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Callon Petroleum Company Reports Improved Results Of Operations For First Quarter 2011

Stocks in this article: CPE

First Quarter 2011 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended March 31, 2011 totaled $12.8 million compared to $11.2 million during the comparable prior year period. As defined by U.S. generally accepted accounting principles (GAAP), net cash flow provided by operating activities totaled $13.5 million and $55.6 million during the quarter ended March 31, 2011 and 2010, respectively. Operating cash flows during 2010 benefited from $52.7 million related to the royalty recoupment received from the Bureau of Ocean Energy Management, Regulation and Enforcement (formerly known as the Minerals Management Service). See “Non-GAAP Financial Measure” that follows and the accompanying reconciliation of discretionary cash flow, a non-GAAP measure, to net cash flow provided by operating activities.

Non-GAAP Financial Measure. This news release refers to a non-GAAP financial measure as “discretionary cash flow.” Callon believes that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company’s ability to internally fund exploration and development activities and to service or incur additional debt. The company also has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements that the company may not control and that may not relate to the period in which the operating activities occurred. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.

           
Reconciliation of Non-GAAP Financial Measure:
(in thousands ) Three Months Ended March 31
2011 2010 Change
 
Discretionary cash flow $ 12,769 $ 11,149 $ 3,562
Net working capital changes and other changes   688   44,401   (43,713 )
 
Net cash flow provided by operating activities $ 13,457 $ 55,550 $ (40,151 )
 

The following table sets forth certain unaudited operating information with respect to the Company's oil and gas operations for the periods indicated:

 
    Three-Months Ended March 31,
2011     2010     $

Change

   

%

Change

Net production:
Oil (MBbls) 201 223 (22 ) (10)%
Gas (MMcf) 1,342 1,166 176 15%
Total production (Mboe) 424 417 7 2%
Average daily production (MBoe) 4.7 4.6 0.1 2%
 
Average realized sales price (a):
Oil (Bbl) $ 93.78 $ 74.78 $ 19.00 25%
Gas (Mcf) 4.95 5.76 (0.81 ) (14)%
Total (Boe) 59.99 56.03 3.96 7%
 
Oil and gas revenues (in thousands):
Oil revenue $ 18,804 $ 16,663 $ 2,141 13%
Gas revenue   6,645     6,722     (77 ) (1)%
Total $ 25,449   $ 23,385   $ 2,064   9%
 
Additional per Boe data:
Sales price $ 59.99 $ 56.03 $ 3.96 7%
Lease operating expense   (11.89 )   (11.14 )   (0.75 ) 7%
Operating margin $ 48.10   $ 44.90   $ 3.20   7%
 
Other expenses per Boe:
Depletion, depreciation and amortization $ 23.05 $ 16.33 $ 6.72 41%
General and administrative $ 9.96 $ 10.31 $ (0.35 ) (4)%
 
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price:
 
Average NYMEX price per barrel of oil $ 94.11 $ 78.72 $ 15.39 20%
Basis differential and quality adjustments 1.28 (2.75 ) 4.03 nm
Transportation (1.11 ) (1.19 ) 0.08 (7)%
Hedging   (0.50 )   -     (0.50 ) 100%
Average realized price per barrel of oil $ 93.78   $ 74.78   $ 19.00   25%
 
Average NYMEX price per thousand cubic feet of natural gas (“Mcf”) $ 4.20 $ 5.04 (0.84 ) (17)%
Basis differential and quality adjustments 0.75 0.72 0.03 4%
Hedging   -     -     -   0%
Average realized price per Mcf of gas $ 4.95   $ 5.76   $ (0.81 ) (14)%
 
nm – Not Meaningful
 
 
 
 
 
 

Callon Petroleum Company

Consolidated Balance Sheets

(in thousands, except share data)

 
 
    March 31, 2011     December 31, 2010
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 54,482 $ 17,436
Accounts receivable 10,424 10,728
Other current assets   1,247     2,180  
Total current assets   66,153     30,344  
 
Oil and gas properties, full-cost accounting method:
Evaluated properties 1,333,509 1,316,677
Less accumulated depreciation, depletion and amortization   (1,165,685 )   (1,155,915 )
Net oil and gas properties 167,824 160,762
Unevaluated properties excluded from amortization   8,662     8,106  
Total oil and gas properties   176,486     168,868  
 
Other property and equipment, net 3,800 3,370
Restricted investments 4,082 4,044
Investment in Medusa Spar LLC 10,214 10,424
Other assets, net   1,019     1,276  
Total assets $ 261,754   $ 218,326  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 19,727 $ 17,702
Asset retirement obligations 2,405 2,822
Fair market value of derivatives   2,937     937  
Total current liabilities   25,069     21,461  
 
13% Senior Notes
Principal outstanding 106,961 137,961
Deferred credit, net of accumulated amortization of $10,790 and $3,964, respectively   20,717     27,543  
Total 13% Senior Notes   127,678     165,504  
 
Asset retirement obligations 13,146 13,103
Other long-term liabilities   3,441     2,448  
Total liabilities   169,334     202,516  
 
Stockholders' equity:
Preferred Stock, $.01 par value, 2,500,000 shares authorized; - -

Common Stock, $.01 par value, 60,000,000 shares authorized; 39,135,887 and 28,984,125 shares outstanding at March 31, 2011 and December 31, 2010, respectively

391 290
Capital in excess of par value 322,464 248,160
Other comprehensive loss (10,519 ) (8,560 )
Retained earnings (deficit)   (219,916 )   (224,080 )
Total stockholders' equity   92,420     15,810  
Total liabilities and stockholders' equity $ 261,754   $ 218,326  
 
 
 
 
 
 

Callon Petroleum Company

Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 
 
    Three-Months Ended March 31,
2011     2010
Operating revenues:
Oil sales $ 18,804 $ 16,663
Gas sales   6,645     6,722  
Total operating revenues   25,449     23,385  
 
Operating expenses:
Lease operating expenses 5,045 4,648
Depreciation, depletion and amortization 9,776 6,813
General and administrative 4,224 4,304
Accretion expense   615     580  
Total operating expenses   19,660     16,345  
Income from operations   5,789     7,040  
 
Other (income) expenses:
Interest expense 3,492 3,594
Gain on early extinguishment of debt, net (1,942 ) -
Other (income) expense   172     (361 )
Total other expenses   1,722     3,233  
 
Income before income taxes 4,067 3,807
Income tax expense   -     -  
Income before equity in earnings of Medusa Spar LLC 4,067 3,807
Equity in earnings of Medusa Spar LLC   97     116  
Net income available to common shares $ 4,164   $ 3,923  
 
Net income per common share:
Basic $ 0.12   $ 0.14  
Diluted $ 0.12   $ 0.13  
 
Shares used in computing net income per common share:
Basic   33,744     28,738  
Diluted   34,539     29,229  
 
 
 
 
 
 

Callon Petroleum Company

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 
 

 

   

Three-Months Ended March 31,

2011     2010
Cash flows from operating activities:
Net income $ 4,164 $ 3,923

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

Depreciation, depletion and amortization 10,001 6,989
Accretion expense 615 580
Amortization of non-cash debt related items 104 137
Amortization of deferred credit (822 ) (889 )
Gain on early extinguishment of debt (1,942 ) -
Equity in earnings of Medusa Spar LLC (97 ) (116 )
Deferred income tax expense 1,982 1,332
Valuation allowance (1,982 ) (1,332 )
Non-cash derivative expense due to hedge ineffectiveness 41 -
Non-cash charge related to compensation plans 776 643
Payments to settle asset retirement obligations (71 ) (118 )
Changes in current assets and liabilities:
Accounts receivable (110 ) 47,081
Other current assets 933 585
Current liabilities (256 ) (2,850 )
Change in gas balancing receivable 182 (44 )
Change in gas balancing payable 69 87
Change in other long-term liabilities - (115 )
Change in other assets, net   (130 )   (343 )
Cash provided by operating activities   13,457     55,550  
 
Cash flows from investing activities:
Capital expenditures (18,170 ) (6,856 )
Investment in restricted assets for plugging and abandonment (38 ) (262 )
Proceeds from sale of mineral interest 2,787 -
Distribution from Medusa Spar LLC   307     473  
Cash used in investing activities   (15,114 )   (6,645 )
 
Cash flows from financing activities:
Payments on senior secured credit facility - (10,000 )
Redemption of 13% senior notes (35,062 ) -
Issuance of common stock   73,765     -  
Cash provided by (used in) financing activities   38,703     (10,000 )
 
Net change in cash and cash equivalents 37,046 38,905
Cash and cash equivalents:
Balance, beginning of period 17,436 3,635
Less: Cash held by subsidiary deconsolidated at January 1, 2010   -     (311 )
Balance, end of period $ 54,482   $ 42,229  
 
 
 

Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties in Louisiana, Texas, and the offshore waters of the Gulf of Mexico.

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