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Callon Petroleum Company Reports Results For Third Quarter, First Nine Months Of 2011

Stocks in this article: CPE

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 which the company may not control and 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 U.S. GAAP.

    Three Months Ended September 30,     Nine Months Ended September 30,
2011     2010     Change 2011     2010     Change
Discretionary cash flow $ 19,989 $ 8,108 $ 11,881 $ 56,996 $ 29,872 $ 27,124
Net working capital changes and other changes   6,982   132   6,850   933   52,372   (51,439 )
Net cash flow provided by operating activities $ 26,971 $ 8,240 $ 18,731 $ 57,929 $ 82,244 $ (24,315 )
 
 

Callon Petroleum Company Consolidated Balance Sheets (in thousands, except share data)

 
    September 30, 2011     December 31, 2010
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 48,234 $ 17,436
Accounts receivable 15,786 10,728
Fair market value of derivatives 8,338 -
Other current assets   1,744     2,180  
Total current assets   74,102     30,344  
 
Oil and gas properties, full-cost accounting method:
Evaluated properties 1,388,501 1,316,677
Less accumulated depreciation, depletion and amortization   (1,195,371 )   (1,155,915 )
Net oil and gas properties 193,130 160,762
Unevaluated properties excluded from amortization   7,811     8,106  
Total oil and gas properties   200,941     168,868  
 
Other property and equipment, net 10,716 3,370
Restricted investments 3,750 4,044
Investment in Medusa Spar LLC 9,914 10,424
Other assets, net   3,395     1,276  
Total assets $ 302,818   $ 218,326  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 24,335 $ 17,702
Asset retirement obligations 1,372 2,822
Fair market value of derivatives   -     937  
Total current liabilities   25,707     21,461  
 
13% Senior Notes due 2016
Principal outstanding 106,961 137,961
Deferred credit, net of accumulated amortization of $12,329 and $3,964, respectively   19,178     27,543  
Total 13% Senior Notes   126,139     165,504  
 
Asset retirement obligations 12,565 13,103
Other long-term liabilities   2,910     2,448  
Total liabilities   167,321     202,516  
 
Stockholders' equity:
Preferred Stock, $.01 par value, 2,500,000 shares authorized; - -

Common Stock, $.01 par value, 60,000,000 shares authorized; 39,381,693 and 28,984,125 shares outstanding at September 30, 2011 and December 31, 2010, respectively

394 290
Capital in excess of par value 323,693 248,160
Other comprehensive income (loss) 3,027 (8,560 )
Retained earnings (deficit)   (191,617 )   (224,080 )
Total stockholders' equity   135,497     15,810  
Total liabilities and stockholders' equity $ 302,818   $ 218,326  
 
 

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

 
   

Three Months Ended September 30,

   

Nine months Ended September 30,

2011     2010 2011     2010
Operating revenues:
Oil sales $ 26,537 $ 15,123 $ 74,428 $ 47,687
Gas sales   7,013     5,362   21,404     17,752  
Total operating revenues   33,550     20,485   95,832     65,439  
 
Operating expenses:
Lease operating expenses 5,980 4,327 16,324 13,006
Depreciation, depletion and amortization 13,013 7,392 35,741 21,247
General and administrative 3,464 3,371 11,487 12,086
Accretion expense 569 601 1,767 1,803
Acquisition expense   -     139   -     139  
Total operating expenses   23,026     15,830   65,319     48,281  
Income from operations   10,524     4,655   30,513     17,158  
 
Other (income) expenses:
Interest expense 2,722 3,133 8,912 9,925
(Gain) loss on early extinguishment of debt - - (1,942 ) 339
Gain on acquired assets (See Note 10) - - (3,688 ) -
Gain on sale of acquired assets (217 ) - (217 ) -
Loss on impairment of acquired assets 171 - 171 -
Other (income) expense   (347 )   63   (599 )   (409 )
Total other (income) expenses   2,329     3,196   2,637     9,855  
 
Income before income taxes 8,195 1,459 27,876 7,303
Income tax benefit   -     -   (3,972 )   -  
Income before equity in earnings of Medusa Spar LLC 8,195 1,459 31,848 7,303
Equity in earnings of Medusa Spar LLC   211     143   597     352  
Net income available to common shares $ 8,406   $ 1,602 $ 32,445   $ 7,655  
 
Net income per common share:
Basic $ 0.21   $ 0.06 $ 0.87   $ 0.27  
Diluted $ 0.21   $ 0.05 $ 0.85   $ 0.26  
 
Shares used in computing net income per common share:
Basic   39,322     28,815   37,431     28,769  
Diluted   39,976     29,491   38,120     29,431  
 
 

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

 
    Nine months Ended September 30,
2011     2010
Cash flows from operating activities:
Net income $ 32,445 $ 7,655

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

Depreciation, depletion and amortization 36,501 21,860
Accretion expense 1,767 1,803
Gain on acquired assets (3,688 ) -
Amortization of non-cash debt related items 338 305
Amortization of deferred credit (2,361 ) (2,723 )
Non-cash (gain) loss on early extinguishment of debt (1,942 ) 179
Equity in earnings of Medusa Spar LLC (597 ) (352 )
Deferred income tax expense 10,696 2,455
Deferred income tax asset valuation allowance (14,668 ) (2,455 )
Non-cash derivative income due to hedge ineffectiveness (189 ) -
Non-cash charge related to compensation plans 1,122 2,356
Payments to settle asset retirement obligations (2,428 ) (1,211 )
Changes in current assets and liabilities
Accounts receivable (5,280 ) 54,593
Other current assets 37 (1,462 )
Current liabilities 6,334 (134 )
Change in gas balancing receivable 198 370
Change in gas balancing payable (29 ) (292 )
Change in other long-term liabilities 100 (115 )
Change in other assets, net   (427 )   (588 )
Cash provided by operating activities   57,929     82,244  
 
Cash flows from investing activities:
Capital expenditures (74,388 ) (39,617 )
Acquisition expenditures - (995 )
Investment in restricted assets for plugging and abandonment (112 ) (337 )
Proceeds from sale of mineral interest and equipment 7,559 -
Distribution from Medusa Spar LLC   1,107     1,224  
Cash used in investing activities   (65,834 )   (39,725 )
 
Cash flows from financing activities:
Payments on senior secured credit facility - (10,000 )
Redemption of remaining 9.75% senior notes - (16,052 )
Redemption of 13% senior notes (35,062 ) -
Proceeds from exercise of employee stock options - (41 )
Issuance of common stock   73,765     -  
Cash provided by (used in) financing activities   38,703     (26,093 )
 
Net change in cash and cash equivalents 30,798 16,426
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 $ 48,234   $ 19,750  
 

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

 

Callon Petroleum Company Operating Information (Unaudited)

 
    Three Months Ended September 30,
2011     2010     Change     % Change
Net production:
Oil (MBbls) 270 209 61 29 %
Gas (MMcf) 1,284 1,107 177 16 %
Total production (Mboe) 484 393 91 23 %
Average daily production (Boe) 5,261 4,274 987 23 %
 
Average realized sales price (a):
Oil (Bbl) $ 98.27 $ 72.47 $ 25.80 36 %
Gas (Mcf) 5.46 4.84 0.62 13 %
Total (Boe) 69.31 52.10 17.21 33 %
 
Oil and gas revenues (in thousands):
Oil revenue $ 26,537 $ 15,123 $ 11,414 76 %
Gas revenue   7,013     5,362     1,651   31 %
Total $ 33,550   $ 20,485   $ 13,065   64 %
 
Additional per Boe data:
Sales price $ 69.31 $ 52.10 $ 17.21 33 %
Lease operating expense   (12.35 )   (11.00 )   (1.35 ) (12 ) %
Operating margin $ 56.96   $ 41.10   $ 15.86   39 %
 
Other expenses per Boe:
Depletion, depreciation and amortization $ 26.88 $ 18.80 $ 8.08 43 %
General and administrative $ 7.16 $ 8.57 $ (1.41 ) (16 )%
 
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price:
 
Average NYMEX price per barrel of oil $ 89.78 $ 76.23 $ 13.55 18 %
Basis differential and quality adjustments 9.10 (2.62 ) 11.72 nm
Transportation (0.94 ) (1.14 ) 0.20 (18 )%
Hedging   0.33     -     0.33   100 %
Average realized price per barrel of oil $ 98.27   $ 72.47   $ 25.80   36 %
 
Average NYMEX price per Mcf of natural gas $ 4.29 $ 4.24 0.05 1 %
Basis differential and quality adjustments 1.17 0.49 0.68 139 %
Hedging   -     0.11     (0.11 ) 100 %
Average realized price per Mcf of natural gas $ 5.46   $ 4.84   $ 0.62   13 %
 
nm – Not Meaningful
 
 

Callon Petroleum Company Operating Information (Unaudited)

 
    Nine Months Ended September 30,
2011     2010     Change     % Change
Net production:
Oil (MBbls) 746 646 100 15 %
Gas (MMcf) 4,014 3,359 655 19 %
Total production (Mboe) 1,415 1,206 209 17 %
Average daily production (Boe) 5,182 4,417 765 17 %
 
Average realized sales price (a):
Oil (Bbl) $ 99.82 $ 73.78 $ 26.04 35 %
Gas (Mcf) 5.33 5.29 0.04 1 %
Total (Boe) 67.75 54.27 13.48 25 %
 
Oil and gas revenues (in thousands):
Oil revenue $ 74,428 $ 47,687 $ 26,741 56 %
Gas revenue   21,404     17,752     3,652   21 %
Total $ 95,832   $ 65,439   $ 30,393   46 %
 
Additional per Boe data:
Sales price $ 67.75 $ 54.27 $ 13.48 25 %
Lease operating expense   (11.54 )   (10.79 )   (0.75 ) (7 ) %
Operating margin $ 56.21   $ 43.48   $ 12.73   29 %
 
Other expenses per Boe:
Depletion, depreciation and amortization $ 25.27 $ 17.62 $ 7.65 43 %
General and administrative $ 8.12 $ 10.02 $ (1.90 ) (19 )%
 
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price:
 
Average NYMEX price per barrel of oil $ 95.48 $ 77.65 $ 17.83 23 %
Basis differential and quality adjustments 5.84 (2.70 ) 8.54 nm
Transportation (1.02 ) (1.18 ) 0.16 (14 )%
Hedging   (0.48 )   0.01     (0.49 ) nm
Average realized price per barrel of oil $ 99.82   $ 73.78   $ 26.04   35 %
 
Average NYMEX price per Mcf of natural gas $ 4.29 $ 4.54 $ (0.25 ) (6 )%
Basis differential and quality adjustments 1.04 0.64 0.40 63 %
Hedging   -     0.11     (0.11 ) (100 )%
Average realized price per Mcf of natural gas $ 5.33   $ 5.29   $ 0.04   1 %
 
nm – Not Meaningful
 

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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