Le Lézard
Classified in: Oil industry, Business
Subjects: ERN, ERP

Callon Petroleum Company Reports Third Quarter 2023 Results


Reduced long-term debt to $1.9 billion
Reiterated full-year 2023 capital expenditure outlook of $960 ? $980 million
Recent efficiency gains are expected to reduce 2024 drilling, completion, and facilities costs by more than 15% per well

HOUSTON, Nov. 1, 2023 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported third quarter 2023 financial and operating results. A conference call is planned for 8 a.m. CT, Thursday, November 2; participation details can be found in this release. Slides accompanying today's release are available at www.callon.com/investors.

Third Quarter Highlights:

"The third quarter marked an important milestone for Callon as we completed a reorganization of our operations group into a business unit design to improve focus on capital efficiency and capital allocation," said Joe Gatto, President and Chief Executive Officer. "We have delivered tangible benefits from this move in a short period of time, especially in terms of structural drilling efficiency gains from well design changes. We now expect to complete approximately 50,000 more lateral feet and commence drilling an incremental five wells relative to our mid-year forecast. This additional activity will benefit 2024 production, all while staying within our existing budget. These gains position us well heading into 2024 and set the stage for incremental structural efficiency gains as the year progresses. We expect these improvements will reduce our 2024 average total well costs, including facilities, by over 15%. Our focus into next year remains unchanged -- generate free cash flow, reduce debt, lower costs and return cash to our owners under our share repurchase program."

Financial Results

Callon reported third quarter 2023 net income of $119.5 million, or $1.75 per share, (all share amounts are stated on a diluted basis),  and adjusted EBITDAX of $342.2 million. Adjusted income was $123.9 million, or $1.82 per share. The Company generated $266.8 million of net cash provided by operating activities in the third quarter. Total operational capital expenditures for the quarter were $251 million.

Operational Results

Third quarter total production was in line with guidance and averaged 101.7 MBoe/d (57% oil and 79% liquids). Oil production for the period was lower than expectations and averaged 58.0 MBbls/d. Oil volumes during the period were negatively impacted by weather-related power and midstream disruptions in August and September and a lower-than-expected oil mix from recent completions in the Delaware West area. Approximately half of the third quarter 2023 turned-in-lines (15 of 33) were in the Delaware West.

Average realized commodity prices during the third quarter were $82.18 per Bbl for oil (100% of NYMEX WTI), $22.40 per Bbl for natural gas liquids, and $2.14 per MMBtu for natural gas (80% of NYMEX HH). The total average realized price for the period was $54.50 per Boe on an unhedged basis.

2023 Outlook

Callon today revised its outlook for fourth quarter and full-year 2023 production and reiterated guidance for full-year 2023 capital expenditures.

For the fourth quarter, the Company expects that its total and oil production will average 100 ? 103 MBoe/d (~79% liquids) and 56 ? 59 MBbls/d (previous guidance was 104 ? 108 MBoe/d and 63 ? 65 MBbls/d, respectively). Full year 2023 total and oil production is now expected to average 102 ? 104 MBoe/d and 59 ? 61 MBbls/d (previous guidance was 103 ? 106 MBoe/d and 62 ? 64 MBbls/d, respectively).

Adjustments to the production outlook reflect the increased natural gas and NGL content from Delaware West and the ongoing optimization of Callon's artificial lift programs. In the third quarter, the Company accelerated a change in its Delaware Basin artificial lift program, previously planned to start in 2024, that will incorporate an increased proportion of gas lift to reduce production downtime, lower workover expense, and enhance longer-term resource recovery.

Guidance for capital expenditures for full-year 2023 is unchanged at $960 ? $980 million, despite an increase in previously forecast drilled lateral feet and completion activity into year-end. The Company is currently running five drilling rigs, four in the Delaware Basin and one in the Midland Basin, as well as one completion crew.

Shareholder Returns

During the third quarter, Callon repurchased 386,719 shares of common stock at a weighted average purchase price of $38.72 per common share for a total cost of approximately $15 million. As of September 30, 2023, the remaining authorized repurchase amount under the Share Repurchase Program was $285 million. Callon intends to use 40% of the fourth quarter adjusted free cash flow to repurchase shares.

Capital Structure

Callon remains focused on using a majority of its adjusted free cash flow to reduce total debt. As of September 30, 2023, Callon has approximately $1.1 billion of liquidity and $1.9 billion of long-term debt, including a drawn balance on the revolving credit facility of $396 million.

Earnings Call Information

The Company plans to host a conference call on Thursday, November 2, 2023, to discuss its third quarter 2023 financial and operating results and outlook. 

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

Time/Date:

8 a.m. CT / 9 a.m. ET, Thursday, November 2, 2023

Webcast:

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

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

About Callon Petroleum

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

Contact
Matthew Hesterberg
Callon Petroleum Company
ir@callon.com
(281) 589-5200

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 expectations and plans with respect to its share repurchase program; wells anticipated to be drilled and placed on production; future levels of development activity and associated production, capital expenditures and cash flow expectations and expected uses thereof; the Company's production and expenditure guidance; estimated reserve quantities and the present value thereof; future debt levels and leverage; the Company's initiatives to control costs and improve capital and structural drilling efficiency; 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 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; general economic conditions, including the availability of credit, inflation or rising interest rates; 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; rising interest rates and inflation; 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 U.S. Securities and Exchange Commission (the "SEC"), including our most recent Annual Report 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.

Non-GAAP Financial Measures
This news release refers to non-GAAP financial measures such as "adjusted free cash flow," "adjusted EBITDAX," "adjusted income," and "adjusted income per diluted share." 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 SEC and posted on our website.

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


Three Months Ended


September 30, 2023


June 30, 2023


September 30, 2022


(In thousands except per share data)

Net income (loss)

$119,484


($107,896)


$502,039

(Gain) loss on derivative contracts

55,804


(5,941)


(134,850)

Gain (loss) on commodity derivative settlements, net

(9,196)


13,663


(105,006)

Non-cash expense related to share-based awards

3,955


3,688


1,741

Impairment of oil and gas properties

?


406,898


?

Gain on sale of oil and gas properties

(20,570)


?


?

Merger, integration and transaction

4,925


1,543


?

Other expense

3,220


54


2,861

Gain on extinguishment of debt

(1,238)


?


?

Tax effect on adjustments above (a)

(7,749)


(88,180)


49,403

Change in valuation allowance

(24,690)


(100,749)


(102,755)

Adjusted income

$123,945


$123,080


$213,433







Net income (loss) per diluted share

$1.75


($1.74)


$8.11

Adjusted income per diluted share

$1.82


$1.99


$3.45







Basic weighted average common shares outstanding

67,931


61,856


61,703

Diluted weighted average common shares outstanding (GAAP)

68,083


61,856


61,870

Effect of potentially dilutive instruments

?


55


?

Adjusted diluted weighted average common shares outstanding

68,083


61,911


61,870


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



Three Months Ended


September 30, 2023


June 30, 2023


September 30, 2022


(In thousands)

Net income (loss)

$119,484


($107,896)


$502,039

(Gain) loss on derivative contracts

55,804


(5,941)


(134,850)

Gain (loss) on commodity derivative settlements, net

(9,196)


13,663


(105,006)

Non-cash expense related to share-based awards

3,955


3,688


1,741

Impairment of oil and gas properties

?


406,898


?

Gain on sale of oil and gas properties

(20,570)


?


?

Merger, integration and transaction

4,925


1,543


?

Other expense

3,220


54


2,861

Income tax (benefit) expense

509


(156,212)


3,383

Interest expense

43,149


47,239


46,929

Depreciation, depletion and amortization

138,598


127,348


129,895

Exploration

3,588


1,882


2,942

Gain on extinguishment of debt

(1,238)


?


?

Adjusted EBITDAX

$342,228


$332,266


$449,934

 

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


Three Months Ended


September 30, 2023


June 30, 2023


September 30, 2022


(In thousands)

Net cash provided by operating activities

$266,828


$279,522


$437,780

Changes in working capital and other

26,344


11,188


(69,388)

Changes in accrued hedge settlements

(10,224)


638


40,590

Merger, integration and transaction

4,925


1,543


?

Cash flow from operations before net change in working

287,873


292,891


408,982







Capital expenditures

252,407


293,697


303,268

Increase (decrease) in accrued capital expenditures

(12,872)


(13,083)


(42,247)

Capital expenditures before accruals

239,535


280,614


261,021







Adjusted free cash flow

$48,338


$12,277


$147,961

 

Callon Petroleum Company

Consolidated Balance Sheets

(In thousands, except par and share amounts)



September 30, 2023


December 31, 2022*

ASSETS




Current assets:




   Cash and cash equivalents

$3,456


$3,395

   Accounts receivable, net

262,394


237,128

   Fair value of derivatives

1,196


21,332

   Other current assets

29,665


35,783

      Total current assets

296,711


297,638

Oil and natural gas properties, successful efforts accounting method:




   Proved properties, net

4,815,776


4,851,529

   Unproved properties

1,287,019


1,225,768

      Total oil and natural gas properties, net

6,102,795


6,077,297

Other property and equipment, net

26,398


26,152

Deferred income taxes

199,734


?

Deferred financing costs

14,235


18,822

Fair value of derivatives

21,742


454

Other assets, net

66,908


68,106

   Total assets

$6,728,523


$6,488,469

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Accounts payable and accrued liabilities

$585,529


$536,233

   Fair value of derivatives

61,189


16,197

   Other current liabilities

103,077


150,384

      Total current liabilities

749,795


702,814

Long-term debt

1,948,619


2,241,295

Asset retirement obligations

41,290


53,892

Fair value of derivatives

44,807


13,415

Other long-term liabilities

82,954


51,272

   Total liabilities

2,867,465


3,062,688

Commitments and contingencies




Stockholders' equity:




   Common stock, $0.01 par value, 130,000,000 shares authorized;

   67,770,721 and 61,621,518 shares outstanding, respectively

678


616

   Capital in excess of par value

4,225,183


4,022,194

   Accumulated deficit

(364,803)


(597,029)

      Total stockholders' equity

3,861,058


3,425,781

Total liabilities and stockholders' equity

$6,728,523


$6,488,469



*

Financial information for the prior period has been recast to reflect retrospective application of the successful efforts method of accounting. For additional information, refer to our Form 10-Q for the period ended September 30, 2023.

 

Callon Petroleum Company

Consolidated Statements of Operations

(In thousands, except per share amounts)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2023


2022*


2023


2022*

Operating Revenues:








Oil

$438,665


$575,852


$1,269,996


$1,748,913

Natural gas

25,045


81,018


63,054


189,907

Natural gas liquids

46,489


67,548


130,488


210,696

Sales of purchased oil and gas

109,099


111,459


278,089


377,199

Total operating revenues

619,298


835,877


1,741,627


2,526,715









Operating Expenses:








Lease operating

73,525


76,121


225,415


216,389

Production and ad valorem taxes

30,592


43,290


88,019


125,841

Gathering, transportation and processing

27,255


27,575


80,570


71,617

Exploration

3,588


2,942


7,702


7,237

Cost of purchased oil and gas

111,118


111,439


285,947


378,107

Depreciation, depletion and amortization

138,598


129,895


391,911


359,494

Impairment of oil and gas properties

?


?


406,898


?

Gain on sale of oil and gas properties

(20,570)


?


(20,570)


?

General and administrative

29,339


24,253


86,905


71,485

Merger, integration and transaction

4,925


?


6,468


769

Total operating expenses

398,370


415,515


1,559,265


1,230,939

Income From Operations

220,928


420,362


182,362


1,295,776









Other (Income) Expenses:








Interest expense

43,149


46,929


136,694


141,020

(Gain) loss on derivative contracts

55,804


(134,850)


24,218


305,098

(Gain) loss on extinguishment of debt

(1,238)


?


(1,238)


42,417

Other (income) expense

3,220


2,861


(3,140)


3,130

Total other (income) expense

100,935


(85,060)


156,534


491,665









Income Before Income Taxes

119,993


505,422


25,828


804,111

Income tax benefit (expense)

(509)


(3,383)


206,398


(6,536)

Net Income

$119,484


$502,039


$232,226


$797,575









Net Income Per Common Share:








Basic

$1.76


$8.14


$3.64


$12.94

Diluted

$1.75


$8.11


$3.63


$12.88









Weighted Average Common Shares Outstanding:








Basic

67,931


61,703


63,827


61,624

Diluted

68,083


61,870


64,016


61,927



*

Financial information for the prior period has been recast to reflect retrospective application of the successful efforts method of accounting. For additional information, refer to our Form 10-Q for the period ended September 30, 2023.

 

Callon Petroleum Company

Consolidated Statements of Cash Flows

(In thousands)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2023


2022*


2023


2022*

Cash flows from operating activities:








Net income

$119,484


$502,039


$232,226


$797,575

Adjustments to reconcile net income to net cash provided by operating activities:








  Depreciation, depletion and amortization

138,598


129,895


391,911


359,494

  Impairment of oil and gas properties

?


?


406,898


?

  Amortization of non-cash debt related items, net

2,734


2,559


7,979


9,680

  Deferred income tax (benefit) expense

(1,200)


1,110


(206,041)


1,110

 (Gain) loss on derivative contracts

55,804


(134,850)


24,218


305,098

  Cash received (paid) for commodity derivative settlements, net

1,028


(145,596)


13,274


(433,518)

 (Gain) loss on extinguishment of debt

(1,238)


?


(1,238)


42,417

  Gain on sale of oil and gas properties

(20,570)


?


(20,570)


?

  Non-cash expense related to share-based awards

3,955


1,741


9,524


4,427

  Other, net

3,971


3,504


4,563


8,704

  Changes in current assets and liabilities:








    Accounts receivable

(28,352)


71,479


14,219


(52,423)

    Other current assets

(6,574)


(4,732)


(13,178)


(12,229)

    Accounts payable and accrued liabilities

(812)


10,631


(69,522)


(8,649)

    Net cash provided by operating activities

266,828


437,780


794,263


1,021,686

Cash flows from investing activities:








Capital expenditures

(252,407)


(303,268)


(751,004)


(648,149)

Acquisition of oil and gas properties

(227,984)


(1,692)


(278,434)


(17,006)

Proceeds from sales of assets

549,333


4,723


551,446


9,313

Cash paid for settlement of contingent consideration arrangement

?


?


?


(19,171)

Other, net

(1,212)


4,788


(2,850)


13,497

    Net cash provided by (used in) investing activities

67,730


(295,449)


(480,842)


(661,516)

Cash flows from financing activities:








Borrowings on credit facility

1,105,000


811,000


2,629,500


2,535,000

Payments on credit facility

(1,237,000)


(954,000)


(2,736,500)


(2,684,000)

Issuance of 7.5% Senior Notes due 2030

?


?


?


600,000

Redemption of 8.25% Senior Notes due 2025

(187,238)


?


(187,238)


?

Redemption of 6.125% Senior Notes due 2024

?


?


?


(467,287)

Redemption of 9.0% Second Lien Senior Secured Notes due 2025

?


?


?


(339,507)

Payment of deferred financing costs

(510)


(1,081)


(560)


(11,623)

Cash paid to repurchase common stock

(14,980)


?


(14,980)


?

Other, net

(24)


?


(3,582)


1,715

    Net cash used in financing activities

(334,752)


(144,081)


(313,360)


(365,702)

Net change in cash and cash equivalents

(194)


(1,750)


61


(5,532)

  Balance, beginning of period

3,650


6,100


3,395


9,882

  Balance, end of period

$3,456


$4,350


$3,456


$4,350



*

Financial information for the prior period has been recast to reflect retrospective application of the successful efforts method of accounting. For additional information, refer to our Form 10-Q for the period ended September 30, 2023.

 

SOURCE Callon Petroleum Company


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