CPE
$37.18
Callon Petroleum
($.33)
(.88%)
Earnings Details
2nd Quarter June 2022
Wednesday, August 3, 2022 5:00:00 PM
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Summary

Callon Petroleum Misses

Callon Petroleum (CPE) reported 2nd Quarter June 2022 earnings of $3.68 per share on revenue of $913.6 million. The consensus earnings estimate was $4.00 per share on revenue of $570.2 million. The Earnings Whisper number was $4.28 per share. Revenue grew 107.5% on a year-over-year basis.

Callon Petroleum Co is engaged in the exploration, development, acquisition and production of oil and natural gas properties.

Results
Reported Earnings
$3.68
Earnings Whisper
$4.28
Consensus Estimate
$4.00
Reported Revenue
$913.6 Mil
Revenue Estimate
$570.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Callon Petroleum Company Announces Second Quarter 2022 Results

HOUSTON, Aug. 3 , 2022 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported results of operations for the three and six months ended June 30, 2022.

Presentation slides accompanying this earnings release are available on the Company's website at www.callon.com located on the "Presentations" page within the Investors section of the site.

Second Quarter 2022 and Recent Highlights

  • Delivered production of approximately 100.7 MBoe/d (61% oil and 81% liquids) in the second quarter of 2022
  • Increased Delaware Basin well productivity in 2022 by approximately 20% over 2021 as co-development offset spacing and completions initiatives are implemented
  • Generated net cash provided by operating activities of $372.3 million and adjusted free cash flow of $125.6 million
  • Reported net income of $348.0 million, or $5.62 per diluted share, adjusted EBITDA of $418.5 million, and adjusted income of $227.8 million, or $3.68 per diluted share
  • Achieved an operating margin of $67.58 per Boe, a sequential increase of over 15%
  • Executed a refinancing transaction that extended maturities and reduced term balances, with total debt balance of $2.5 billion at June 30 after continued debt reduction

"Callon continues to execute on important steps to solidify a foundation for durable free cash flow generation" said Joe Gatto, President and Chief Executive Officer. "In the inflationary environment that we operate in today, and likely for the foreseeable future, operating margins are critical to our cash generation objectives. In our most recent quarter, our operating margins increased to almost $70 per Boe produced, our eighth consecutive quarterly increase, which drove unhedged adjusted EBITDA of over $600 million. When our industry leading margins are combined with demonstrated well productivity gains in the Delaware and drilling and completion efficiencies across the portfolio, we expect to drive more efficient conversion of EBITDA into free cash flow. These cash flow benefits will be further enhanced in the near-term with a steadily decreasing impact of financial hedges and a reduced interest expense burden as debt continues to be reduced."   

Callon Operations Update

At June 30, 2022, Callon had 1,377 gross (1,229.3 net) wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended June 30, 2022 was 100.7 MBoe/d (61% oil and 81% liquids).

Production volumes for the quarter include the impact of the following items:

  • Increased Workover Activity – Callon experienced a higher level of well failures than historical trends due to intermittent power disruptions and the timing of useful equipment lives. During these outages, Callon accelerated its artificial lift initiatives, which provide production and runtime benefits, primarily in Delaware Basin South. Given the additional time to complete these conversion and repair projects, which were roughly double the level executed in the first quarter, downtime was elevated in the second quarter. Portions of this activity were previously planned to occur later in the year and, as a result, workovers and associated downtime for this initiative should be reduced going forward relative to our previous forecast.
  • Conversion of Midland Basin Gathering Contract – Natural gas and NGL volumes increased from the conversion of a Midland Basin gathering contract from a percentage of proceeds to fee-based which resulted in a reduction in oil cut for the quarter.

Operated drilling and completion activity for the three months ended June 30, 2022 are summarized in the table below:



Three Months Ended June 30, 2022



Drilled


Completed


Placed on Production

Region


Gross


Net


Gross


Net


Gross


Net

Delaware Basin


11


10.9


6


5.9


11


10.1

Midland Basin


16


14.3


7


6.3


7


6.0

Eagle Ford Shale


8


7.4


15


13.0


15


13.0

Total


35


32.6


28


25.2


33


29.1

 

For the three months ended June 30, 2022, Callon drilled 35 gross (32.6 net) wells and placed a combined 33 gross (29.1 net) wells on production. Completions operations for the quarter included 6 gross (5.9 net) wells in the Delaware Basin, 7 gross (6.3 net) wells in the Midland Basin, and 15 gross (13.0 net) wells in the Eagle Ford Shale. Callon placed 11 gross (10.1 net) wells on production in the Delaware Basin, 7 gross (6.0 net) wells in the Midland Basin, and 15 gross (13.0 net) wells in the Eagle Ford Shale. The average lateral length for the wells completed during the second quarter was 8,281 feet. Operated completions during the second quarter consisted of 4 Upper Wolfcamp A wells and 2 Lower Wolfcamp A wells in the Delaware Basin; 2 Lower Spraberry wells, 3 Wolfcamp A wells and 2 Wolfcamp B wells in the Midland Basin; and 15 lower Eagle Ford Shale wells. 

Leverage and Liquidity Update

On June 9, 2022, Callon priced $600 million principal amount of 7.50% Senior Notes due 2030 in a private offering. On June 24, 2022, the Company deposited with the trustee the proceeds from the offering of the 7.50% Senior Notes due 2030, along with borrowings under the Credit Facility, to redeem all of its outstanding 6.125% Senior Notes due 2024 and 9.0% Second Lien Notes due 2025. As of June 30, 2022, the drawn balance on the facility was $779.0 million and cash balances were $6.1 million. The Company intends to continue its application of organic free cash flow towards repayment of debt balances related to the credit facility and other debt instruments.

Third Quarter Activity Outlook and Guidance

Callon is currently running six rigs, with three rigs in the Delaware Basin, two rigs in the Midland Basin and one rig in the Eagle Ford which the Company will be dropping in the coming days. Callon plans to utilize two to three completion crews for the third quarter, supporting new production across the Midland, Delaware and Eagle Ford positions.

For the third quarter, the Company expects to produce between 102 and 105 MBoe/d (63% oil) with between 38 and 42 gross wells (33 and 36 net) placed on production. In addition, Callon projects an operational capital spending level of between $245 and $255 million on an accrual basis.

For full year 2022, Callon is increasing the bottom end of its production guidance to between 102 and 105 MBoe/d (63% oil) to reflect underlying Permian well performance that is above expectations, and an increase in natural gas and NGL volumes from the Midland Basin gathering contract conversion. The revised guidance is available in the accompanying presentation.

Capital Expenditures

For the three months ended June 30, 2022, Callon incurred $237.8 million in operational capital expenditures on an accrual basis. Total capital expenditures, inclusive of capitalized expenses, are detailed below on an accrual and cash basis:



Three Months Ended June 30, 2022



Operational


Capitalized


Capitalized


Total Capital



Capital (a)


Interest


G&A


Expenditures



(In thousands)

Cash basis (b)


$181,071


$19,958


$11,432


$212,461

Timing adjustments (c)


65,110


4,459



69,569

Non-cash items


(8,369)


1,887


(147)


(6,629)

   Accrual basis


$237,812


$26,304


$11,285


$275,401



(a) 

Includes drilling, completions, facilities and equipment, but excludes land, seismic and asset retirement costs.

(b) 

Cash basis is presented here to help users of financial information reconcile amounts from the cash flow statement to the balance sheet by accounting for timing related changes in working capital that align with our development pace and rig count.

(c) 

Includes timing adjustments related to cash disbursements in the current period for capital expenditures incurred in the prior period.

 

Hedge Portfolio Summary

As of July 29, 2022, Callon had the following outstanding oil and natural gas derivative contracts:


For the Remainder


For the Full Year


For the Full Year

Oil Contracts (WTI)

2022


2023


2024

Swap Contracts






Total volume (Bbls)

3,634,000


1,538,500


Weighted average price per Bbl

$64.83


$81.04


$—

Collar Contracts with Short Puts (Three-Way Collars)






Total volume (Bbls)


1,825,000


Weighted average price per Bbl






Ceiling (short call)

$—


$90.00


$—

Floor (long put)

$—


$70.00


$—

Floor (short put)

$—


$50.00


$—

Collar Contracts






Total volume (Bbls)

2,392,000


2,730,000


Weighted average price per Bbl






Ceiling (short call)

$70.12


$87.15


$—

Floor (long put)

$60.00


$71.92


$—

Short Call Swaption Contracts (a)






Total volume (Bbls)



1,830,000

Weighted average price per Bbl

$—


$—


$80.30







Oil Contracts (Midland Basis Differential)






Swap Contracts






Total volume (Bbls)

1,196,000



Weighted average price per Bbl

$0.50


$—


$—

   

(a)    The 2024 short call swaption contracts have exercise expiration dates of December 29, 2023.

 


For the Remainder


For the Full Year

Natural Gas Contracts (Henry Hub)

2022


2023

Swap Contracts




Total volume (MMBtu)

6,150,000


Weighted average price per MMBtu

$3.62


$—

Collar Contracts




Total volume (MMBtu)

5,510,000


6,640,000

Weighted average price per MMBtu




Ceiling (short call)

$5.96


$6.60

Floor (long put)

$4.21


$4.48





Natural Gas Contracts (Waha Basis Differential)




Swap Contracts




Total volume (MMBtu)

1,220,000


6,080,000

Weighted average price per MMBtu

($0.75)


($0.75)

 

Operating and Financial Results

The following table presents summary information for the periods indicated:



Three Months Ended



June 30, 2022


March 31, 2022


June 30, 2021

Total production







Oil (MBbls)







Permian


4,290


4,469


3,232

Eagle Ford


1,299


1,377


1,870

Total oil


5,589


5,846


5,102








Natural gas (MMcf)







Permian


8,875


8,590


7,138

Eagle Ford


1,437


1,525


1,745

Total natural gas


10,312


10,115


8,883








NGLs (MBbls)







Permian


1,622


1,455


1,216

Eagle Ford


232


252


299

Total NGLs


1,854


1,707


1,515








Total production (MBoe)







Permian


7,391


7,356


5,637

Eagle Ford


1,771


1,883


2,460

Total barrels of oil equivalent


9,162


9,239


8,097








Total daily production (Boe/d)







Permian


81,216


81,733


61,948

Eagle Ford


19,469


20,922


27,033

Total barrels of oil equivalent


100,685


102,655


88,981

Oil as % of total daily production


61 %


63 %


63 %








Average realized sales price (excluding impact of settled derivatives)





Oil (per Bbl)







Permian


$110.71


$94.52


$65.08

Eagle Ford


111.53


95.02


65.83

Total oil


$110.90


$94.64


$65.36








Natural gas (per Mcf)







Permian


$6.14


$4.20


$2.68

Eagle Ford


7.27


5.18


2.82

Total natural gas


$6.29


$4.35


$2.71








NGLs (per Bbl)







Permian


$41.06


$40.25


$24.71

Eagle Ford


38.53


35.93


22.00

Total NGLs


$40.74


$39.61


$24.17








Average realized sales price (per Boe)







Permian


$80.64


$70.29


$46.04

Eagle Ford


92.75


78.50


54.72

Total average realized sales price


$82.98


$71.97


$48.68








Average realized sales price (including impact of settled derivatives)





Oil (per Bbl)


$82.27


$73.78


$46.82

Natural gas (per Mcf)


3.91


3.59


2.25

NGLs (per Bbl)


40.74


37.34


23.21

Total average realized sales price (per Boe)


$62.84


$57.52


$36.31










Three Months Ended



June 30, 2022


March 31, 2022


June 30, 2021

Revenues (in thousands) (a)







Oil







Permian


$474,936


$422,404


$210,340

Eagle Ford


144,876


130,845


123,102

Total oil


$619,812


$553,249


$333,442








Natural gas







Permian


$54,469


$36,069


$19,152

Eagle Ford


10,444


7,907


4,928

Total natural gas


$64,913


$43,976


$24,080








NGLs







Permian


$66,592


$58,563


$30,047

Eagle Ford


8,938


9,055


6,578

Total NGLs


$75,530


$67,618


$36,625








Total revenues







Permian


$595,997


$517,036


$259,539

Eagle Ford


164,258


147,807


134,608

Total revenues


$760,255


$664,843


$394,147








Additional per Boe data







Sales price (b)







Permian


$80.64


$70.29


$46.04

Eagle Ford


92.75


78.50


54.72

Total sales price


$82.98


$71.97


$48.68








Lease operating expense







Permian


$7.33


$6.85


$4.60

Eagle Ford


10.59


8.99


8.34

Total lease operating expense


$7.96


$7.29


$5.74








Production and ad valorem taxes







Permian


$4.66


$3.89


$2.53

Eagle Ford


5.89


4.82


3.12

Total production and ad valorem taxes


$4.90


$4.08


$2.71








Gathering, transportation and processing







Permian


$2.69


$2.33


$2.75

Eagle Ford


1.93


1.92


1.84

Total gathering, transportation and processing


$2.54


$2.25


$2.47








Operating margin







Permian


$65.96


$57.22


$36.16

Eagle Ford


74.34


62.77


41.42

Total operating margin


$67.58


$58.35


$37.76








   Depreciation, depletion and amortization


$11.94


$11.15


$10.27

   General and administrative


$1.19


$1.85


$1.37

   Adjusted G&A







      Cash component (c)


$1.54


$1.40


$0.71

      Non-cash component


$0.20


$0.14


$0.21


(a)      Excludes sales of oil and gas purchased from third parties.

(b)     Excludes the impact of settled derivatives.

(c)      Excludes the change in fair value and amortization of share-based incentive awards.

 

Revenue. For the quarter ended June 30, 2022, Callon reported revenue of $760.3 million, which excluded revenue from sales of commodities purchased from a third party of $153.4 million. Revenues including the loss from the settlement of derivative contracts ("Adjusted Total Revenue") were $575.7 million, reflecting the impact of a $184.6 million loss from the settlement of derivative contracts. Average daily production and average realized prices, including and excluding the effects of hedging, are detailed above.

Commodity Derivatives. For the quarter ended June 30, 2022, the net loss on commodity derivative contracts includes the following (in thousands):


Three Months Ended

June 30, 2022

Loss on oil derivatives

$75,910

Loss on natural gas derivatives

5,738

Loss on NGL derivatives

Loss on commodity derivative contracts

$81,648

 

For the quarter ended June 30, 2022, the cash paid for commodity derivative settlements includes the following (in thousands):


Three Months Ended

June 30, 2022

Cash paid on oil derivatives, net

($162,334)

Cash paid on natural gas derivatives, net

(21,808)

Cash paid on NGL derivatives, net

(2,255)

Cash paid for commodity derivative settlements, net

($186,397)

 

Lease Operating Expenses, including workover ("LOE"). LOE for the three months ended June 30, 2022 was $72.9 million, or $7.96 per Boe, compared to LOE of $67.3 million, or $7.29 per Boe, in the first quarter of 2022. The sequential increase in LOE was primarily due to increases in workover costs as well as certain operating costs such as fuel, power and equipment rentals. The increase in LOE per Boe was due to the increases in operating costs mentioned above as well as the distribution of fixed costs spread over lower production volumes.

Production and Ad Valorem Taxes. Production and ad valorem taxes for the three months ended June 30, 2022 were approximately 5.9% of total revenue excluding revenue from sales of commodities purchased from a third-party and before the impact of derivative settlements, or $4.90 per Boe.

Gathering, Transportation and Processing. Gathering, transportation and processing expense for the three months ended June 30, 2022 was $23.3 million, or $2.54 per Boe, as compared to $20.8 million, or $2.25 per Boe, in the first quarter of 2022. This increase in gathering, transportation and processing expense was primarily due to a new contract entered into during the second quarter of 2022 as well as inflationary cost increases.

Depreciation, Depletion and Amortization ("DD&A"). DD&A for the three months ended June 30, 2022 was $11.94 per Boe compared to $11.15 per Boe in the first quarter of 2022. The increase in DD&A per Boe was primarily attributable to higher capital expenditures during the three months ended June 30, 2022 and increases in future development cost assumptions.

General and Administrative Expense ("G&A"). G&A for the three months ended June 30, 2022 and March 31, 2022 was $10.9 million and $17.1 million, respectively. G&A, excluding non-cash incentive share-based compensation valuation adjustments, ("Adjusted G&A") was $16.0 million for the three months ended June 30, 2022 compared to $14.3 million for the first quarter of 2022. The cash component of Adjusted G&A increased to $14.1 million for the three months ended June 30, 2022 compared to $13.0 million for the first quarter of 2022 primarily as a result of higher compensation costs during the quarter.

The following table reconciles total G&A to Adjusted G&A - cash component and full cash G&A (in thousands):


Three Months Ended


June 30, 2022


March 31, 2022


June 30, 2021

Total G&A

$10,909


$17,121


$11,065

Change in the fair value of liability share-based awards

(non-cash)

5,071


(2,851)


(3,555)

Adjusted G&A – total

15,980


14,270


7,510

Equity-settled, share-based compensation (non-cash)

(1,861)


(1,315)


(1,724)

Adjusted G&A – cash component

$14,119


$12,955


$5,786







Capitalized cash G&A

11,432


9,703


7,404

Full cash G&A

$25,551


$22,658


$13,190

 

Income Tax. Callon provides for income taxes at the statutory rate of 21% adjusted for permanent differences expected to be realized. We recorded income tax expense of $3.0 million and $0.5 million for the three months ended June 30, 2022 and March 31, 2022, respectively. Since the second quarter of 2020, we have concluded that it is more likely than not that the net deferred tax assets will not be realized and have recorded a full valuation allowance against our deferred tax assets. As long as we continue to conclude that the valuation allowance is necessary, we will not have significant deferred tax expense or benefit.

Adjusted Income, Adjusted EBITDA and Unhedged Adjusted EBITDA. The following tables reconcile the Company's net income (loss) to adjusted income, adjusted EBITDA and unhedged adjusted EBITDA:


Three Months Ended


June 30, 2022


March 31, 2022


June 30, 2021


(In thousands, except per share data)

Net income (loss)

$348,009


$39,737


($11,695)

Loss on derivative contracts

81,648


358,300


190,463

Loss on commodity derivative settlements, net

(184,558)


(133,476)


(100,128)

Non-cash (benefit) expense related to share-based awards

(3,210)


4,166


5,279

Merger, integration, transaction and other

1,051


(13)


5,584

Loss on extinguishment of debt

42,417



Tax effect on adjustments above (a)

13,157


(48,085)


(21,252)

Change in valuation allowance

(70,704)


(7,963)


2,079

Adjusted income

$227,810


$212,666


$70,330







Net income (loss) per diluted share

$5.62


$0.64


($0.25)

Adjusted income per diluted share

$3.68


$3.43


$1.49







Basic weighted average common shares outstanding

61,679


61,487


46,267

Diluted weighted average common shares outstanding (GAAP)

61,909


62,065


46,267

Effect of potentially dilutive instruments



862

Adjusted diluted weighted average common shares outstanding

61,909


62,065


47,129


(a)  Calculated using the federal statutory rate of 21%.

 


Three Months Ended


June 30, 2022


March 31, 2022


June 30, 2021


(In thousands)

Net income (loss)

$348,009


$39,737


($11,695)

Loss on derivative contracts

81,648


358,300


190,463

Loss on commodity derivative settlements, net

(184,558)


(133,476)


(100,128)

Non-cash (benefit) expense related to share-based awards

(3,210)


4,166


5,279

Merger, integration, transaction and other

1,051


(13)


5,584

Income tax (benefit) expense

3,009


484


(478)

Interest expense, net

20,691


21,558


24,634

Depreciation, depletion and amortization

109,409


102,979


83,128

Loss on extinguishment of debt

42,417



Adjusted EBITDA

$418,466


$393,735


$196,787

Add: Loss on commodity derivative settlements, net

184,558


133,476


100,128

Unhedged adjusted EBITDA

$603,024


$527,211


$296,915

 

Adjusted Free Cash Flow. The following table reconciles the Company's net cash provided by operating activities to unhedged adjusted EBITDA, adjusted EBITDA and adjusted free cash flow:


Three Months Ended


June 30, 2022


March 31, 2022


June 30, 2021


(In thousands)

Net cash provided by operating activities

$372,325


$281,270


$175,603

Changes in working capital and other

25,096


123,805


13,520

Changes in accrued hedge settlements

1,839


(31,951)


(14,719)

Loss on commodity derivative settlements, net

184,558


133,476


100,128

Cash interest expense, net

19,206


19,842


22,383

Merger, integration and transaction


769


Unhedged adjusted EBITDA

$603,024


$527,211


$296,915

Less: Loss on commodity derivative settlements, net

184,558


133,476


100,128

Adjusted EBITDA

$418,466


$393,735


$196,787

Less: Operational capital expenditures (accrual)

237,812


157,378


138,321

Less: Capitalized cash interest

24,416


23,506


21,740

Less: Cash interest expense, net

19,206


19,842


22,383

Less: Capitalized cash G&A

11,432


9,703


7,404

Adjusted free cash flow

$125,600


$183,306


$6,939

 

Adjusted Discretionary Cash Flow. The following table reconciles the Company's net cash provided by operating activities to adjusted discretionary cash flow:


Three Months Ended


June 30, 2022


March 31, 2022


June 30, 2021


(In thousands)

Net cash provided by operating activities

$372,325


$281,270


$175,603

Changes in working capital

23,342


126,997


11,709

Merger, integration and transaction


769


Adjusted discretionary cash flow

$395,667


$409,036


$187,312

 

Adjusted Total Revenue. Adjusted total revenue is reconciled to total operating revenues, which excludes revenue from sales of commodities purchased from a third party, in the following table:


Three Months Ended


June 30, 2022


March 31, 2022


June 30, 2021


(In thousands)

Operating revenues






Oil

$619,812


$553,249


$333,442

Natural gas

64,913


43,976


24,080

NGLs

75,530


67,618


36,625

Total operating revenues

$760,255


$664,843


$394,147

Impact of settled derivatives

(184,558)


(133,476)


(100,128)

Adjusted total revenue

$575,697


$531,367


$294,019

 

Net Debt. The following table reconciles the Company's total debt to net debt:


June 30, 2022


March 31,
2022


December 31, 2021


September 30, 2021


June 30, 2021


(In thousands)

Total debt

$2,516,337


$2,623,282


$2,694,115


$2,809,610


$2,865,154

Unamortized premiums, discount, and deferred loan costs, net

20,684


26,639


28,806


48,311


37,487

Adjusted total debt

$2,537,021


$2,649,921


$2,722,921


$2,857,921


$2,902,641

Less: Cash and cash equivalents

6,100


4,150


9,882


3,699


3,800

Net debt

$2,530,921


$2,645,771


$2,713,039


$2,854,222


$2,898,841

 

Callon Petroleum Company

Consolidated Balance Sheets

(In thousands, except par and share amounts)

(Unaudited)

 



June 30, 2022


December 31, 2021

ASSETS





Current assets:





   Cash and cash equivalents


$6,100


$9,882

   Accounts receivable, net


360,955


232,436

   Fair value of derivatives



22,381

   Other current assets


37,960


30,745

      Total current assets


405,015


295,444

Oil and natural gas properties, full cost accounting method:





   Evaluated properties, net


3,573,282


3,352,821

   Unevaluated properties


1,876,531


1,812,827

      Total oil and natural gas properties, net


5,449,813


5,165,648

Other property and equipment, net


26,332


28,128

Deferred financing costs


14,961


18,125

Other assets, net


52,209


40,158

   Total assets


$5,948,330


$5,547,503

LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





   Accounts payable and accrued liabilities


$606,093


$569,991

   Fair value of derivatives


301,362


185,977

   Other current liabilities


134,581


116,523

      Total current liabilities


1,042,036


872,491

Long-term debt


2,516,337


2,694,115

Asset retirement obligations


57,427


54,458

Fair value of derivatives


21,251


11,409

Other long-term liabilities


51,942


49,262

   Total liabilities


3,688,993


3,681,735

Commitments and contingencies





Stockholders' equity:





Common stock, $0.01 par value, 130,000,000 and 78,750,000 shares authorized; 61,715,672 and 61,370,684 shares outstanding, respectively


617


614

   Capital in excess of par value


4,018,178


4,012,358

   Accumulated deficit


(1,759,458)


(2,147,204)

      Total stockholders' equity


2,259,337


1,865,768

Total liabilities and stockholders' equity


$5,948,330


$5,547,503

 

Callon Petroleum Company

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 


Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021

Operating Revenues:








Oil

$619,812


$333,442


$1,173,061


$600,487

Natural gas

64,913


24,080


108,889


48,300

Natural gas liquids

75,530


36,625


143,148


65,982

Sales of purchased oil and gas

153,365


46,252


265,740


85,511

Total operating revenues

913,620


440,399


1,690,838


800,280









Operating Expenses:








Lease operating

72,940


46,460


140,268


86,913

Production and ad valorem taxes

44,873


21,958


82,551


40,397

Gathering, transportation and processing

23,267


20,031


44,042


38,012

Cost of purchased oil and gas

155,397


49,249


266,668


90,166

Depreciation, depletion and amortization

109,409


83,128


212,388


154,115

General and administrative

10,909


11,065


28,030


27,864

Merger, integration and transaction



769


Total operating expenses

416,795


231,891


774,716


437,467

Income From Operations

496,825


208,508


916,122


362,813









Other (Income) Expenses:








Interest expense, net of capitalized amounts

20,691


24,634


42,249


49,050

Loss on derivative contracts

81,648


190,463


439,948


404,986

Loss on extinguishment of debt

42,417



42,417


Other (income) expense

1,051


5,584


269


2,278

Total other expense

145,807


220,681


524,883


456,314









Income (Loss) Before Income Taxes

351,018


(12,173)


391,239


(93,501)

Income tax benefit (expense)

(3,009)


478


(3,493)


1,399

Net Income (Loss)

$348,009


($11,695)


$387,746


($92,102)









Net Income (Loss) Per Common Share:








Basic

$5.64


($0.25)


$6.30


($2.07)

Diluted

$5.62


($0.25)


$6.26


($2.07)









Weighted Average Common Shares Outstanding:








Basic

61,679


46,267


61,583


44,439

Diluted

61,909


46,267


61,956


44,439

 

Callon Petroleum Company

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 


Three Months Ended

June 30,


Six Months Ended June 30,


2022


2021


2022


2021

Cash flows from operating activities:








Net income (loss)

$348,009


($11,695)


$387,746


($92,102)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:








  Depreciation, depletion and amortization

109,409


83,128


212,388


154,115

  Amortization of non-cash debt related items, net

1,485


2,252


3,201


4,508

  Loss on derivative contracts

81,648


190,463


439,948


404,986

  Cash paid for commodity derivative settlements, net

(186,397)


(85,409)


(287,922)


(127,571)

  Loss on extinguishment of debt

42,417



42,417


  Non-cash (benefit) expense related to share-based awards

(3,210)


5,279


956


12,887

  Other, net

2,306


3,294


5,200


4,511

  Changes in current assets and liabilities:








    Accounts receivable

(14,072)


(21,674)


(130,394)


(67,357)

    Other current assets

(3,317)


(4,567)


(7,497)


(7,423)

    Accounts payable and accrued liabilities

(5,953)


14,532


(18,940)


26,714

    Cash received for settlements of contingent consideration arrangements, net



6,492


    Net cash provided by operating activities

372,325


175,603


653,595


313,268

Cash flows from investing activities:








Capital expenditures

(212,461)


(149,662)


(413,939)


(251,003)

Acquisition of oil and gas properties

(6,536)


(1,447)


(15,945)


(2,215)

Proceeds from sales of assets

106


31,611


4,590


31,611

Cash paid for settlement of contingent consideration arrangement



(19,171)


Other, net

5,074


625


8,709


4,220

    Net cash used in investing activities

(213,817)


(118,873)


(435,756)


(217,387)

Cash flows from financing activities:








Borrowings on Credit Facility

1,051,000


433,500


1,724,000


736,500

Payments on Credit Facility

(984,000)


(508,500)


(1,730,000)


(846,500)

Issuance of 7.50% Senior Notes due 2030

600,000



600,000


Redemption of 6.125% Senior Notes due 2024

(467,287)



(467,287)


Redemption of 9.00% Second Lien Senior Secured Notes due 2025

(339,507)



(339,507)


Cash received for settlement of contingent consideration arrangement



8,512


Payment of deferred financing costs

(10,542)



(10,542)


Other, net

(6,222)


(2,280)


(6,797)


(2,317)

    Net cash used in financing activities

(156,558)


(77,280)


(221,621)


(112,317)

Net change in cash and cash equivalents

1,950


(20,550)


(3,782)


(16,436)

  Balance, beginning of period

4,150


24,350


9,882


20,236

  Balance, end of period

$6,100


$3,800


$6,100


$3,800

 

Non-GAAP Financial Measures

This news release refers to non-GAAP financial measures such as "adjusted free cash flow," "adjusted EBITDA," "unhedged adjusted EBITDA," "operating margin," "adjusted income," "adjusted income per diluted share," "adjusted diluted weighted average common shares outstanding," "adjusted discretionary cash flow," "adjusted total revenue," "adjusted G&A," "full cash G&A," and "net debt." These measures, detailed below, are provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our filings with the U.S. Securities and Exchange Commission (the "SEC") and posted on our website.

  • Adjusted free cash flow is a supplemental non-GAAP measure that is defined by the Company as adjusted EBITDA less operational capital expenditures (accrual), capitalized cash interest, capitalized cash G&A (which excludes capitalized expense related to share-based awards), and cash interest expense, net. We believe adjusted free cash flow provides useful information to investors because it is a comparable metric against other companies in the industry and is a widely accepted financial indicator of an oil and natural gas company's ability to generate cash for the use of internally funding their capital development program and to service or incur debt. Adjusted free cash flow is not a measure of a company's financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities, or as a measure of liquidity, or as an alternative to net income (loss).
  • Callon calculates adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit), depreciation, depletion and amortization, (gains) losses on derivative instruments excluding net settled derivative instruments, impairment of evaluated oil and gas properties, non-cash share-based compensation expense, merger, integration and transaction expense, (gain) loss on extinguishment of debt, and certain other expenses. Adjusted EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with GAAP. However, the Company believes that adjusted EBITDA provides useful information to investors because it provides additional information with respect to our performance or ability to meet our future debt service, capital expenditures and working capital requirements. Because adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the adjusted EBITDA presented above may not be comparable to similarly titled measures of other companies.
  • Callon calculates unhedged adjusted EBITDA as adjusted EBITDA, as defined above, excluding the impact of net settled derivative instruments. Unhedged 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 unhedged adjusted EBITDA provides useful information to investors because it provides additional information with respect to our performance without the impact of our settled derivative instruments. Because unhedged adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the unhedged adjusted EBITDA presented above may not be comparable to similarly titled measures of other companies.
  • Callon believes that operating margin is a comparable metric against other companies in the industry and is useful to investors because it is an indicator of an oil and natural gas company's operating profitability per unit of production. Operating margin is a supplemental non-GAAP measure that is defined by the Company as oil, natural gas, and NGL revenues sales price less lease operating expense; production and ad valorem taxes; and gathering, transportation and processing fees divided by total production for the period.
  • Adjusted income and adjusted income per diluted share are supplemental non-GAAP measures that Callon believes are useful to investors because they provide readers with a meaningful measure of our profitability before recording certain items whose timing or amount cannot be reasonably determined. These measures exclude the net of tax effects of these items and non-cash valuation adjustments, which are detailed in the reconciliation provided. Adjusted income and adjusted income per diluted share are not measures of financial performance under GAAP. Accordingly, neither should be considered as a substitute for net income (loss), operating income (loss), or other income data prepared in accordance with GAAP. However, the Company believes that adjusted income and adjusted income per diluted share provide additional information with respect to our performance. Because adjusted income and adjusted income per diluted share exclude some, but not all, items that affect net income (loss) and may vary among companies, the adjusted income and adjusted income per diluted share presented above may not be comparable to similarly titled measures of other companies.
  • Adjusted diluted weighted average common shares outstanding is a non-GAAP financial measure which includes the effect of potentially dilutive instruments that, under certain circumstances described below, are excluded from diluted weighted average common shares outstanding, the most directly comparable GAAP financial measure. When a net loss exists, all potentially dilutive instruments are anti-dilutive to the net loss per common share and therefore excluded from the computation of diluted weighted average common shares outstanding. The effect of potentially dilutive instruments are included in the computation of adjusted diluted weighted average common shares outstanding for purposes of computing adjusted income per diluted share.
  • Adjusted discretionary cash flow is a supplemental non-GAAP measure that Callon believes provides useful information to investors because it is a comparable metric against other companies in the industry and is a widely accepted financial indicator of an oil and natural gas company's ability to generate cash for the use of internally funding their capital development program and to service or incur debt. Adjusted discretionary cash flow is defined by Callon as net cash provided by operating activities before changes in working capital and merger, integration and transaction expenses. Callon has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements, which the Company may not control, and the cash flow effect may not be reflected the period in which the operating activities occurred. Adjusted discretionary cash flow is not a measure of a company's financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities, or as a measure of liquidity, or as an alternative to net income (loss).
  • Callon believes that the non-GAAP measure of adjusted total revenue (which is revenue including the gain or loss from the settlement of derivative contracts) is useful to investors because it provides readers with a revenue value more comparable to other companies who engage in price risk management activities through the use of commodity derivative instruments and reflects the results of derivative settlements with expected cash flow impacts within total revenues.
  • Adjusted G&A is a supplemental non-GAAP financial measure that excludes non-cash incentive share-based compensation valuation adjustments and adjusted G&A - cash component further excludes equity-settled, share-based compensation expenses. Callon believes that the non-GAAP measure of adjusted G&A and adjusted G&A - cash component are useful to investors because they provide for greater comparability period-over-period. In addition, adjusted G&A - cash component provides a meaningful measure of our recurring G&A expense.
  • Full cash G&A is a supplemental non-GAAP financial measure that Callon defines as adjusted G&A – cash component plus capitalized G&A excluding capitalized expense related to share-based awards. Callon believes that the non-GAAP measure of full cash G&A is useful to investors because it provides a meaningful measure of our total recurring cash G&A costs, whether expensed or capitalized, and provides for greater comparability on a period-over-period basis.
  • Net debt is a supplemental non-GAAP measure that is defined by the Company as total debt excluding unamortized premiums, discount, and deferred loan costs, less cash and cash equivalents. Net debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. We believe this metric is useful to analysts and investors in determining the Company's leverage position since the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt. This metric is sometimes presented as a ratio with Adjusted EBITDA in order to provide investors with another means of evaluating the Company's ability to service its existing debt obligations as well as any future increase in the amount of such obligations. This ratio is referred to by the Company as its leverage ratio.

Earnings Call Information

The Company will host a conference call on Thursday, August 4, 2022, to discuss second quarter 2022 financial and operating results, outlook and guidance for the remainder of 2022, and current corporate strategy and initiatives.

Please join Callon Petroleum Company via the Internet for a webcast of the conference call:

Date/Time:            Thursday, August 4, 2022, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time)

Webcast:                Select "News and Events" under the "Investors" section of the Company's website: www.callon.com.

An archive of the conference call webcast will also be available at www.callon.com under the "Investors" section of the website.

About Callon Petroleum Company

Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and West Texas.

Cautionary Statement Regarding Forward-Looking Information

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include all statements regarding wells anticipated to be drilled and placed on production; future levels of development activity and associated production, capital expenditures and cash flow expectations; the Company's production and expenditure guidance; estimated reserve quantities and the present value thereof; future debt levels and leverage; and the implementation of the Company's business plans and strategy, as well as statements including the words "believe," "expect," "plans," "may," "will," "should," "could," and words of similar meaning. These statements reflect the Company's current views with respect to future events and financial performance based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements include the volatility of oil and natural gas prices; changes in the supply of and demand for oil and natural gas, including as a result of the COVID-19 pandemic and various governmental actions taken to mitigate its impact or actions by, or disputes among members of OPEC and other oil and natural gas producing countries with respect to production levels or other matters related to the price of oil; our ability to drill and complete wells; operational, regulatory and environment risks; the cost and availability of equipment and labor; our ability to finance our development activities at expected costs or at expected times or at all; our inability to realize the benefits of recent transactions; currently unknown risks and liabilities relating to the newly acquired assets and operations; adverse actions by third parties involved with the transactions; risks that are not yet known or material to us; and other risks more fully discussed in our filings with the SEC, including our most recent Annual Reports on Form 10-K and subsequent Quarterly Reports on Form 10-Q, available on our website or the SEC's website at www.sec.gov. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Contact Information

Kevin Smith
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200

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SOURCE Callon Petroleum Company