Exhibit 99.1
CALLON PETROLEUM COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On November 5, 2013, Callon Petroleum Operating Company, a subsidiary of Callon Petroleum Company ("Callon" or the "Company"), closed on a portion of the previously announced sale of its 15% working interest in the Medusa field (Mississippi Canyon blocks 582 and 538), 10% membership interest in Medusa Spar LLC which owns a 75% interest in the Medusa field's production facilities, and interests in 10 non-operated Gulf of Mexico shelf fields (collectively termed "The Transaction") for an estimated net cash consideration of USD $76.4 million after customary purchase price adjustments and the assumption of related abandonment and retirement obligations. The Transaction is effective as of July 1, 2013.
The following unaudited pro forma condensed consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2013 and for the year ended December 31, 2012 ("Pro Forma Statements"), which have been prepared by the Company's management, are derived from the unaudited condensed consolidated financial statements of Callon as of and for the nine months ended September 30, 2013 included in its Quarterly Report on Form 10-Q for the period then ended and the audited consolidated financial statements of Callon for the year ended December 31, 2012 included in its 2012 Annual Report on Form 10-K. These pro forma financial statements reflect the entire Transaction and include the anticipated final closing on or before November 30, 2013 of the remaining assets included in The Transaction.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2013 was prepared assuming that The Transaction had occurred on that date. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013 were prepared assuming The Transaction had occurred on January 1, 2012. As previously announced, Callon sold its 11.25% working interest in the Habanero field (Garden Banks block 341) to Shell Offshore, Inc., a subsidiary of Royal Dutch shell plc ("The Previous Transaction"), for net cash consideration of $39.4 million in December 2012. The pro forma consolidated statements of operations for the year ended December 31, 2012 also include the effect of The Previous Transaction. The Pro Forma Statements do not purport to represent what Callon's financial position or results of operations would have been had The Transaction and Previous Transaction (collectively termed "The Combined Transactions") been consummated on the dates indicated or the financial position or results of operations for any future date of period. Callon believes the assumptions used in the preparation of the Pro Forma Statements provide a reasonable basis for presenting the significant effects directly attributable to The Combined Transactions.
The Pro Forma Statements should be read in conjunction with the historical consolidated financial statements and accompanying notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and in the Company’s Quarterly Report on Form10-Q for the quarter ended September 30, 2013.
|
| | | | | | | | | | | | |
| CALLON PETROLEUM COMPANY |
| Unaudited Pro forma Condensed Consolidated Balance Sheet as of September 30, 2013 |
| ($ in thousands, except share data) |
| | | | | The | | |
| | | Historical | | Transaction | | Pro forma |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 869 |
| | $ | 87,439 |
| (a) (b) | $ | 88,308 |
|
| Accounts receivable | | 20,072 |
| | (4,154 | ) | (b) | 15,918 |
|
| Deferred tax asset | | 3,323 |
| | — |
| | 3,323 |
|
| Other current assets | | 1,738 |
| | — |
| | 1,738 |
|
| Total current assets | | 26,002 |
| | 83,285 |
| | 109,287 |
|
| | | | | | | |
| Oil and gas properties, full cost accounting method: | | 354,825 |
| | (84,950 | ) | (c) | 269,875 |
|
| Investment in Medusa Spar, LLC | | 7,776 |
| | (7,776 | ) | (c) | — |
|
| Other property and equipment, net | | 10,635 |
| | — |
| | 10,635 |
|
| Deferred tax asset | | 60,198 |
| | — |
| | 60,198 |
|
| Other assets, net | | 8,005 |
| | (244 | ) | (e) | 7,761 |
|
| | | | | | | |
| Total assets | | $ | 467,441 |
| | $ | (9,685 | ) | | $ | 457,756 |
|
| | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
| Current liabilities | | | | | | |
| Accounts payable and accrued liabilities | | $ | 50,523 |
| | $ | (4,715 | ) | (b) | $ | 45,808 |
|
| Asset retirement obligations | | 6,002 |
| | (566 | ) | (d) | 5,436 |
|
| Total current liabilities | | 56,525 |
| | (5,281 | ) | | 51,244 |
|
| | | | | | | |
| Long-term debt | | 108,220 |
| | — |
| | 108,220 |
|
| Credit facility | | 17,000 |
| | — |
| | 17,000 |
|
| Asset retirement obligations | | 5,505 |
| | (3,917 | ) | (d) | 1,588 |
|
| Other long-term liabilities | | 3,579 |
| | (487 | ) | (e) | 3,092 |
|
| Total liabilities | | 190,829 |
| | (9,685 | ) | | 181,144 |
|
| | | | | | | |
| Stockholders' equity | | 276,612 |
| | — |
| | 276,612 |
|
| | | | | | | |
| Total liabilities and stockholders' equity | | $ | 467,441 |
| | $ | (9,685 | ) | | $ | 457,756 |
|
|
| | |
| The unaudited pro forma condensed consolidated balance sheet includes the following adjustments: |
| | | |
| (a) | | Reflects transactions related to cash proceeds received, net of cash flow from operations (revenues less lease operating expenses) of conveyed properties attributable to the period from the July 1, 2013 effective date through the respective transaction closing dates, and net of transaction costs. |
| | | |
| (b) | | Reflects the elimination of receivables and payables related to the working interest sold. |
| | | |
| (c) | | Reflects the elimination of investment in evaluated properties related to the properties sold. |
| | | |
| (d) | | Reflects the elimination of asset retirement obligations associated with the working interest sold. |
| | | |
| (e) | | Reflects the elimination of imbalances associated with the working interest sold. |
|
| | | | | | | | | | | | |
| CALLON PETROLEUM COMPANY |
| Unaudited Pro forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2012 |
| ($ in thousands, except share data) |
| | | | | The Combined | | |
| | | Historical | | Transactions | | Pro Forma |
| Operating revenues: | | | | | | |
| Total oil and natural gas revenues | | 110,733 |
| | (62,947 | ) | (f) | 47,786 |
|
| | | | | | | |
| Operating expenses: | | | | | | |
| Lease operating expenses | | 26,554 |
| | (9,529 | ) | (f) | 17,025 |
|
| Depreciation, depletion and amortization | | 49,701 |
| | (22,722 | ) | (g) | 26,979 |
|
| General and administrative | | 20,358 |
| | — |
| | 20,358 |
|
| Accretion expense | | 2,253 |
| | (865 | ) | (h) | 1,388 |
|
| Impairment of other property and equipment | | 1,177 |
| | — |
| | 1,177 |
|
| | | 100,043 |
| | (33,116 | ) | | 66,927 |
|
| | | | | | | |
| Income from operations | | 10,690 |
| | (29,831 | ) | | (19,141 | ) |
| | | | | | | |
| Other (income) expenses: | | | | | | |
| Interest expense | | 9,108 |
| | — |
| | 9,108 |
|
| Other (income) | | (1,796 | ) | | — |
| | (1,796 | ) |
| Gain on early extinguishment of debt | | (1,366 | ) | | — |
| | (1,366 | ) |
| Total other expenses | | 5,946 |
| | — |
| | 5,946 |
|
| | | | | | | |
| Income (loss) before income taxes | | 4,744 |
| | (29,831 | ) | | (25,087 | ) |
| Income tax expense (benefit) | | 2,223 |
| | (10,441 | ) | (i) | (8,218 | ) |
| | | | | | | |
| Income (loss) before equity in earnings of Medusa Spar LLC | | 2,521 |
| | (19,390 | ) | | (16,869 | ) |
| Equity in earnings of Medusa Spar LLC, net of tax | | 226 |
| | (226 | ) | (f) | — |
|
| | | | | | | |
| Net income (loss) available to common shares | | $ | 2,747 |
| | $ | (19,616 | ) | | $ | (16,869 | ) |
| | | | | | | |
| Net income (loss) per common share: | | | | | | |
| Basic | | $ | 0.07 |
| | | | $ | (0.43 | ) |
| Diluted | | $ | 0.07 |
| | | | $ | (0.43 | ) |
| | | | | | | |
| Shares used in computing net income (loss) per share amounts: | | | | | | |
| Basic | | 39,522 |
| | | | 39,522 |
|
| Diluted | | 40,337 |
| | | | 39,522 |
|
|
| | |
| The unaudited pro forma condensed consolidated statements of operations includes the following adjustments: |
| | | |
| (f) | | Reflects the elimination of revenues and direct operating expenses attributable to the working interest sold. |
| | | |
| (g) | | Reflects the elimination of depreciation, depletion and amortization expense attributable to the working interest sold. |
| | | |
| (h) | | Reflects the elimination of accretion expense attributable to the working interest sold. |
| | | |
| (i) | | Reflects the income tax expense at the federal statutory rate of 35% attributable to the working interest sold. |
|
| | | | | | | | | | | | |
| CALLON PETROLEUM COMPANY |
| Unaudited Pro forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2013 |
| ($ in thousands, except share data) |
| | | | | The | | |
| | | Historical | | Transaction | | Pro Forma |
| Operating revenues: | | | | | | |
| Total oil and natural gas revenues | | 76,098 |
| | (32,310 | ) | (f) | 43,788 |
|
| | | | | | | |
| Operating expenses: | | | | | | |
| Lease operating expenses | | 18,629 |
| | (5,957 | ) | (f) | 12,672 |
|
| Depreciation, depletion and amortization | | 33,603 |
| | (14,636 | ) | (g) | 18,967 |
|
| General and administrative | | 14,110 |
| | — |
| | 14,110 |
|
| Accretion expense | | 1,556 |
| | (566 | ) | (h) | 990 |
|
| | | 67,898 |
| | (21,159 | ) | | 46,739 |
|
| | | | | | | |
| Income from operations | | 8,200 |
| | (11,151 | ) | | (2,951 | ) |
| | | | | | | |
| Other (income) expenses: | | | | | | |
| Interest expense | | 4,469 |
| | — |
| | 4,469 |
|
| Other expense, net | | 1,755 |
| | — |
| | 1,755 |
|
| Total other expenses | | 6,224 |
| | — |
| | 6,224 |
|
| | | | | | | |
| Income (loss) before income taxes | | 1,976 |
| | (11,151 | ) | | (9,175 | ) |
| Income tax expense (benefit) | | 950 |
| | (3,903 | ) | (i) | (2,953 | ) |
| | | | | | | |
| Income (loss) before equity in earnings of Medusa Spar LLC | | 1,026 |
| | (7,248 | ) | | (6,222 | ) |
| Equity in earnings of Medusa Spar LLC, net of tax | | 14 |
| | (14 | ) | (f) | — |
|
| | | | | | | |
| Net income (loss) | | 1,040 |
| | (7,262 | ) | | (6,222 | ) |
| Preferred stock dividends | | (2,654 | ) | | — |
| | (2,654 | ) |
| | | | | | | |
| Net income (loss) available to common shares | | $ | (1,614 | ) | | $ | (7,262 | ) | | $ | (8,876 | ) |
| | | | | | | |
| Net income (loss) per common share: | | | | | | |
| Basic | | $ | (0.04 | ) | | | | $ | (0.22 | ) |
| Diluted | | (0.04 | ) | | | | (0.22 | ) |
| | | | | | | |
| Shares used in computing net income per share amounts: | | | | | | |
| Basic | | 40,064 |
| | | | 40,064 |
|
| Diluted | | 40,064 |
| | | | 40,064 |
|
|
| | |
| The unaudited pro forma condensed consolidated statements of operations includes the following adjustments: |
| | | |
| (f) | | Reflects the elimination of revenues and direct operating expenses attributable to the working interest sold. |
| | | |
| (g) | | Reflects the elimination of depreciation, depletion and amortization expense attributable to the working interest sold. |
| | | |
| (h) | | Reflects the elimination of accretion expense attributable to the working interest sold. |
| | | |
| (i) | | Reflects the income tax expense at the federal statutory rate of 35% attributable to the working interest sold. |
CALLON PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
On November 5, 2013, Callon Petroleum Operating Company, a subsidiary of Callon Petroleum Company ("Callon" or the "Company"), closed on a portion of the previously announced sale of its 15% working interest in the Medusa field (Mississippi Canyon blocks 582 and 538), 10% membership interest in Medusa Spar LLC which owns a 75% interest in the Medusa field's production facilities, and interests in 10 non-operated Gulf of Mexico shelf fields (collectively termed "The Transaction") for an estimated net cash consideration of USD $76.4 million after customary purchase price adjustments and the assumption of related abandonment and retirement obligations. The Transaction is effective as of July 1, 2013. The remaining portion of The Transaction is expected to close on or before November 30, 2013 with anticipated additional net cash consideration of $11.5 million after customary purchase price adjustments, the effects for which are included in the pro forma financial information presented herein.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2013 was prepared assuming that The Transaction had occurred on that date. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013 were prepared assuming The Transaction had occurred on January 1, 2012. As previously announced, Callon sold its 11.25% working interest in the Habanero field (Garden Banks block 341) to Shell Offshore, Inc., a subsidiary of Royal Dutch shell plc ("The Previous Transaction"), for net cash consideration of $39.4 million in December 2012. The pro forma consolidated statements of operations for the year ended December 31, 2012 also include the effect of The Previous Transaction. The Pro Forma Statements do not purport to represent what Callon's financial position or results of operations would have been had The Transaction and Previous Transaction (collectively termed "The Combined Transactions") been consummated on the dates indicated or the financial position or results of operations for any future date of period. Callon believes the assumptions used in the preparation of the Pro Forma Statements provide a reasonable basis for presenting the significant effects directly attributable to The Combined Transactions.
