CPE
$40.60
Callon Petroleum
($1.01)
(2.43%)
Earnings Details
1st Quarter March 2022
Wednesday, May 4, 2022 5:00:00 PM
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Summary

Callon Petroleum Misses

Callon Petroleum (CPE) reported 1st Quarter March 2022 earnings of $3.43 per share on revenue of $777.2 million. The consensus earnings estimate was $3.28 per share on revenue of $584.0 million. The Earnings Whisper number was $3.53 per share. Revenue grew 116.0% 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
$3.43
Earnings Whisper
$3.53
Consensus Estimate
$3.28
Reported Revenue
$777.2 Mil
Revenue Estimate
$584.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Callon Petroleum Company Announces First Quarter 2022 Results

HOUSTON, May 4, 2022 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported results of operations for the three months ended March 31, 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.

First Quarter 2022 and Recent Highlights

  • Delivered production of approximately 102.7 MBoe/d (63% oil) in the first quarter of 2022
  • Placed two co-development projects on production in the Delaware South area with performance exceeding expectations
  • Increased drilled, uncompleted well count to 42 wells at quarter end
  • Generated net cash provided by operating activities of $281.3 million and adjusted free cash flow of $183.3 million
  • Reported net income of $39.7 million, or $0.64 per diluted share, adjusted EBITDA of $393.7 million, and adjusted income of $212.7 million, or $3.43 per diluted share
  • Reduced lease operating expense and gathering, processing & transportation expense on a sequential basis by $6.2 million and $1.3 million, respectively 
  • Achieved an operating margin of $58.35 per Boe, including oil price realizations of over 100% of WTI benchmark
  • Reduced trailing twelve-month net debt-to-adjusted EBITDA to 1.97x, calculated pursuant to our credit facility, driven by strong operating margins and absolute debt reduction during the quarter

"Callon delivered another outstanding quarter as our results reflected both strong Permian well performance and increased overall capital and operating efficiency," said Joe Gatto, President and Chief Executive Officer. "We took several steps this quarter to help set the stage for future production growth and sustained free cash flow generation, including the build-out of a DUC inventory on our newly acquired Delaware South acreage to accommodate a more efficient scaled development model going forward. Our initial projects in this area implementing our scaled development model and completion designs are performing above expectations, and future activity in Delaware South will be an important contributor to our targeted 10% oil production growth by the fourth quarter of this year. 

"We are pleased with the rapid transformation of our balance sheet that has been the product of disciplined capital allocation and leading cash margins. Our leverage ratio was below 2.0x at the end of the first quarter and we expect that metric to approach 1.0x by year-end 2022 providing improved optionality for capital allocation, including a program of capital returns that accompany further debt reduction and re-investment in a deep inventory of low-breakeven projects," concluded Mr. Gatto.

Callon Operations Update

At March 31, 2022, Callon had 1,344 gross (1,204.3 net) wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended March 31, 2022 was 102.7 MBoe/d (63% oil).

For the three months ended March 31, 2022, Callon drilled 31 gross (26.4 net) wells and placed a combined 17 gross (16.5 net) wells on production. First quarter completion activity was solely focused on the Delaware Basin. Within the Delaware Basin, a six-well co-development project targeting Wolfcamp A and B zones was brought online in January and has exceeded production expectations with average 30-day production rates of 1,312 barrels of oil equivalent (Boe) per day and an oil cut of approximately 71%. Additionally, a five-well project, targeting the same two zones, was brought online in February and also has strong performance with an average 30-day production rates of 1,199 Boe/d and an oil cut of approximately 70%. As part of a broader optimization program for producing assets, Callon continues to convert gas lift systems to electric submersible pumps, positively impacting the production profile of the existing asset base across the Delaware position.

In the Eagle Ford, Callon drilled 9 gross (7.2 net) wells during the quarter but had no completion activity. During the quarter, the Company expanded its electrification efforts in the area, advancing sustainability initiatives and improving productivity. The project has resulted in the removal of another 25 generators, providing a cleaner and more reliable source of energy for field operations. Altogether, these efforts are expected to save approximately $1.5 million annually in lease operating expenses. Additional field electrification efforts are progressing and are expected to be completed by year-end.

Credit Facility Redetermination

On May 2, 2022, Callon completed the spring redetermination for its senior secured credit facility. The borrowing base and elected commitment were both reaffirmed at $1.6 billion. As of March 31, 2022, the drawn balance on the facility was $712.0 million and cash balances were $4.2 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.

Second Quarter Activity Outlook and Guidance

Callon is currently running seven rigs, with four rigs in the Delaware Basin, two rigs in the Midland Basin and one rig in the Eagle Ford. One rig is expected to be released in June. The Company plans to utilize two completion crews for the second quarter, supporting new production across the Midland, Delaware and Eagle Ford positions.

For the second quarter, the Company expects to produce between 100 and 102 MBoe/d (64% oil) with between 32 and 35 gross wells (28 - 31 net) placed on production. In addition, Callon projects an operational capital spending level of between $225 and $240 million on an accrual basis.

Capital Expenditures

For the three months ended March 31, 2022, Callon incurred $157.4 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 March 31, 2022



Operational


Capitalized


Capitalized


Total Capital



Capital (a)


Interest


G&A


Expenditures



(In thousands)

Cash basis (b)


$174,563


$17,212


$9,703


$201,478

Timing adjustments (c)


(8,883)


6,293



(2,590)

Non-cash items


(8,302)


2,033


1,877


(4,392)

   Accrual basis


$157,378


$25,538


$11,580


$194,496

 

(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 April 29, 2022, Callon had the following outstanding oil, natural gas and NGL derivative contracts:


For the Remainder


For the Full Year

Oil Contracts (WTI)

2022


2023

   Swap Contracts




        Total volume (Bbls)

3,676,000

(a)

905,000

        Weighted average price per Bbl

$62.77

(a)

$71.20

   Collar Contracts




        Total volume (Bbls)

4,712,500


2,096,500

        Weighted average price per Bbl




             Ceiling (short call)

$68.77


$80.25

             Floor (long put)

$57.83


$69.48

     Short Call Swaption Contracts (b)




          Total volume (Bbls)


1,825,000

          Weighted average price per Bbl

$—


$72.00





Oil Contracts (Midland Basis Differential)




   Swap Contracts




        Total volume (Bbls)

1,787,500


        Weighted average price per Bbl

$0.50


$—





Oil Contracts (Argus Houston MEH)




   Collar Contracts




          Total volume (Bbls)

227,500


          Weighted average price per Bbl




               Ceiling (short call)

$63.15


$—

               Floor (long put)

$51.25


$—

 

(a)

In March 2022, the Company entered into certain offsetting WTI swaps at an average price of $100.87/Bbl for the second quarter of 2022. These offsetting swaps resulted in a recognized loss of approximately $39.3 million which will be settled in the second quarter of 2022 as the applicable contracts settle.

(b)

The 2023 short call swaption contracts have exercise expiration dates of December 30, 2022.

 


For the Remainder


For the Full Year

Natural Gas Contracts (Henry Hub)

2022


2023

   Swap Contracts




      Total volume (MMBtu)

10,700,000


      Weighted average price per MMBtu

$3.62


$—

Collar Contracts




      Total volume (MMBtu)

7,330,000


6,640,000

      Weighted average price per MMBtu




         Ceiling (short call)

$5.49


$6.60

         Floor (long put)

$3.99


$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



March 31, 2022


December 31, 2021


March 31, 2021

Total production







Oil (MBbls)







     Permian


4,469


4,727


3,088

     Eagle Ford


1,377


1,839


1,593

          Total oil


5,846


6,566


4,681








Natural gas (MMcf)







     Permian


8,590


9,183


6,208

     Eagle Ford


1,525


2,090


1,627

          Total natural gas


10,115


11,273


7,835








NGLs (MBbls)







     Permian


1,455


1,549


1,075

     Eagle Ford


252


344


224

          Total NGLs


1,707


1,893


1,299








Total production (MBoe)







     Permian


7,356


7,806


5,198

     Eagle Ford


1,883


2,532


2,088

          Total barrels of oil equivalent


9,239


10,338


7,286








Total daily production (Boe/d)







     Permian


81,733


84,848


57,758

     Eagle Ford


20,922


27,517


23,199

          Total barrels of oil equivalent


102,655


112,365


80,957

Oil as % of total daily production


63%


64%


64%








Average realized sales price (excluding impact of settled derivatives)





Oil (per Bbl)







     Permian


$94.52


$76.86


$56.66

     Eagle Ford


95.02


77.84


57.80

          Total oil


$94.64


$77.13


$57.05








Natural gas (per Mcf)







     Permian


$4.20


$4.81


$3.11

     Eagle Ford


5.18


6.00


3.03

          Total natural gas


$4.35


$5.03


$3.09








NGLs (per Bbl)







     Permian


$40.25


$37.50


$22.68

     Eagle Ford


35.93


34.00


22.24

          Total NGLs


$39.61


$36.86


$22.60








Average realized sales price (per Boe)







     Permian


$70.29


$59.64


$42.06

     Eagle Ford


78.50


66.10


48.85

          Total average realized sales price


$71.97


$61.22


$44.01








Average realized sales price (including impact of settled derivatives)





Oil (per Bbl)


$73.78


$57.05


$44.33

Natural gas (per Mcf)


3.59


3.81


2.88

NGLs (per Bbl)


37.34


34.56


21.77

          Total average realized sales price (per Boe)


$57.52


$46.72


$35.46










Three Months Ended



March 31, 2022


December 31, 2021


March 31, 2021

Revenues (in thousands)(a)







Oil







     Permian


$422,404


$363,306


$174,967

     Eagle Ford


130,845


143,139


92,078

          Total oil


$553,249


$506,445


$267,045








Natural gas







     Permian


$36,069


$44,133


$19,290

     Eagle Ford


7,907


12,541


4,930

          Total natural gas


$43,976


$56,674


$24,220








NGLs







     Permian


$58,563


$58,085


$24,376

     Eagle Ford


9,055


11,697


4,981

          Total NGLs


$67,618


$69,782


$29,357








Total revenues







     Permian


$517,036


$465,524


$218,633

     Eagle Ford


147,807


167,377


101,989

          Total revenues


$664,843


$632,901


$320,622








Additional per Boe data







Sales price (b)







     Permian


$70.29


$59.64


$42.06

     Eagle Ford


78.50


66.10


48.85

          Total sales price


$71.97


$61.22


$44.01








Lease operating expense







     Permian


$6.85


$7.22


$4.31

     Eagle Ford


8.99


6.77


8.65

          Total lease operating expense


$7.29


$7.11


$5.55








Production and ad valorem taxes







     Permian


$3.89


$3.15


$2.32

     Eagle Ford


4.82


3.60


3.07

          Total production and ad valorem taxes


$4.08


$3.26


$2.53








Gathering, transportation and processing







     Permian


$2.33


$2.26


$2.54

     Eagle Ford


1.92


1.76


2.29

          Total gathering, transportation and processing


$2.25


$2.14


$2.47








Operating margin







     Permian


$57.22


$47.01


$32.89

     Eagle Ford


62.77


53.97


34.84

          Total operating margin


$58.35


$48.71


$33.46








   Depreciation, depletion and amortization


$11.15


$10.89


$9.74

   General and administrative


$1.85


$1.27


$2.31

   Adjusted G&A







      Cash component (c)


$1.40


$1.18


$1.26

      Non-cash component


$0.14


$0.12


$0.23

 

(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 March 31, 2022, Callon reported revenue of $664.8 million, which excluded revenue from sales of commodities purchased from a third party of $112.4 million. Revenues including the gain or loss from the settlement of derivative contracts ("Adjusted Total Revenue") were $531.4 million, reflecting the impact of a $133.5 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 March 31, 2022, the net loss on commodity derivative contracts includes the following (in thousands):


Three Months Ended
March 31, 2022

Loss on oil derivatives

$325,348

Loss on natural gas derivatives

28,181

Loss on NGL derivatives

4,771

Loss on commodity derivative contracts

$358,300

For the quarter ended March 31, 2022, the cash paid for commodity derivative settlements includes the following (in thousands):


Three Months Ended
March 31, 2022

Cash paid on oil derivatives, net

($95,353)

Cash paid on natural gas derivatives, net

(4,644)

Cash paid on NGL derivatives, net

(1,528)

Cash paid for commodity derivative settlements, net

($101,525)

Lease Operating Expenses, including workover ("LOE"). LOE per Boe for the three months ended March 31, 2022 was $67.3 million, or $7.29 per Boe, compared to LOE of $73.5 million, or $7.11 per Boe, in the fourth quarter of 2021. The sequential reduction in LOE was primarily due to changing service providers and improving the efficiency of operations. The increase in LOE per Boe was due to 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 March 31, 2022 were approximately 5.7% of total revenue excluding revenue from sales of commodities purchased from a third-party and before the impact of derivative settlements, or $4.08 per Boe.

Gathering, Transportation and Processing. Gathering, transportation and processing expense for the three months ended March 31, 2022 was $20.8 million, or $2.25 per Boe, as compared to $22.1 million, or $2.14 per Boe, in the fourth quarter of 2021. This decrease in gathering, transportation and processing expense was primarily due to the 9% decrease in production volumes between the two periods.

Depreciation, Depletion and Amortization ("DD&A"). DD&A for the three months ended March 31, 2022 was $11.15 per Boe compared to $10.89 per Boe in the fourth quarter of 2021. The increase in DD&A per Boe was primarily attributable to the larger decrease in production volumes as compared to the depletion rate of our proved reserves from the fourth quarter of 2021 to the first quarter of 2022.

General and Administrative Expense ("G&A"). G&A for the three months ended March 31, 2022 and December 31, 2021 was $17.1 million and $13.1 million, respectively. G&A, excluding certain non-cash incentive share-based compensation valuation adjustments, ("Adjusted G&A") was $14.3 million for the three months ended March 31, 2022 compared to $13.4 million for the fourth quarter of 2021. The cash component of Adjusted G&A increased to $13.0 million for the three months ended March 31, 2022 compared to $12.2 million for the fourth quarter of 2021 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


March 31, 2022


December 31, 2021


March 31, 2021

Total G&A

$17,121


$13,116


$16,799

     Change in the fair value of liability share-based awards

     (non-cash)

(2,851)


296


(5,943)

Adjusted G&A – total

14,270


13,412


10,856

     Equity-settled, share-based compensation (non-cash) and other
     non-recurring expenses

(1,315)


(1,230)


(1,665)

Adjusted G&A – cash component

$12,955


$12,182


$9,191







Capitalized cash G&A

9,703


11,035


6,913

Full cash G&A

$22,658


$23,217


$16,104

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 $0.5 million and income tax benefit of $0.8 million for the three months ended March 31, 2022 and December 31, 2021, 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 EBITDA. Net income was $39.7 million and adjusted EBITDA was $393.7 million for the first quarter of 2022 as compared to net income of $285.4 million and adjusted EBITDA of $339.2 million for the fourth quarter of 2021. The increase in adjusted EBITDA from the fourth quarter of 2021 was primarily due to an increase in revenues primarily as a result of the 23% increase in the price of oil as well as $16.5 million less cash paid for derivative settlements.

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


Three Months Ended


March 31, 2022


December 31, 2021


March 31, 2021


(In thousands, except per share data)

Net income (loss)

$39,737


$285,351


($80,407)

     Loss on derivative contracts

358,300


10,145


214,523

     Loss on commodity derivative settlements, net

(133,476)


(149,938)


(62,280)

     Non-cash expense related to share-based awards

4,166


939


7,608

     Merger, integration and transaction

769


11,271


     Other (income) expense

(782)


1,072


(3,306)

     Loss on extinguishment of debt


43,460


     Tax effect on adjustments above(a)

(48,085)


17,441


(32,874)

     Change in valuation allowance

(7,963)


(60,585)


26,724

Adjusted income

$212,666


$159,156


$69,988







Net income (loss) per diluted share

$0.64


$4.78


($1.89)

Adjusted income per diluted share

$3.43


$2.66


$1.49







Basic weighted average common shares outstanding

61,487


59,143


42,590

Diluted weighted average common shares outstanding (GAAP)

62,065


59,737


42,590

Effect of potentially dilutive instruments



4,354

Adjusted diluted weighted average common shares outstanding

62,065


59,737


46,944

 

(a)

Calculated using the federal statutory rate of 21%.

 


Three Months Ended


March 31, 2022


December 31, 2021


March 31, 2021


(In thousands)

Net income (loss)

$39,737


$285,351


($80,407)

   Loss on derivative contracts

358,300


10,145


214,523

   Loss on commodity derivative settlements, net

(133,476)


(149,938)


(62,280)

   Non-cash expense related to share-based awards

4,166


939


7,608

   Merger, integration and transaction

769


11,271


   Other (income) expense

(782)


1,072


(3,306)

   Income tax (benefit) expense

484


(837)


(921)

   Interest expense, net

21,558


25,226


24,416

   Depreciation, depletion and amortization

102,979


112,551


70,987

   Loss on extinguishment of debt


43,460


Adjusted EBITDA

$393,735


$339,240


$170,620

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


Three Months Ended


March 31, 2022


December 31, 2021


March 31, 2021


(In thousands)

Net cash provided by operating activities

$281,270


$366,310


$137,665

     Changes in working capital and other

123,805


(67,390)


30,913

     Change in accrued hedge settlements

(31,951)


6,781


(20,117)

     Cash interest expense, net

19,842


22,268


22,159

     Merger, integration and transaction

769


11,271


Adjusted EBITDA

$393,735


$339,240


$170,620

     Less: Operational capital expenditures (accrual)

157,378


159,786


95,545

     Less: Capitalized cash interest

23,506


22,591


21,817

     Less: Cash interest expense, net

19,842


22,268


22,159

     Less: Capitalized cash G&A

9,703


11,035


6,913

Adjusted free cash flow

$183,306


$123,560


$24,186

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


March 31, 2022


December 31, 2021


March 31, 2021


(In thousands)

Cash flows from operating activities:






Net income (loss)

$39,737


$285,351


($80,407)

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






     Depreciation, depletion and amortization

102,979


112,551


70,987

      Amortization of non-cash debt related items, net

1,716


2,958


2,256

     Loss on derivative contracts

358,300


10,145


214,523

     Cash paid for commodity derivative settlements, net

(101,525)


(156,719)


(42,162)

     Loss on extinguishment of debt


43,460


     Non-cash expense related to share-based awards

4,166


939


7,608

     Merger, integration and transaction

769


11,271


Other, net

2,894


31


1,217

Adjusted discretionary cash flow

$409,036


$309,987


$174,022

     Changes in working capital

(126,997)


67,594


(36,357)

     Merger, integration and transaction

(769)


(11,271)


Net cash provided by operating activities

$281,270


$366,310


$137,665

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


March 31, 2022


December 31, 2021


March 31, 2021


(In thousands)

Operating revenues






     Oil

$553,249


$506,445


$267,045

     Natural gas

43,976


56,674


24,220

     NGLs

67,618


69,782


29,357

Total operating revenues

$664,843


$632,901


$320,622

     Impact of settled derivatives

(133,476)


(149,938)


(62,280)

Adjusted total revenue

$531,367


$482,963


$258,342

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


March 31,
2021


June 30,
2021


September 30,
2021


December 31,
2021


March 31,
2022


(In thousands)

Total debt

$2,937,239


$2,865,154


$2,809,610


$2,694,115


$2,623,282

     Unamortized premiums, discount, and
     deferred loan costs, net

40,402


37,487


48,311


28,806


26,639

Adjusted total debt

$2,977,641


$2,902,641


$2,857,921


$2,722,921


$2,649,921

     Less: Cash and cash equivalents

24,350


3,800


3,699


9,882


4,150

Net debt

$2,953,291


$2,898,841


$2,854,222


$2,713,039


$2,645,771

 

Callon Petroleum Company
Consolidated Balance Sheets
(In thousands, except par and share amounts)
(Unaudited)








March 31, 2022


December 31, 2021

ASSETS





Current assets:





     Cash and cash equivalents


$4,150


$9,882

     Accounts receivable, net


347,593


232,436

     Fair value of derivatives



22,381

     Other current assets


33,249


30,745

          Total current assets


384,992


295,444

Oil and natural gas properties, full cost accounting method:





     Evaluated properties, net


3,426,156


3,352,821

     Unevaluated properties


1,847,790


1,812,827

     Total oil and natural gas properties, net


5,273,946


5,165,648

Other property and equipment, net


28,985


28,128

Deferred financing costs


16,543


18,125

Other assets, net


41,054


40,158

          Total assets


$5,745,520


$5,547,503

LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





     Accounts payable and accrued liabilities


$516,440


$569,991

     Fair value of derivatives


392,928


185,977

     Other current liabilities


163,936


116,523

          Total current liabilities


1,073,304


872,491

Long-term debt


2,623,282


2,694,115

Asset retirement obligations


55,160


54,458

Fair value of derivatives


34,434


11,409

Other long-term liabilities


44,750


49,262

          Total liabilities


3,830,930


3,681,735

Commitments and contingencies





Stockholders' equity:





     Common stock, $0.01 par value, 78,750,000 shares authorized; 61,493,753
     and 61,370,684 shares outstanding, respectively


615


614

     Capital in excess of par value


4,021,442


4,012,358

     Accumulated deficit


(2,107,467)


(2,147,204)

          Total stockholders' equity


1,914,590


1,865,768

Total liabilities and stockholders' equity


$5,745,520


$5,547,503

 

Callon Petroleum Company
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)



Three Months Ended

March 31,


2022


2021

Operating Revenues:




     Oil

$553,249


$267,045

     Natural gas

43,976


24,220

     Natural gas liquids

67,618


29,357

Sales of purchased oil and gas

112,375


39,259

          Total operating revenues

777,218


359,881





Operating Expenses:




     Lease operating

67,328


40,453

     Production and ad valorem taxes

37,678


18,439

     Gathering, transportation and processing

20,775


17,981

     Cost of purchased oil and gas

111,271


40,917

     Depreciation, depletion and amortization

102,979


70,987

     General and administrative

17,121


16,799

     Merger, integration and transaction

769


          Total operating expenses

357,921


205,576

Income From Operations

419,297


154,305





Other (Income) Expenses:




     Interest expense, net of capitalized amounts

21,558


24,416

     Loss on derivative contracts

358,300


214,523

     Other income

(782)


(3,306)

          Total other expense

379,076


235,633





Income (Loss) Before Income Taxes

40,221


(81,328)

Income tax benefit (expense)

(484)


921

Net Income (Loss)

$39,737


($80,407)





Net Income (Loss) Per Common Share:




Basic

$0.65


($1.89)

Diluted

$0.64


($1.89)





Weighted Average Common Shares Outstanding:




Basic

61,487


42,590

Diluted

62,065


42,590

 

Callon Petroleum Company
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)



Three Months Ended

March 31,


2022


2021

Cash flows from operating activities:




Net income (loss)

$39,737


($80,407)

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




     Depreciation, depletion and amortization

102,979


70,987

     Amortization of non-cash debt related items, net

1,716


2,256

     Loss on derivative contracts

358,300


214,523

     Cash paid for commodity derivative settlements, net

(101,525)


(42,162)

     Non-cash expense related to share-based awards

4,166


7,608

     Other, net

2,894


1,217

     Changes in current assets and liabilities:




          Accounts receivable

(116,322)


(45,683)

          Other current assets

(4,180)


(2,856)

          Accounts payable and accrued liabilities

(12,987)


12,182

          Cash received for settlements of contingent consideration arrangements, net

6,492


          Net cash provided by operating activities

281,270


137,665

Cash flows from investing activities:




Capital expenditures

(201,478)


(101,341)

Acquisition of oil and gas properties

(9,409)


(768)

Proceeds from sales of assets

4,484


Cash paid for settlement of contingent consideration arrangement

(19,171)


Other, net

3,635


3,595

          Net cash used in investing activities

(221,939)


(98,514)

Cash flows from financing activities:




Borrowings on Credit Facility

673,000


303,000

Payments on Credit Facility

(746,000)


(338,000)

Cash received for settlement of contingent consideration arrangement

8,512


Other, net

(575)


(37)

          Net cash used in financing activities

(65,063)


(35,037)

Net change in cash and cash equivalents

(5,732)


4,114

Balance, beginning of period

9,882


20,236

Balance, end of period

$4,150


$24,350

 

Non-GAAP Financial Measures

This news release refers to non-GAAP financial measures such as "adjusted free cash flow," "adjusted discretionary cash flow," "adjusted G&A," "full cash G&A," "adjusted income," "adjusted income per diluted share," "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 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).
       
  • 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).
       
  • Adjusted G&A is a supplemental non-GAAP financial measure that excludes certain non-cash incentive share-based compensation valuation adjustments and adjusted G&A - cash component further excludes equity-settled, share-based compensation expenses and non-recurring 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.
       
  • 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.
       
  • 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 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.
       
  • Callon believes that operating margin is a comparable metric against other companies in the industry 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. 
       
  • 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.

Earnings Call Information

The Company will host a conference call on Thursday, May 5, 2022, to discuss first quarter 2022 financial and operating results, outlook 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, May 5, 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