
Capital Expenditures
For the three months ended March 31, 2020, Callon incurred
$277.6 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 (in thousands):
|
|
Three Months Ended
March 31, 2020
|
|
|
Operational
|
|
Capitalized
|
|
Capitalized
|
|
Total
Capital
|
|
|
Capital
(a)
|
|
Interest
|
|
G&A
|
|
Expenditures
|
Cash basis
(b)
|
|
$
|
197,483
|
|
|
$
|
19,395
|
|
|
$
|
7,570
|
|
|
$
|
224,448
|
|
Timing adjustments
(c)
|
|
84,594
|
|
|
4,590
|
|
|
—
|
|
|
89,184
|
|
Non-cash
items
|
|
(4,437)
|
|
|
—
|
|
|
(168)
|
|
|
(4,605)
|
|
Accrual
basis
|
|
$
|
277,640
|
|
|
$
|
23,985
|
|
|
$
|
7,402
|
|
|
$
|
309,027
|
|
|
|
(a)
|
Includes seismic,
land, technology, and other items.
|
(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.
|
Operating and Financial Results
The following table presents summary information for the periods
indicated:
|
|
Three Months
Ended
|
|
|
March 31,
2020
|
|
December 31,
2019
|
|
March 31,
2019
|
Net
production
|
|
|
|
|
|
|
Oil
(MBbls)
|
|
5,847
|
|
|
3,234
|
|
|
2,858
|
|
Natural gas
(MMcf)
|
|
9,793
|
|
|
5,530
|
|
|
4,619
|
|
NGLs
(MBbls)
|
|
1,707
|
|
|
135
|
|
|
—
|
|
Total barrels of oil
equivalent (MBoe)
|
|
9,186
|
|
|
4,291
|
|
|
3,628
|
|
Total daily
production (Boe/d)
|
|
100,955
|
|
|
46,641
|
|
|
40,311
|
|
Oil as % of total
daily production
|
|
64
|
%
|
|
75
|
%
|
|
79
|
%
|
Average realized
sales price
(excluding impact of
settled derivatives)
|
|
|
|
|
|
|
Oil (per
Bbl)
|
|
$45.45
|
|
|
$56.61
|
|
|
$49.37
|
|
Natural gas (per
Mcf)
|
|
0.62
|
|
|
1.98
|
|
|
2.59
|
|
NGLs (per
Bbl)
|
|
10.62
|
|
|
15.37
|
|
|
—
|
|
Total (per
BOE)
|
|
31.56
|
|
|
45.70
|
|
|
42.18
|
|
Average realized
sales price
(including impact of
settled derivatives)
|
|
|
|
|
|
|
Oil (per
Bbl)
|
|
$48.90
|
|
|
$55.33
|
|
|
$48.83
|
|
Natural gas (per
Mcf)
|
|
1.13
|
|
|
2.12
|
|
|
2.86
|
|
NGLs (per
Bbl)
|
|
10.62
|
|
|
15.37
|
|
|
—
|
|
Total (per
Boe)
|
|
34.30
|
|
|
44.92
|
|
|
42.11
|
|
Revenues
(in thousands)
|
|
|
|
|
|
|
Oil
|
|
$265,767
|
|
|
$183,071
|
|
|
$141,098
|
|
Natural
gas
|
|
6,029
|
|
|
10,949
|
|
|
11,949
|
|
NGLs
|
|
18,123
|
|
|
2,075
|
|
|
—
|
|
Total
revenues
|
|
289,919
|
|
|
196,095
|
|
|
153,047
|
|
Additional per Boe
data
|
|
|
|
|
|
|
Sales price
(a)
|
|
$31.56
|
|
|
$45.70
|
|
|
$42.18
|
|
Lease operating
expense
|
|
5.70
|
|
|
5.90
|
|
|
6.63
|
|
Production
taxes
|
|
2.14
|
|
|
2.06
|
|
|
2.98
|
|
Gathering,
transportation and processing
|
|
1.57
|
|
|
—
|
|
|
—
|
|
Operating
margin
|
|
$22.15
|
|
|
$37.74
|
|
|
$32.57
|
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization
|
|
$14.31
|
|
|
$14.30
|
|
|
$16.59
|
|
Adjusted
G&A (b)
|
|
|
|
|
|
|
Cash component
(c)
|
|
$1.20
|
|
|
$2.41
|
|
|
$2.28
|
|
Non-cash
component
|
|
$0.41
|
|
|
0.53
|
|
|
0.44
|
|
|
|
(a)
|
Excludes the impact
of settled derivatives.
|
(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)
|
Excludes the
amortization of equity-settled, share-based incentive
awards.
|
Total Revenue. For the quarter ended
March 31, 2020, Callon reported total revenue of $289.9 million and total revenue including the
gain or loss from the settlement of derivative contracts ("Adjusted
Total Revenue,"(1)) of $315.0
million, reflecting the impact of a $25.1 million gain from the settlement of
derivative contracts. Average daily production for the quarter was
101.0 Mboe/d, compared to average daily production of 46.6 Mboe/d
in the fourth quarter of 2019. Average realized prices, including
and excluding the effects of hedging, are detailed above.
Hedging impacts. For the quarter ended
March 31, 2020, the net gain (loss) on commodity derivative
instruments includes the following (in thousands):
|
Three Months
Ended
March 31, 2020
|
Gain (loss) on oil
derivatives
|
$257,323
|
|
Gain (loss) on
natural gas derivatives
|
(6,829)
|
|
Gain (loss) on total
commodity derivatives
|
$250,494
|
|
For the quarter ended March 31, 2020, the cash received
(paid) for commodity derivative settlements includes the following
(in thousands):
|
Three Months
Ended
March 31, 2020
|
Cash paid on oil
derivatives
|
($1,777)
|
|
Cash received on gas
derivatives
|
4,390
|
|
Cash received for
commodity derivative settlements
|
$2,613
|
|
Lease Operating Expenses, including workover
("LOE"). LOE per Boe for the three months ended
March 31, 2020 was $5.70 per
Boe, compared to LOE of $5.90 per Boe
in the fourth quarter of 2019. LOE on a per unit basis is fairly
consistent with the previous quarter.
Production Taxes, including ad valorem
taxes. Production taxes were $2.14 per Boe for the three months ended
March 31, 2020, representing approximately 6.8% of total
revenue before the impact of derivative settlements.
Gathering, Transportation and Processing
Expenses. Gathering, transportation and processing costs
for the three months ended March 31,
2020 were $14.4 million. The
increase is primarily due to the assumption of processing
agreements in the Carrizo acquisition and certain contract
modifications effective January 1,
2020. As such, the Company now records contractual fees
associated with gathering, processing, treating and compression, as
well as any transportation fees incurred to deliver the product to
the purchaser, as gathering, transportation and processing expense.
These fees were historically recorded as a reduction of revenue
depending on when control transferred to the purchaser.
Depreciation, Depletion and Amortization
("DD&A"). DD&A for the three months ended
March 31, 2020 was consistent at $14.31 per Boe compared to $14.30 per Boe in the fourth quarter of
2019.
General and Administrative
("G&A"). G&A was $8.3 million, or $0.91 per Boe, and G&A, excluding certain
non-cash incentive share-based compensation valuation adjustments,
("Adjusted G&A", a non-GAAP measure1) was
$14.8 million, or $1.62 per Boe, for the three months ended
March 31, 2020 and $12.6
million, or $2.94 per Boe, for
the fourth quarter of 2019. The cash component of Adjusted G&A
was $11.1 million, or $1.20 per Boe, for the three months ended
March 31, 2020 compared to $10.3
million, or $2.41 per Boe, for
the fourth quarter of 2019.
For the three months ended March 31, 2020, G&A and
Adjusted G&A, which excludes the amortization of equity-settled
and share-based incentive awards, are calculated as follows (in
thousands):
|
Three Months
Ended
March 31, 2020
|
Total G&A
expense
|
$8,325
|
|
Change
in the fair value of liability share-based awards
(non-cash)
|
6,516
|
|
Adjusted G&A –
total
|
14,841
|
|
Restricted stock share-based compensation (non-cash)
|
(3,776)
|
|
Adjusted G&A –
cash component
|
$11,065
|
|
Income Tax Expense. Callon provides for income taxes
at the statutory rate of 21% adjusted for permanent
differences expected to be realized. Callon recorded income tax
expense of $64.0 million for the
three months ended March 31, 2020, compared to income tax
expense of $5.9 million for the three
months ended December 31, 2019. The change in income tax
expense is largely proportional to the amount of income before
income taxes generated in the respective periods.
Outlook
Due to uncertain nature of the current commodity markets and the
underlying supply and demand landscape, Callon will not be
providing full year guidance for 2020. As market dynamics evolve in
the upcoming months, the Company will be in a better position to
comment on the details surrounding long term expectations. In the
interim, Callon believes the following commentary may provide
additional insight to investors:
- Callon currently expects to spend less than $100 million in operational capital in the second
quarter of 2020
- Second quarter production is currently expected to be in excess
of 105 Mboe/d, including the impact of planned curtailments through
May 2020
- Assuming an improvement in benchmark commodity price and basis
expectations for 2H20 and outlook for 2021, a potential return to
modest completion activity at some point during 2H20 after
suspending activity in April (associated total operational capital
scenarios of $250 - $325 million for the remaining nine months of
2020, which includes the $100 million
planned for the second quarter)
- We are not considering a scenario in which total operational
capital for 2020 would exceed $525 -
$600 million following a $278 million spend in the first quarter that
converted a large number of uncompleted wells from year-end 2019 to
production
- The Company expects to exit the second quarter with an
inventory of approximately 70 drilled, uncompleted wells that will
provide a potential path for capital efficient production additions
in the coming months
- The Company expects to generate between $25 million and $100
million of free cash flow(2) during the final
three quarters of 2020 under the range of "return to activity"
scenarios assuming average WTI oil prices of $25 - $30/Bbl over
that period
- Under these potential scenarios, full year 2020 oil production
is estimated to be inline or above 1Q20 volumes and 2021
maintenance capital relative to fourth quarter 2020 volumes is
estimated to be below $500
million
- First quarter LOE and cash G&A expenses, on an absolute
basis, are expected to be the highest of any quarter for the full
year
First Quarter 2020 Earnings Conference Call
The Company has posted presentation slides accompanying this
earnings release and an associated, pre-recorded webcast discussion
on the Company's website. The presentation slides and associated
webcast can both be found at www.callon.com located on the
"News/Events" page within the Investors section on the site. The
Company's previously scheduled conference call to discuss first
quarter results on Monday, May 11,
2020, at 10:00 am CDT is
canceled.
Hedge Portfolio Summary
The following table summarizes Callon's open derivative
positions as of March 31, 2020 for the periods indicated:
|
For the
Remainder
|
|
|
For the Full
Year
|
|
Oil contracts
(WTI)
|
of
2020
|
|
|
of
2021
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (Bbls)
|
13,085,720
|
|
|
|
—
|
|
|
Weighted
average price per Bbl
|
$42.11
|
|
|
|
$—
|
|
|
Swap
contracts with short puts
|
|
|
|
|
|
Total
volume (Bbls)
|
1,650,000
|
|
|
|
—
|
|
|
Weighted
average price per Bbl
|
|
|
|
|
|
Swap
|
$56.06
|
|
|
|
$—
|
|
|
Floor
(short put)
|
$42.50
|
|
|
|
$—
|
|
|
Short
call contracts
|
|
|
|
|
|
Total
volume (Bbls)
|
2,750,000
|
|
(1)
|
|
4,825,300
|
|
(1)
|
Weighted
average price per Bbl
|
$45.59
|
|
|
|
$63.62
|
|
|
|
|
|
|
|
|
Oil contracts
(Brent ICE)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (Bbls)
|
366,000
|
|
|
|
—
|
|
|
Weighted
average price per Bbl
|
$46.15
|
|
|
|
$—
|
|
|
|
|
|
|
|
|
Oil contracts
(Midland basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (Bbls)
|
6,574,800
|
|
|
|
4,015,100
|
|
|
Weighted
average price per Bbl
|
($1.24)
|
|
|
|
$0.40
|
|
|
|
|
|
|
|
|
Oil contracts
(Argus Houston MEH basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (Bbls)
|
4,612,205
|
|
|
|
—
|
|
|
Weighted
average price per Bbl
|
($0.24)
|
|
|
|
$—
|
|
|
Oil contracts
(Argus Houston MEH swaps)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total
volume (Bbls)
|
504,500
|
|
|
|
—
|
|
|
Weighted
average price per Bbl
|
$58.22
|
|
|
|
$—
|
|
|
|
|
|
|
|
|
Natural gas
contracts (Henry Hub)
|
|
|
|
|
|
Collar contracts (three-way collars)
|
|
|
|
|
|
Total volume
(MMBtu)
|
3,665,000
|
|
|
|
1,350,000
|
|
|
Weighted average price
per MMBtu
|
|
|
|
|
|
Ceiling (short call)
|
$2.74
|
|
|
|
$2.70
|
|
|
Floor (long put)
|
$2.48
|
|
|
|
$2.42
|
|
|
Floor (short put)
|
$2.00
|
|
|
|
$2.00
|
|
|
Swap
contracts
|
|
|
|
|
|
Total volume
(MMBtu)
|
9,170,000
|
|
|
|
—
|
|
|
Weighted average price
per MMBtu
|
$2.20
|
|
|
|
$—
|
|
|
Short
call contracts
|
|
|
|
|
|
Total volume
(MMBtu)
|
9,075,000
|
|
|
|
7,300,000
|
|
|
Weighted average price
per MMBtu
|
$3.50
|
|
|
|
$3.09
|
|
|
|
|
|
|
|
|
Natural gas
contracts (Waha basis differential)
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
Total volume
(MMBtu)
|
18,982,000
|
|
|
|
—
|
|
|
Weighted average price
per MMBtu
|
($1.08)
|
|
|
|
$—
|
|
|
|
|
(1)
|
Premiums from the
sale of call options were used to increase the fixed price of
certain simultaneously executed price swaps.
|
Adjusted Income and Adjusted EBITDA. The
Company reported income available to common stockholders of
$216.6 million, or $0.55 per fully diluted share, for the three months ended
March 31, 2020, and Adjusted Income available to common
stockholders of $46.7 million, or
$0.12 per fully diluted share. The
following tables reconcile the Company's income (loss) available to
common stockholders to Adjusted Income, and the Company's net
income (loss) to Adjusted EBITDA:
|
Three Months
Ended
|
|
March 31,
2020
|
|
December 31,
2019
|
|
March 31,
2019
|
|
(In thousands
except per share data)
|
Income (loss)
available to common stockholders
|
$216,565
|
|
|
($23,543)
|
|
|
($21,367)
|
|
(Gain) loss on
derivative contracts
|
(251,969)
|
|
|
30,694
|
|
|
67,260
|
|
Gain (loss) on
commodity derivative settlements, net
|
25,126
|
|
|
(3,353)
|
|
|
(290)
|
|
Non-cash stock-based
compensation expense
|
(2,972)
|
|
|
3,390
|
|
|
6,426
|
|
Merger and
integration expense
|
15,830
|
|
|
68,420
|
|
|
—
|
|
Other (income)
expense
|
(1,029)
|
|
|
—
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
4,881
|
|
|
—
|
|
Tax effect on
adjustments above
|
45,153
|
|
|
(21,847)
|
|
|
(15,413)
|
|
Adjusted Income
(1)
|
$46,704
|
|
|
$58,642
|
|
|
$36,616
|
|
Adjusted Income per
fully diluted common share (1)
|
$0.12
|
|
|
$0.24
|
|
|
$0.16
|
|
|
Three Months
Ended
|
|
March 31,
2020
|
|
December 31,
2019
|
|
March 31,
2019
|
|
(In
thousands)
|
Net income
(loss)
|
$216,565
|
|
|
($23,543)
|
|
|
($19,543)
|
|
(Gain)
loss on derivative contracts
|
(251,969)
|
|
|
30,694
|
|
|
67,260
|
|
Gain
(loss) on commodity derivative settlements, net
|
25,126
|
|
|
(3,353)
|
|
|
(290)
|
|
Non-cash
stock-based compensation expense
|
(2,972)
|
|
|
3,390
|
|
|
6,426
|
|
Merger
and integration expense
|
15,830
|
|
|
68,420
|
|
|
—
|
|
Other
(income) expense
|
(1,029)
|
|
|
145
|
|
|
157
|
|
Income
tax (benefit) expense
|
64,048
|
|
|
5,857
|
|
|
(5,149)
|
|
Interest
expense
|
20,478
|
|
|
689
|
|
|
738
|
|
Depreciation, depletion and amortization
|
131,463
|
|
|
63,198
|
|
|
60,913
|
|
Loss on
extinguishment of debt
|
—
|
|
|
4,881
|
|
|
—
|
|
Adjusted EBITDA
(1)
|
$217,540
|
|
|
$150,378
|
|
|
$110,512
|
|
Adjusted Discretionary Cash Flow. Operating cash
flow was $191.7 million and adjusted
discretionary cash flow, a non-GAAP measure(1), was
$176.9 million for the three months
ended March 31, 2020. Adjusted discretionary cash flow is
reconciled to operating cash flow in the following table:
|
Three Months
Ended
|
|
March 31,
2020
|
|
December 31,
2019
|
|
March 31,
2019
|
|
(In
thousands)
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
(loss)
|
$216,565
|
|
|
($23,543)
|
|
|
($19,543)
|
|
Adjustments to
reconcile net income to cash provided by
operating activities:
|
|
|
|
|
|
Depreciation, depletion and amortization
|
131,463
|
|
|
63,198
|
|
|
60,913
|
|
Amortization of non-cash debt related items
|
407
|
|
|
689
|
|
|
738
|
|
Deferred
income tax (benefit) expense
|
64,048
|
|
|
5,857
|
|
|
(5,149)
|
|
(Gain)
loss on derivatives, net of settlements
|
(251,969)
|
|
|
30,694
|
|
|
67,260
|
|
Cash
(paid) received for commodity derivative settlements,
net
|
2,613
|
|
|
(3,353)
|
|
|
(290)
|
|
(Gain)
loss on sale of other property and equipment
|
—
|
|
|
(126)
|
|
|
28
|
|
Non-cash
stock-based compensation expense
|
(2,972)
|
|
|
3,417
|
|
|
6,426
|
|
Non-cash
loss on early extinguishment of debt
|
—
|
|
|
4,881
|
|
|
—
|
|
Merger
and integration expense
|
15,830
|
|
|
68,420
|
|
|
—
|
|
Other,
net
|
890
|
|
|
—
|
|
|
—
|
|
Adjusted
discretionary cash flow (1)
|
$176,875
|
|
|
$150,134
|
|
|
$110,383
|
|
Changes
in working capital
|
31,404
|
|
|
58,587
|
|
|
(33,864)
|
|
Payments
to settle asset retirement obligations
|
—
|
|
|
(2,723)
|
|
|
(664)
|
|
Merger
and integration expense
|
(15,830)
|
|
|
(68,420)
|
|
|
—
|
|
Payments
to settle vested liability share-based awards
|
(754)
|
|
|
—
|
|
|
(1,296)
|
|
Net cash provided by
operating activities
|
$191,695
|
|
|
$137,578
|
|
|
$74,559
|
|
Adjusted Total Revenue. Adjusted total
revenue(1) for the three months ended March 31,
2020 was $315.0 million and is
reconciled to total operating revenues in the following table:
|
|
Three Months
Ended
|
|
|
March 31,
2020
|
|
December 31,
2019
|
|
March 31,
2019
|
|
|
(In
thousands)
|
Operating
Revenues
|
|
|
|
|
|
|
Oil
|
|
$265,767
|
|
$183,071
|
|
$141,098
|
Natural
gas
|
|
6,029
|
|
10,949
|
|
11,949
|
Natural gas
liquids
|
|
18,123
|
|
2,075
|
|
—
|
Total operating
revenues
|
|
$289,919
|
|
$196,095
|
|
$153,047
|
Gain (loss) on
commodity derivative settlements, net
|
|
25,126
|
|
(3,353)
|
|
(290)
|
Adjusted total
revenue
|
|
$315,045
|
|
$192,742
|
|
$152,757
|
Callon Petroleum
Company Consolidated Balance Sheets (In
thousands, except par and per share
data) (Unaudited)
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$14,800
|
|
|
$13,341
|
|
Accounts receivable,
net
|
|
93,006
|
|
|
209,463
|
|
Fair value of
derivatives
|
|
224,665
|
|
|
26,056
|
|
Other current
assets
|
|
24,280
|
|
|
19,814
|
|
Total current
assets
|
|
356,751
|
|
|
268,674
|
|
Oil and natural gas
properties, full cost accounting method:
|
|
|
|
|
Evaluated
properties
|
|
5,036,095
|
|
|
4,682,994
|
|
Unevaluated
properties
|
|
1,809,104
|
|
|
1,986,124
|
|
Total oil and natural
gas properties, net
|
|
6,845,199
|
|
|
6,669,118
|
|
Operating lease
right-of-use assets
|
|
56,050
|
|
|
63,908
|
|
Other property and
equipment, net
|
|
33,216
|
|
|
35,253
|
|
Deferred tax
asset
|
|
51,250
|
|
|
115,720
|
|
Deferred financing
costs
|
|
21,383
|
|
|
22,233
|
|
Fair value of
derivatives
|
|
1,983
|
|
|
9,216
|
|
Other assets,
net
|
|
14,129
|
|
|
10,716
|
|
Total
assets
|
|
$7,379,961
|
|
|
$7,194,838
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$525,326
|
|
|
$511,622
|
|
Operating lease
liabilities
|
|
37,686
|
|
|
42,858
|
|
Fair value of
derivatives
|
|
4,851
|
|
|
71,197
|
|
Other current
liabilities
|
|
15,905
|
|
|
26,570
|
|
Total current
liabilities
|
|
583,768
|
|
|
652,247
|
|
Long-term
debt
|
|
3,250,912
|
|
|
3,186,109
|
|
Operating lease
liabilities
|
|
35,746
|
|
|
37,088
|
|
Asset retirement
obligations
|
|
50,531
|
|
|
48,860
|
|
Deferred tax
liability
|
|
—
|
|
|
—
|
|
Fair value of
derivatives
|
|
4,257
|
|
|
32,695
|
|
Other long-term
liabilities
|
|
11,844
|
|
|
14,531
|
|
Total
liabilities
|
|
3,937,058
|
|
|
3,971,530
|
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock, $0.01 par
value, 525,000,000 shares authorized; 396,738,180 and
396,600,022 shares outstanding, respectively
|
|
3,967
|
|
|
3,966
|
|
Capital in excess of
par value
|
|
3,201,105
|
|
|
3,198,076
|
|
Retained
earnings
|
|
237,831
|
|
|
21,266
|
|
Total stockholders'
equity
|
|
3,442,903
|
|
|
3,223,308
|
|
Total liabilities and
stockholders' equity
|
|
$7,379,961
|
|
|
$7,194,838
|
|
Callon Petroleum
Company Consolidated Statements of
Operations (In thousands, except per share
data) (Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Operating
revenues:
|
|
|
|
Oil
|
$265,767
|
|
|
$141,098
|
|
Natural gas
|
6,029
|
|
|
11,949
|
|
Natural gas
liquids
|
18,123
|
|
|
—
|
|
Total operating
revenues
|
289,919
|
|
|
153,047
|
|
Operating
Expenses:
|
|
|
|
Lease
operating
|
52,383
|
|
|
24,067
|
|
Production and ad
valorem taxes
|
19,680
|
|
|
10,813
|
|
Gathering,
transportation and processing
|
14,378
|
|
|
—
|
|
Depreciation,
depletion and amortization
|
131,463
|
|
|
60,184
|
|
General and
administrative
|
8,325
|
|
|
14,777
|
|
Merger and integration
expenses
|
15,830
|
|
|
—
|
|
Other
operating
|
—
|
|
|
157
|
|
Total operating
expenses
|
242,059
|
|
|
109,998
|
|
Income From
Operations
|
47,860
|
|
|
43,049
|
|
|
|
|
|
Other (Income)
Expenses:
|
|
|
|
Interest expense, net
of capitalized amounts
|
20,478
|
|
|
738
|
|
(Gain) loss on
derivative contracts
|
(251,969)
|
|
|
67,260
|
|
Other
income
|
(1,262)
|
|
|
(257)
|
|
Total other (income)
expense
|
(232,753)
|
|
|
67,741
|
|
|
|
|
|
Income (Loss)
Before Income Taxes
|
280,613
|
|
|
(24,692)
|
|
Income tax (expense)
benefit
|
(64,048)
|
|
|
5,149
|
|
Net Income
(Loss)
|
216,565
|
|
|
(19,543)
|
|
Preferred stock
dividends
|
—
|
|
|
(1,824)
|
|
Income (Loss)
Available to Common Stockholders
|
$216,565
|
|
|
($21,367)
|
|
|
|
|
|
Income (Loss)
Available to Common Stockholders Per Common Share:
|
|
|
|
Basic
|
$0.55
|
|
|
($0.09)
|
|
Diluted
|
$0.55
|
|
|
($0.09)
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
Basic
|
396,682
|
|
|
227,784
|
|
Diluted
|
396,836
|
|
|
227,784
|
|
Callon Petroleum
Company Consolidated Statements of Cash
Flows (In thousands) (Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$216,565
|
|
|
($19,543)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation,
depletion and amortization
|
131,463
|
|
|
60,913
|
|
Amortization of
non-cash debt related items
|
407
|
|
|
738
|
|
Deferred income tax
(benefit) expense
|
64,048
|
|
|
(5,149)
|
|
(Gain) loss on
derivative contracts
|
(251,969)
|
|
|
67,260
|
|
Cash (paid) received
for commodity derivative settlements
|
2,613
|
|
|
(290)
|
|
Loss on sale of other
property and equipment
|
—
|
|
|
28
|
|
Non-cash expense
related to equity share-based awards
|
3,776
|
|
|
4,545
|
|
Change in the fair
value of liability share-based awards
|
(6,748)
|
|
|
1,881
|
|
Payments to settle
asset retirement obligations
|
—
|
|
|
(664)
|
|
Payments for
cash-settled restricted stock unit awards
|
(754)
|
|
|
(1,296)
|
|
Other, net
|
890
|
|
|
—
|
|
Changes in current
assets and liabilities:
|
|
|
|
Accounts
receivable
|
115,873
|
|
|
(5,390)
|
|
Other current
assets
|
(781)
|
|
|
(2,294)
|
|
Current
liabilities
|
(83,688)
|
|
|
(26,003)
|
|
Other
|
—
|
|
|
(177)
|
|
Net cash provided
by operating activities
|
191,695
|
|
|
74,559
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(224,448)
|
|
|
(193,211)
|
|
Acquisitions
|
—
|
|
|
(27,947)
|
|
Proceeds from sale of
assets
|
10,240
|
|
|
13,879
|
|
Cash paid for
settlements of contingent consideration arrangements,
net
|
(40,000)
|
|
|
—
|
|
Other, net
|
(158)
|
|
|
—
|
|
Net cash used in
investing activities
|
(254,366)
|
|
|
(207,279)
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings on senior
secured revolving credit facility
|
4,291,000
|
|
|
220,000
|
|
Payments on senior
secured revolving credit facility
|
(4,226,000)
|
|
|
(90,000)
|
|
Payment of preferred
stock dividends
|
—
|
|
|
(1,824)
|
|
Payment of deferred
financing costs
|
(275)
|
|
|
—
|
|
Tax withholdings
related to restricted stock units
|
(313)
|
|
|
(1,025)
|
|
Other, net
|
(282)
|
|
|
—
|
|
Net cash provided
by financing activities
|
64,130
|
|
|
127,151
|
|
Net change in cash
and cash equivalents
|
1,459
|
|
|
(5,569)
|
|
Balance, beginning of
period
|
13,341
|
|
|
16,051
|
|
Balance, end of
period
|
$14,800
|
|
|
$10,482
|
|
Non-GAAP Financial Measures and Reconciliations
This news release refers to non-GAAP financial measures such as
"Free Cash Flow," "Adjusted 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.
- Free Cash Flow is a supplemental non-GAAP measure. Free Cash
Flow is defined by the Company as Adjusted EBITDA less operational
capital, capitalized interest, net interest expense and capitalized
G&A. We believe free 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. 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).
- Callon believes that the non-GAAP measure of Adjusted
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. Adjusted 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. 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 (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 non-cash valuation adjustments related to incentive
compensation plans, as well as other non-cash expenses. 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 contained within this
release 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 fully diluted common 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.
- Callon calculates adjusted earnings before interest, income
taxes, depreciation, depletion and amortization ("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, non-cash stock-based compensation expense, merger and
integration expense, loss on extinguishment of debt, and other
operating 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 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 believes 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.
About Callon Petroleum Company
Callon Petroleum 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.
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
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 the Company's wells
anticipated to be drilled and placed on production; future levels
of drilling activity and associated production and cash flow
expectations; the Company's production guidance and capital
expenditure forecast; estimated reserve quantities and the present
value thereof; anticipated returns and financial position; and the
implementation of the Company's business plans and strategy, as
well as statements including the words "believe," "expect," "may,"
"will," "forecast," "outlook," "plans" 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, as of this date, 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 of 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, natural gas and natural gas liquids ("NGLs")
prices or a prolonged period of low oil, natural gas or NGLs prices
and the effects of actions by, or disputes among or between
significant oil and natural gas producing countries, general
economic conditions, including the availability of credit and
access to existing lines of credit; the effects of excess supply of
oil and natural gas resulting from reduced demand caused by the
COVID-19 pandemic and the actions of certain oil and natural gas
producing countries; our ability to drill and complete wells;
operational, regulatory and environment risks; cost and
availability of equipment and labor; our ability to finance our
activities; the ultimate timing, outcome and results of integrating
the operations of Carrizo Oil & Gas, Inc. and Callon; and the
ability of the combined company to realize anticipated synergies
and other benefits in the timeframe expected or at all; and other
risks more fully discussed in our filings with the Securities and
Exchange Commission (the "SEC"), including our most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Q and
subsequent 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
(281) 589-5200
1)
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See "Non-GAAP
Financial Measures and Reconciliations" included within this
release for related disclosures and calculations
|
2)
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Free cash flow
("FCF") defined as Adjusted EBITDA minus the sum of operational
capital, capitalized interest, capitalized G&A, and interest
expense. Adjusted EBITDA is a non-GAAP financial measure; please
refer to the Important Disclosures for a definition on Adjusted
EBITDA as calculated by Callon and the Appendix for
reconciliation.
|
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SOURCE Callon Petroleum Company