Callon Petroleum Company Announces First Quarter 2020 Results
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 measure(1)) 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 3,967 3,966
396,600,022 shares outstanding, respectively
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) See "Non-GAAP
Financial
Measures and
Reconciliations"
included
within this
release for
related
disclosures
and
calculations
2) 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
