For further information contact
Rodger W. Smith, 1-800-451-1294
FOR IMMEDIATE RELEASE
Callon Petroleum Company Reports Increased Earnings
For Third Quarter, First Nine Months of 2008
Natchez, MS (November 10, 2008)—Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and the nine-month periods ended September 30, 2008.
Third Quarter and Nine Months 2008 Net Income. For the quarter ended September 30, 2008, the company reported net income of $5.9 million, which was 156% higher than the $2.3 million reported for the same period in 2007. Net income per share was $0.27 and $0.11 for the quarters ended September 30, 2008 and 2007, respectively. For the nine months ended September 30, 2008, Callon reported net income of $18.6 million, or $0.85 per share after a one-time charge of $11.9 million, or $0.35 per share, net of tax, related to the early extinguishment of debt under the company’s $200 million Senior Revolving Credit Facility which was retired in April 2008. This compares with net income of $10.7 million, or $0.50 per share during the same period of 2007. All per share amounts are on a diluted basis.
Third Quarter and Nine Months 2008 Operating Results. . Operating results for the third quarter of 2008 were impacted by two back-to-back Hurricanes. On August 30, 2008 several of the company’s fields were shut-in due to the approach of Hurricane Gustav and, subsequently, Hurricane Ike. Primarily as a result of damage caused by those two storms to third-party transmission lines and downstream facilities which process Callon’s crude oil and natural gas, production of approximately 12.6 million cubic feet of natural gas equivalent per day (MMcfe/d) was deferred during the third quarter of 2008. Average daily production in the third quarter was 25.9 MMcfe/d. Operating results for the three months ended September 30, 2008 include oil and gas sales of $32.8 million. This corresponds to sales of $37.9 million from average production of 45.4 MMcfe/d during the comparable 2007 period. The average price received per thousand cubic feet of natural gas (Mcf) in the third quarter of 2008, after the impact of hedging, increased to $10.77 compared to $7.73 during the third quarter of 2007. The average price received per barrel of oil (Bbl) in the third quarter of 2008, after the impact of hedging, increased to $99.40, compared to $71.29 during the same period a year earlier. Oil and natural gas sales for the first nine months of 2008 totaled $125.8 million from average production of 35.0 MMcfe/d. This corresponds to sales of $126.8 million from average production of 53.2 MMcfe/d during the same period in 2007. The average price received per Mcf in the nine-month period of 2008, after the impact of hedging, increased to $10.53, compared to $7.97 during the first nine months of 2007. The average price received per Bbl in the nine months of 2008, after the impact of hedging, increased to $94.89, compared to $62.09 during the same period in 2007.
Third Quarter and Nine Months 2008 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended September 30, 2008 totaled $21.9 million compared to $21.0 million during the comparable prior year period. Net cash flow provided by operating activities, as defined by GAAP, totaled $60.9 million and $19.8 million during the quarters ended September 30, 2008 and 2007, respectively. Discretionary cash flow for the first nine months of 2008 totaled $81.2 million compared to $79.4 million during the same period in 2007. Net cash flow provided by operating activities, as defined by GAAP, totaled $124.8 million and $89.9 million during the nine-month periods ended September 30, 2008 and 2007, respectively. (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 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 GAAP.
| Reconciliation of Non-GAAP Financial Measure: | | Three Months Ended | | | Nine Months Ended | |
| (In thousands) | | September 30, | | | September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Discretionary cash flow | | $ | 21,873 | | | $ | 21,012 | | | $ | 81,161 | | | $ | 79,404 | |
| Net working capital changes and other changes | | | 38,993 | | | | (1,248 | ) | | | 43,614 | | | | 10,516 | |
| Net cash flow provided by operating activities | | $ | 60,866 | | | $ | 19,764 | | | $ | 124,775 | | | $ | 89,920 | |
| Production and Price Information: | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Production: | | | | | | | | | | | | |
| Oil (MBbls) | | | 205 | | | | 223 | | | | 780 | | | | 774 | |
| Gas (MMcf) | | | 1,153 | | | | 2,840 | | | | 4,913 | | | | 9,883 | |
| Gas equivalent (MMcfe) | | | 2,383 | | | | 4,179 | | | | 9,593 | | | | 14,527 | |
| Average daily (MMcfe) | | | 25.9 | | | | 45.4 | | | | 35.0 | | | | 53.2 | |
| | | | | | | | | | | | | | | | | |
| Average prices: | | | | | | | | | | | | | | | | |
| Oil ($/Bbl) (a) | | $ | 99.40 | | | $ | 71.29 | | | $ | 94.89 | | | $ | 62.09 | |
| Gas ($/Mcf) | | $ | 10.77 | | | $ | 7.73 | | | $ | 10.53 | | | $ | 7.97 | |
| Gas equivalent ($/Mcfe) | | $ | 13.76 | | | $ | 9.06 | | | $ | 13.11 | | | $ | 8.73 | |
| | | | | | | | | | | | | | | | | |
| Additional per Mcfe data: | | | | | | | | | | | | | | | | |
| Sales price | | $ | 13.76 | | | $ | 9.06 | | | $ | 13.11 | | | $ | 8.73 | |
| Lease operating expenses | | | 1.55 | | | | 1.28 | | | | 1.43 | | | | 1.41 | |
| Operating margin | | $ | 12.21 | | | $ | 7.78 | | | $ | 11.68 | | | $ | 7.32 | |
| | | | | | | | | | | | | | | | | |
| Depletion | | $ | 4.83 | | | $ | 3.81 | | | $ | 4.35 | | | $ | 3.90 | |
| General and administrative (net of management fees) | | $ | 0.61 | | | $ | 0.62 | | | $ | 0.73 | | | $ | 0.49 | |
| | | | | | | | | | | | | | | | | |
| (a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Average NYMEX oil price | | $ | 117.98 | | | $ | 75.37 | | | $ | 113.29 | | | $ | 66.21 | |
| Basis differentials and quality adjustments | | | 1.32 | | | | (2.96 | ) | | | (3.07 | ) | | | (4.45 | ) |
| Transportation | | | (1.34 | ) | | | (1.12 | ) | | | (1.30 | ) | | | (1.13 | ) |
| | | | | | | | | | | | | | | | | |
| Hedging | | | (18.56 | ) | | | -- | | | | (14.03 | ) | | | 1.46 | |
| Averaged realized oil price | | $ | 99.40 | | | $ | 71.29 | | | $ | 94.89 | | | $ | 62.09 | |
Callon Petroleum Company
Consolidated Balance Sheets
(In thousands, except share data)
| | | September 30, | | | December 31, | |
| | | 2008 | | | 2007 | |
| ASSETS | | (Unaudited) | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 101,549 | | | $ | 53,250 | |
| Accounts receivable | | | 50,148 | | | | 22,073 | |
| Restricted investments | | | -- | | | | 100 | |
| Fair market value of derivatives | | | 5,066 | | | | -- | |
| Other current assets | | | 3,498 | | | | 6,592 | |
| Total current assets | | | 160,261 | | | | 82,015 | |
| | | | | | | | | |
| Oil and gas properties, full-cost accounting method: | | | | | | | | |
| Evaluated properties | | | 1,345,841 | | | | 1,349,904 | |
| Less accumulated depreciation, depletion and amortization | | | (780,134 | ) | | | (738,374 | ) |
| | | | 565,707 | | | | 611,530 | |
| | | | | | | | | |
| Unevaluated properties excluded from amortization | | | 51,401 | | | | 70,176 | |
| Total oil and gas properties | | | 617,108 | | | | 681,706 | |
| | | | | | | | | |
| Other property and equipment, net | | | 2,547 | | | | 1,986 | |
| Restricted investments | | | 4,733 | | | | 4,525 | |
| Investment in Medusa Spar LLC | | | 12,679 | | | | 12,673 | |
| Other assets, net | | | 4,934 | | | | 9,577 | |
| Total assets | | $ | 802,262 | | | $ | 792,482 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 112,295 | | | $ | 37,180 | |
| Advances from joint interest owners | | | 12,966 | | | | 518 | |
| Asset retirement obligations | | | 3,935 | | | | 9,810 | |
| Fair market value of derivatives | | | 1,345 | | | | 5,205 | |
| Total current liabilities | | | 130,541 | | | | 52,713 | |
| | | | | | | | | |
| Long-term debt | | | 272,227 | | | | 392,012 | |
| Asset retirement obligations | | | 36,187 | | | | 27,027 | |
| Deferred tax liability | | | 43,998 | | | | 32,190 | |
| Other long-term liabilities | | | 2,995 | | | | 1,465 | |
| Total liabilities | | | 485,948 | | | | 505,407 | |
| Stockholders' equity: | | | | | | | | |
| Preferred Stock, $.01 par value, 2,500,000 shares authorized; | | | -- | | | | -- | |
| Common Stock, $.01 par value, 30,000,000 shares authorized; 21,611,847 and 20,891,145 shares outstanding at September 30, 2008 and December 31, 2007, respectively | | | 216 | | | | 209 | |
| Capital in excess of par value | | | 226,639 | | | | 223,336 | |
| Other comprehensive income | | | 3,905 | | | | (3,383 | ) |
| Retained earnings | | | 85,554 | | | | 66,913 | |
| Total stockholders' equity | | | 316,314 | | | | 287,075 | |
| Total liabilities and stockholders' equity | | $ | 802,262 | | | $ | 792,482 | |
Callon Petroleum Company
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Operating revenues: | | | | | | | | | | | | |
| Oil sales | | $ | 20,366 | | | $ | 15,912 | | | $ | 74,016 | | | $ | 48,058 | |
| Gas sales | | | 12,417 | | | | 21,957 | | | | 51,756 | | | | 78,769 | |
| Total operating revenues | | | 32,783 | | | | 37,869 | | | | 125,772 | | | | 126,827 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Lease operating expenses | | | 3,701 | | | | 5,338 | | | | 13,749 | | | | 20,550 | |
| Depreciation, depletion and amortization | | | 11,513 | | | | 15,931 | | | | 41,760 | | | | 56,597 | |
| General and administrative | | | 1,451 | | | | 2,606 | | | | 7,046 | | | | 7,098 | |
| Accretion expense | | | 1,092 | | | | 904 | | | | 3,076 | | | | 2,959 | |
| Derivative expense | | | 1,386 | | | | -- | | | | 1,386 | | | | -- | |
| Total operating expenses | | | 19,143 | | | | 24,779 | | | | 67,017 | | | | 87,204 | |
| | | | | | | | | | | | | | | | | |
| Income from operations | | | 13,640 | | | | 13,090 | | | | 58,755 | | | | 39,623 | |
| | | | | | | | | | | | | | | | | |
| Other (income) expenses: | | | | | | | | | | | | | | | | |
| Interest expense | | | 5,014 | | | | 10,148 | | | | 19,709 | | | | 23,905 | |
| Loss on early extinguishment of debt | | | -- | | | | -- | | | | 11,871 | | | | -- | |
| Other (income) expense | | | (89 | ) | | | (387 | ) | | | (940 | ) | | | (814 | ) |
| Total other (income) expenses | | | 4,925 | | | | 9,761 | | | | 30,640 | | | | 23,091 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 8,715 | | | | 3,329 | | | | 28,115 | | | | 16,532 | |
| Income tax expense | | | 2,919 | | | | 1,165 | | | | 9,731 | | | | 6,283 | |
| | | | | | | | | | | | | | | | | |
| Income before Medusa Spar LLC | | | 5,796 | | | | 2,164 | | | | 18,384 | | | | 10,249 | |
| Income from Medusa Spar LLC, net of tax | | | 60 | | | | 104 | | | | 257 | | | | 403 | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 5,856 | | | $ | 2,268 | | | $ | 18,641 | | | $ | 10,652 | |
| | | | | | | | | | | | | | | | | |
| Net income per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.27 | | | $ | 0.11 | | | $ | 0.88 | | | $ | 0.51 | |
| Diluted | | $ | 0.27 | | | $ | 0.11 | | | $ | 0.85 | | | $ | 0.50 | |
| | | | | | | | | | | | | | | | | |
| Shares used in computing net income per common share: | | | | | | | | | | | | | | | | |
| Basic | | | 21,460 | | | | 20,800 | | | | 21,078 | | | | 20,728 | |
| Diluted | | | 22,028 | | | | 21,230 | | | | 21,893 | | | | 21,220 | |
Callon Petroleum Company
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | | Nine Months Ended | |
| | | September 30, 2008 | | | September 30, 2007 | |
| Cash flows from operating activities: | | | | | | |
| Net income | | $ | 18,641 | | | $ | 10,652 | |
| Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | |
| Depreciation, depletion and amortization | | | 42,333 | | | | 57,270 | |
| Accretion expense | | | 3,076 | | | | 2,959 | |
| Amortization of deferred financing costs | | | 2,308 | | | | 2,153 | |
| Non-cash loss on early extinguishment of debt | | | 5,598 | | | | -- | |
| Equity in earnings of Medusa Spar LLC | | | (257 | ) | | | (403 | ) |
| Non-cash derivative expense | | | 690 | | | | -- | |
| Deferred income tax expense | | | 9,731 | | | | 6,283 | |
| Non-cash charge related to compensation plans | | | 1,026 | | | | 490 | |
| Excess tax benefits from share-based payment arrangements | | | (1,985 | ) | | | -- | |
| Changes in current assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 13,094 | | | | 7,891 | |
| Other current assets | | | 3,094 | | | | (413 | ) |
| Current liabilities | | | 26,039 | | | | 896 | |
| Change in gas balancing receivable | | | 806 | | | | (160 | ) |
| Change in gas balancing payable | | | 356 | | | | 564 | |
| Change in other long-term liabilities | | | 1,174 | | | | (7 | ) |
| Change in other assets, net | | | (949 | ) | | | 1,745 | |
| Cash provided by operating activities | | | 124,775 | | | | 89,920 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Capital expenditures | | | (123,626 | ) | | | (106,899 | ) |
| Entrada acquisition | | | -- | | | | (150,000 | ) |
| Proceeds from sale of Entrada working interest | | | 167,493 | | | | -- | |
| Distribution from Medusa Spar LLC | | | 389 | | | | 559 | |
| Cash provided by (used in) investing activities | | | 44,256 | | | | (256,340 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Change in accrued liabilities to be refinanced | | | -- | | | | 10,000 | |
| Increases in debt | | | 94,435 | | | | 213,000 | |
| Payments on debt | | | (216,000 | ) | | | (48,000 | ) |
| Deferred financing costs | | | -- | | | | (6,429 | ) |
| Equity issued related to employee stock plans | | | (1,152 | ) | | | -- | |
| Excess tax benefits from share-based payment arrangements | | | 1,985 | | | | -- | |
| Capital leases | | | -- | | | | (872 | ) |
| Cash (used in) provided by financing activities | | | (120,732 | ) | | | 167,699 | |
| | | | | | | | | |
| Net increase in cash and cash equivalents | | | 48,299 | | | | 1,279 | |
| Cash and cash equivalents: | | | | | | | | |
| Balance, beginning of period | | | 53,250 | | | | 1,896 | |
| Balance, end of period | | $ | 101,549 | | | $ | 3,175 | |
Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region. The majority of Callon’s properties and operations are concentrated in the offshore waters of the Gulf of Mexico.
This news release is posted on the company’s website at www.callon.com and will be archived there for subsequent review. It can be accessed from the “News Releases” link on the left side of the homepage.
It should be noted that this news release contains projections and other 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. These projections and statements reflect the company’s current views with respect to future events and financial performance. 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. 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 are discussed in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, available on our website or the SEC’s website at www.sec.gov.
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