Callon Petroleum Company Announces Second Quarter 2023 Results :: Callon Petroleum Company (CPE)

Delivered 7% sequential production growth

Capital expenditures at low end of guidance

13th straight quarter of delivering adjusted free cash flow

Share buyback program to commence in 3Q

HOUSTON, Aug. 2, 2023 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported second quarter 2023 financial and operating results. A conference call to discuss the results is planned for 8 a.m. CDT, Thursday, August 3. Slides accompanying today's release are available at www.callon.com/investors.

Second Quarter 2023 Highlights

"The second quarter highlighted the contributions from several large-scale projects across the Permian Basin combined with improvements in our cash operating structure and efficiencies in our capital spending program," said Joe Gatto, President and Chief Executive Officer. "We enter the second half of 2023 as a Permian-focused company with multiple initiatives to drive further improvements in our capital efficiency and operating margins which are already delivering near-term results. Importantly, we now progress forward with another lever to increase shareholder value through a share repurchase program that will complement further reductions in our debt balances."

Financial Results

Callon reported a second quarter 2023 net loss of $107.9 million, or $1.74 per share, and adjusted EBITDAX of $332.3 million. Excluding a one-time $406.9 million non-cash impairment charge related to the sale of the Eagle Ford assets as well as other items, adjusted income was $123.1 million, or $1.99 per share.

The Company generated $279.5 million of net cash provided from operating activities in the second quarter. Total operational capital expenditures for the quarter were $285.1 million. Callon expects adjusted free cash flow to increase in the second half of 2023 materially and be allocated between debt reduction and the recently announced two-year, $300 million share buyback program.

Operational Results

Second quarter production averaged 107 MBoe/d (59% oil and 80% liquids), in line with guidance. During the quarter, 32 gross wells were turned in-line.

Average realized commodity prices during the quarter were $73.52 per Bbl for oil (100% of NYMEX WTI), $19.87 per Bbl for natural gas liquids, and $1.23 per MMBtu for natural gas (53% of NYMEX HH). Total average realized price for the period was $49.00 per Boe on an unhedged basis.

Lease operating expense, which includes workover expense, for the quarter was $76.8 million or $7.89 per Boe compared to $75.1 million or $8.36 per Boe in the first quarter of 2023. The sequential per unit decrease was primarily related to increases in total production volumes.

Third and Fourth Quarter Outlook and Guidance

Callon entered the third quarter running seven drilling rigs, five in the Delaware Basin, one in the Midland Basin, and one in the Eagle Ford. Upon closing the Eagle Ford divestiture on July 3rd, the acquiring party assumed the Eagle Ford rig.

Callon has finalized plans for integrating the newly acquired Delaware Basin assets into its scaled co-development model and drilling and completion schedules. The Company intends to release a drilling rig in the Permian Basin in August and maintain a 5-rig drilling program through the end of the year. Development activity on the acquired assets is scheduled to resume in the second half after the previous operator dropped its one drilling rig in the second quarter. Five drilled but uncompleted wells acquired with the asset package are expected to be turned to sales in the fourth quarter.

During the second quarter, the now divested Eagle Ford assets produced 17 MBoe/d and the newly acquired Delaware assets produced 14 MBoe/d. Transitioning to the third quarter, the Company expects to produce 100 – 103 MBoe/d, which includes oil volumes of 60 – 62 MBbls/d. These estimates include the impact of a force majeure event at a large Midland Basin natural gas processing facility in July that lasted for 14 days. Given the elevated occurrences of weather-related power and midstream disruptions experienced during June and July, the Company has also assumed incremental downtime above previous seasonal levels used for forecasting. Combined, these two factors reduced third quarter production estimates by approximately 1,500 Boe/d. Wells turned in-line are expected to be 30 - 35 gross operated wells (27 - 32 net). Operational capital expenditures are expected to be $250 - $275 million on an accrual basis.

For the fourth quarter, Callon expects to produce 104 – 108 MBoe/d which includes oil volumes of 63 – 65 MBbls/d.

Capital spending for the second half now includes approximately $15 million in non-operated capital projects previously budgeted for 2024 due to a change in the operator's schedule. Despite the incremental activity, Callon's 2023 full-year capital expenditure guidance is unchanged due to identified savings related to the base activity plan that offset the project spend. The production contribution from these non-operated capital projects is expected in 2024.

Full-year 2023 production and capital spending guidance remains unchanged and is available in the accompanying presentation.

Capital Structure Update

As of June 30, 2023, the drawn balance on the revolving credit facility was $528.0 million. After the quarter end, the Company applied the net cash proceeds from the recent transactions to pay down the revolving credit facility and redeemed all $187.2 million of Callon's outstanding 8.25% Senior Notes due 2025 at par. The pro forma effect of these subsequent events leaves Callon with approximately $1.1 billion of liquidity and less than $2.0 billion of total debt.

In the second quarter, Callon received upgrades from two rating agencies. Standard & Poor's Global Ratings upgraded Callon's issuer credit rating to B+ and its senior unsecured notes rating to BB- with a stable outlook; and Fitch Ratings upgraded Callon's long-term issuer default rating to B+ with a stable outlook and its senior unsecured notes rating to BB-.

Earnings Call Information

The Company plans to host a conference call on Thursday, August 3, 2023, to discuss its second quarter 2023 financial and operating results and outlook for the remainder of 2023.

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

Date/Time:

Thursday, August 3, 2023, at 8:00 a.m. Central Daylight Time (9:00 a.m. Eastern Daylight Time)

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 Information

Kevin SmithDirector of Investor RelationsCallon Petroleum [email protected](281) 589-5200

Cautionary Statement Regarding Forward Looking InformationThis 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; 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 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.

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

June 30, 2023

March 31, 2023

June 30, 2022

(In thousands except per share data)

Net income (loss)

($107,896)

$220,638

$303,251

(Gain) loss on derivative contracts

(5,941)

(25,645)

81,648

Gain (loss) on commodity derivative settlements, net

13,663

12,012

(184,558)

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

3,688

1,881

(3,357)

Impairment of oil and gas properties

406,898

—

Merger, integration and transaction

1,543

—

Other (income) expense

(6,414)

1,051

Loss on extinguishment of debt

—

42,417

Tax effect on adjustments above (a)

(88,180)

3,815

13,188

Change in valuation allowance

(100,749)

(86,383)

(61,123)

Adjusted income

$123,080

$119,904

$192,517

Net income (loss) per diluted share

($1.74)

$3.57

$4.90

Adjusted income per diluted share

$1.99

$1.94

$3.11

Basic weighted average common shares outstanding

61,856

61,625

61,679

Diluted weighted average common shares outstanding (GAAP)

61,856

61,874

61,909

Effect of potentially dilutive instruments

—

Adjusted diluted weighted average common shares outstanding

61,911

61,874

61,909

(a)

Calculated using the federal statutory rate of 21%.

Three Months Ended

June 30, 2023

March 31, 2023

June 30, 2022

(In thousands)

Net income (loss)

($107,896)

$220,638

$303,251

(Gain) loss on derivative contracts

(5,941)

(25,645)

81,648

Gain (loss) on commodity derivative settlements, net

13,663

12,012

(184,558)

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

3,688

1,881

(3,357)

Impairment of oil and gas properties

406,898

—

Merger, integration and transaction

1,543

—

Other (income) expense

(6,414)

1,051

Income tax (benefit) expense

(156,212)

(50,695)

3,240

Interest expense

47,239

46,306

46,995

Depreciation, depletion and amortization

127,348

125,965

115,956

Exploration

1,882

2,232

2,410

Loss on extinguishment of debt

—

42,417

Adjusted EBITDAX

$332,266

$326,280

$409,053

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

June 30, 2023

March 31, 2023

June 30, 2022

(In thousands)

Net cash provided by operating activities

$279,522

$247,913

$336,085

Changes in working capital and other

11,188

18,869

29,007

Changes in accrued hedge settlements

638

12,791

1,839

Merger, integration and transaction

1,543

—

Cash flow from operations before net change in working capital

292,891

279,573

366,931

Capital expenditures

293,697

204,900

176,611

Increase (decrease) in accrued capital expenditures

(13,083)

67,460

65,110

Capital expenditures before accruals

280,614

272,360

241,721

Adjusted free cash flow

$12,277

$7,213

$125,210

Callon Petroleum Company

Consolidated Balance Sheets

(In thousands, except par and share amounts)

June 30, 2023

December 31, 2022*

ASSETS

Current assets:

Cash and cash equivalents

$3,650

$3,395

Accounts receivable, net

164,708

237,128

Fair value of derivatives

14,960

21,332

Assets held for sale

606,614

—

Other current assets

37,975

35,783

Total current assets

827,907

297,638

Oil and natural gas properties, successful efforts accounting method:

Proved properties, net

4,216,641

4,851,529

Unproved properties

1,203,168

1,225,768

Total oil and natural gas properties, net

5,419,809

6,077,297

Other property and equipment, net

26,596

26,152

Deferred income taxes

198,534

—

Deferred financing costs

15,447

18,822

Other assets, net

77,265

68,560

Total assets

$6,565,558

$6,488,469

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$507,471

$536,233

Fair value of derivatives

1,506

16,197

Liabilities associated with assets held for sale

71,114

—

Other current liabilities

100,701

150,384

Total current liabilities

680,792

702,814

Long-term debt

2,268,116

2,241,295

Asset retirement obligations

36,235

53,892

Fair value of derivatives

1,941

13,415

Other long-term liabilities

35,802

51,272

Total liabilities

3,022,886

3,062,688

Commitments and contingencies

Stockholders' equity:

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

61,888,356 and 61,621,518 shares outstanding, respectively

619

616

Capital in excess of par value

4,026,340

4,022,194

Accumulated deficit

(484,287)

(597,029)

Total stockholders' equity

3,542,672

3,425,781

Total liabilities and stockholders' equity

$6,565,558

$6,488,469

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

Callon Petroleum Company

Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022*

2023

2022*

Operating Revenues:

Oil

$421,775

$619,812

$831,331

$1,173,061

Natural gas

14,423

64,913

38,009

108,889

Natural gas liquids

40,629

75,530

83,999

143,148

Sales of purchased oil and gas

85,456

153,365

168,990

265,740

Total operating revenues

562,283

913,620

1,122,329

1,690,838

Operating Expenses:

Lease operating

76,788

72,940

151,890

140,268

Production and ad valorem taxes

24,706

44,873

57,427

82,551

Gathering, transportation and processing

27,338

23,267

53,315

44,042

Exploration

1,882

2,410

4,114

4,295

Cost of purchased oil and gas

88,768

155,397

174,829

266,668

Depreciation, depletion and amortization

127,348

115,956

253,313

229,599

Impairment of oil and gas properties

406,898

—

406,898

—

General and administrative

29,768

20,175

57,566

47,232

Merger, integration and transaction

1,543

—

1,543

769

Total operating expenses

785,039

435,018

1,160,895

815,424

Income (Loss) From Operations

(222,756)

478,602

(38,566)

875,414

Other (Income) Expenses:

Interest expense

47,239

46,995

93,545

94,091

(Gain) loss on derivative contracts

(5,941)

81,648

(31,586)

439,948

Loss on extinguishment of debt

—

42,417

—

42,417

Other (income) expense

1,051

(6,360)

269

Total other (income) expense

41,352

172,111

55,599

576,725

Income (Loss) Before Income Taxes

(264,108)

306,491

(94,165)

298,689

Income tax benefit (expense)

156,212

(3,240)

206,907

(3,153)

Net Income (Loss)

($107,896)

$303,251

$112,742

$295,536

Net Income (Loss) Per Common Share:

Basic

($1.74)

$4.92

$1.83

$4.80

Diluted

($1.74)

$4.90

$1.82

$4.77

Weighted Average Common Shares Outstanding:

Basic

61,856

61,679

61,741

61,583

Diluted

61,856

61,909

61,939

61,956

Callon Petroleum Company

Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022*

2023

2022*

Cash flows from operating activities:

Net income (loss)

($107,896)

$303,251

$112,742

$295,536

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

Depreciation, depletion and amortization

127,348

115,956

253,313

229,599

Impairment of oil and gas properties

406,898

—

406,898

—

Amortization of non-cash debt related items, net

2,614

3,372

5,245

7,121

Deferred income tax benefit

(152,864)

—

(204,841)

—

(Gain) loss on derivative contracts

(5,941)

81,648

(31,586)

439,948

Cash received (paid) for commodity derivative settlements, net

13,025

(186,397)

12,246

(287,922)

Loss on extinguishment of debt

—

42,417

—

42,417

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

3,688

(3,357)

5,569

2,686

Other, net

1,776

2,306

592

5,200

Changes in current assets and liabilities:

Accounts receivable

18,552

(14,072)

42,571

(123,902)

Other current assets

(4,986)

(3,317)

(6,604)

(7,497)

Accounts payable and accrued liabilities

(22,692)

(5,722)

(68,710)

(19,280)

Net cash provided by operating activities

279,522

336,085

527,435

583,906

Cash flows from investing activities:

Capital expenditures

(293,697)

(176,611)

(498,597)

(344,881)

Acquisition of oil and gas properties

(8,459)

(6,146)

(14,450)

(15,314)

Deposit for acquisition of oil and gas properties

(36,000)

—

(36,000)

—

Proceeds from sales of assets

106

2,113

4,590

Cash paid for settlement of contingent consideration arrangement

—

(19,171)

Other, net

(566)

5,074

(1,638)

8,709

Net cash used in investing activities

(338,663)

(177,577)

(548,572)

(366,067)

Cash flows from financing activities:

Borrowings on credit facility

855,000

1,051,000

1,524,500

1,724,000

Payments on credit facility

(792,300)

(984,000)

(1,499,500)

(1,730,000)

Issuance of 7.5% Senior Notes due 2030

—

600,000

—

600,000

Redemption of 6.125% Senior Notes due 2024

—

(467,287)

—

(467,287)

Redemption of 9.0% Second Lien Senior Secured Notes due 2025

—

(339,507)

—

(339,507)

Payment of deferred financing costs

(8)

(10,542)

(50)

(10,542)

Other, net

(3,271)

(6,222)

(3,558)

1,715

Net cash provided by (used in) financing activities

59,421

(156,558)

21,392

(221,621)

Net change in cash and cash equivalents

280

1,950

255

(3,782)

Balance, beginning of period

3,370

4,150

3,395

9,882

Balance, end of period

$3,650

$6,100

$3,650

$6,100

View original content:https://www.prnewswire.com/news-releases/callon-petroleum-company-announces-second-quarter-2023-results-301891962.html

SOURCE Callon Petroleum Company

Released August 2, 2023