For further information contact
Rodger W. Smith, 1-800-451-1294
FOR IMMEDIATE RELEASE
Callon Petroleum Company Reports Improved Results of Operations
For First Quarter 2010
Natchez, MS (May 6, 2010)—Callon Petroleum Company (NYSE: CPE) today reported net income of $3.9 million, or $0.13 per diluted share, for the quarter ended March 31, 2010, which exceeds analysts’ consensus estimate of $0.09 per diluted share, and compares to $2.4 million or $0.11 per diluted share for the same quarter in 2009.
Highlights of meaningful events thus far in 2010 include:
| | · | Completed the redemption of the remaining $16.1 million of our 9.75% Senior Notes due December 2010 on April 30, 2010, resulting in approximately $889,000 of cash interest cost savings in 2010. |
| | · | Deconsolidated our special purpose subsidiary, Callon Entrada Company, on January 1, 2010, resulting in an approximate $85 million reduction in current liabilities and a corresponding $85 million increase to shareholders’ equity. |
| | · | Received $44.8 million in January 2010 from the Minerals Management Service (MMS) in a recoupment of royalties paid on our Medusa Field; an additional $7.9 million of interest is due to the company and we have been advised by the MMS that it has been processed for payment. |
| | · | Commenced Permian Basin Wolfberry development program. |
| | · | Completed an amended $100 million credit agreement with Regions Bank in January 2010 with an initial borrowing base of $20 million; no borrowings are currently outstanding. |
| | · | Added experienced key staff to implement and enhance our operational and financial objectives related to our new onshore strategy. |
| | · | On April 23, 2010, regained full compliance with the New York Stock Exchange’s continued listing standards five months ahead of the plan. |
First Quarter 2010 Operating Results. Operating results for the three months ended March 31, 2010 include oil and gas sales of $23.4 million from average production of 27.8 million cubic feet of natural gas equivalent per day (MMcfe/d), which was within the company’s published guidance range of 27 MMcfe/d to 29 MMcfe/d. For the same period of 2009, sales were $24.8 million from average production of 33.6 MMcfe/d. For the quarter ended March 31, 2010, the average price received per barrel of oil (Bbl), after the impact of hedging, increased 23% to $74.78, compared to $60.59 during the same period of 2009. Partially offsetting the increases in oil prices, during the first quarter of 2010, the average price received per thousand cubic feet of natural gas (Mcf), after the impact of hedging, decreased 6% to $5.76 from $6.13 for the same period
of 2009.
First Quarter 2010 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended March 31, 2010 totaled $11.3 million compared to $14.2 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 $55.7 million during the quarter ended March 31, 2010 and net cash flow provided by operating activities totaled $2.2 million during the quarter ended March 31, 2009. (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 activiti es or net income as defined by GAAP.
Reconciliation of Non-GAAP Financial Measure:
(in thousands)
| | | Three Months Ended March 31 | |
| | | 2010 | | | 2009 | | | Change | |
| | | | | | | | | | |
| Discretionary cash flow | | $ | 11,267 | | | $ | 14,230 | | | $ | (2,963 | ) |
| Net working capital changes and other changes | | | 44,401 | | | | (11,984 | ) | | | 56,385 | |
| Net cash flow provided by operating activities | | $ | 55,668 | | | $ | 2,246 | | | $ | 53,422 | |
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, | |
| | | 2010 | | | 2009 | | | Change | | | % Change | |
| Net production (a): | | | | | | | | | | | | |
| Oil (MBbls) | | | 223 | | | | 263 | | | | (40 | ) | | | (15 | )% |
| Gas (MMcf) | | | 1,166 | | | | 1,447 | | | | (281 | ) | | | (19 | )% |
| Total production (MMcfe) | | | 2,505 | | | | 3,026 | | | | (521 | ) | | | (17 | )% |
| Average daily production (MMcfe) | | | 27.8 | | | | 33.6 | | | | (5.8 | ) | | | (17 | )% |
| | | | | | | | | | | | | | | | | |
| Average sales price: | | | | | | | | | | | | | | | | |
| Oil (Bbls) (b) | | $ | 74.78 | | | $ | 60.59 | | | $ | 14.19 | | | | 23 | % |
| Gas (Mcf) | | | 5.76 | | | | 6.13 | | | | (0.37 | ) | | | (6 | )% |
| Total (Mcfe) | | | 9.34 | | | | 8.20 | | | | 1.14 | | | | 14 | % |
| | | | | | | | | | | | | | | | | |
| Oil and gas revenues (a): | | | | | | | | | | | | | | | | |
| Oil revenue | | $ | 16,663 | | | $ | 15,952 | | | $ | 711 | | | | 4 | % |
| Gas revenue | | | 6,722 | | | | 8,863 | | | | (2,141 | ) | | | (24 | )% |
| Total | | $ | 23,385 | | | $ | 24,815 | | | $ | (1,430 | ) | | | (6 | )% |
| | | | | | | | | | | | | | | | | |
| Additional per Mcfe data: | | | | | | | | | | | | | | | | |
| Sales price | | $ | 9.34 | | | $ | 8.20 | | | $ | 1.14 | | | | 14 | % |
| Lease operating expense | | | (1.86 | ) | | | (1.33 | ) | | | (0.53 | ) | | | 40 | % |
| Operating margin | | $ | 7.48 | | | $ | 6.87 | | | $ | 0.61 | | | | 9 | % |
| | | | | | | | | | | | | | | | | |
| Other expenses per Mcfe: | | | | | | | | | | | | | | | | |
| Depletion, depreciation and amortization | | $ | 2.72 | | | $ | 3.11 | | | $ | (0.39 | ) | | | (13 | )% |
| General and administrative (net of management fees) | | $ | 1.72 | | | $ | 0.60 | | | $ | 1.12 | | | | 186 | % |
| (a) | Amounts are in thousands |
| (b) | Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil: |
| Average NYMEX oil price | | $ | 78.72 | | | $ | 43.08 | | | $ | 35.64 | | | | 83 | % |
| Basis differential and quality adjustments | | | (2.75 | ) | | | (4.01 | ) | | | 1.26 | | | | (31 | )% |
| Transportation | | | (1.19 | ) | | | (1.35 | ) | | | 0.16 | | | | (12 | )% |
| Hedging | | | - | | | | 22.87 | | | | (22.87 | ) | | | (100 | )% |
| Average realized oil price | | $ | 74.78 | | | $ | 60.59 | | | $ | 14.19 | | | | 23 | % |
Callon Petroleum Company
Consolidated Balance Sheets
(in thousands, except share data)
| | | March 31, 2010 | | | December 31, 2009 | |
| ASSETS | | (Unaudited) | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 42,229 | | | $ | 3,635 | |
| Accounts receivable | | | 15,087 | | | | 20,798 | |
| Accounts receivable - MMS royalty recoupment | | | 7,927 | | | | 51,534 | |
| Fair market value of derivatives | | | 637 | | | | 145 | |
| Other current assets | | | 987 | | | | 1,572 | |
| Total current assets | | | 66,867 | | | | 77,684 | |
| | | | | | | | | |
| Oil and gas properties, full-cost accounting method: | | | | | | | | |
| Evaluated properties | | | 1,234,825 | | | | 1,593,884 | |
| Less accumulated depreciation, depletion and amortization | | | (1,130,942 | ) | | | (1,488,718 | ) |
| Net oil and gas properties | | | 103,883 | | | | 105,166 | |
| Unevaluated properties excluded from amortization | | | 27,714 | | | | 25,442 | |
| Total oil and gas properties | | | 131,597 | | | | 130,608 | |
| | | | | | | | | |
| Other property and equipment, net | | | 2,528 | | | | 2,508 | |
| Restricted investments | | | 4,327 | | | | 4,065 | |
| Investment in Medusa Spar LLC | | | 11,180 | | | | 11,537 | |
| Other assets, net | | | 1,819 | | | | 1,589 | |
| Total assets | | $ | 218,318 | | | $ | 227,991 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 8,575 | | | $ | 12,887 | |
| Asset retirement obligations | | | 3,613 | | | | 4,002 | |
| 9.75% Senior Notes, net of $174 and $232 discount, respectively | | | 15,878 | | | | 15,820 | |
| Fair market value of derivatives | | | 302 | | | | -- | |
| | | | 28,368 | | | | 32,709 | |
| Callon Entrada non-recourse credit facility | | | -- | | | | 84,847 | |
| Total current liabilities | | | 28,368 | | | | 117,556 | |
| | | | | | | | | |
| 13% Senior Notes | | | | | | | | |
| Principal outstanding | | | 137,961 | | | | 137,961 | |
| Deferred credit, net of accumulated amortization of $889 and $0, respectively | | | 30,324 | | | | 31,213 | |
| Total 13% Senior Notes | | | 168,285 | | | | 169,174 | |
| | | | | | | | | |
| Senior secured revolving credit facility | | | -- | | | | 10,000 | |
| Asset retirement obligations | | | 10,425 | | | | 10,648 | |
| Other long-term liabilities | | | 1,908 | | | | 1,467 | |
| Total liabilities | | | 208,986 | | | | 308,845 | |
| | | | | | | | | |
| Stockholders' equity (deficit): | | | | | | | | |
| Preferred Stock, $.01 par value, 2,500,000 shares authorized; | | | -- | | | | -- | |
| Common Stock, $.01 par value, 60,000,000 shares authorized; 28,776,331 and 28,742,926 shares outstanding at March 31, 2010 and December 31, 2009, respectively | | | 288 | | | | 287 | |
| Capital in excess of par value | | | 244,818 | | | | 243,898 | |
| Other comprehensive loss | | | (7,288 | ) | | | (7,478 | ) |
| Retained (deficit) earnings | | | (228,486 | ) | | | (317,561 | ) |
| Total stockholders' equity (deficit) | | | 9,332 | | | | (80,854 | ) |
| Total liabilities and stockholders' equity (deficit) | | $ | 218,318 | | | $ | 227,991 | |
Callon Petroleum Company
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
| | | Three Months Ended March 31, | |
| | | 2010 | | | 2009 | |
| Operating revenues: | | | | | | |
| Oil sales | | $ | 16,663 | | | $ | 15,952 | |
| Gas sales | | | 6,722 | | | | 8,863 | |
| Total operating revenues | | | 23,385 | | | | 24,815 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Lease operating expenses | | | 4,648 | | | | 4,039 | |
| Depreciation, depletion and amortization | | | 6,813 | | | | 9,413 | |
| General and administrative | | | 4,304 | | | | 1,819 | |
| Accretion expense | | | 580 | | | | 1,038 | |
| Total operating expenses | | | 16,345 | | | | 16,309 | |
| Income from operations | | | 7,040 | | | | 8,506 | |
| | | | | | | | | |
| Other (income) expenses: | | | | | | | | |
| Interest expense | | | 3,594 | | | | 4,782 | |
| Callon Entrada non-recourse credit facility interest expense | | | -- | | | | 1,556 | |
| Other income | | | (361 | ) | | | (95 | ) |
| Total other (income) expenses | | | 3,233 | | | | 6,243 | |
| | | | | | | | | |
| Income before income taxes | | | 3,807 | | | | 2,263 | |
| Income tax benefit | | | -- | | | | (24 | ) |
| Income before equity in earnings of Medusa Spar LLC | | | 3,807 | | | | 2,287 | |
| Equity in earnings of Medusa Spar LLC | | | 116 | | | | 117 | |
| Net income available to common shares | | $ | 3,923 | | | $ | 2,404 | |
| | | | | | | | | |
| Net income per common share: | | | | | | | | |
| Basic | | $ | 0.14 | | | $ | 0.11 | |
| Diluted | | $ | 0.13 | | | $ | 0.11 | |
| | | | | | | | | |
| Shares used in computing net income per common share: | | | | | | | | |
| Basic | | | 28,738 | | | | 21,607 | |
| Diluted | | | 29,229 | | | | 21,607 | |
Callon Petroleum Company
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| | | Three Months Ended March 31, | |
| | | 2010 | | | 2009 | |
| Cash flows from operating activities: | | | | | | |
| Net income | | $ | 3,923 | | | $ | 2,404 | |
| Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | |
| Depreciation, depletion and amortization | | | 6,989 | | | | 9,629 | |
| Accretion expense | | | 580 | | | | 1,038 | |
| Amortization of non-cash debt related items | | | 137 | | | | 731 | |
| Amortization of deferred credit | | | (889 | ) | | | -- | |
| Equity in earnings of Medusa Spar LLC | | | (116 | ) | | | (117 | ) |
| Deferred income tax expense | | | -- | | | | (24 | ) |
| Non-cash charge related to compensation plans | | | 643 | | | | 569 | |
| Changes in current assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 47,081 | | | | 5,761 | |
| Other current assets | | | 585 | | | | 912 | |
| Current liabilities | | | (2,850 | ) | | | (19,614 | ) |
| Change in gas balancing receivable | | | (44 | ) | | | 319 | |
| Change in gas balancing payable | | | 87 | | | | 30 | |
| Change in other long-term liabilities | | | (115 | ) | | | 618 | |
| Change in other assets, net | | | (343 | ) | | | (10 | ) |
| Cash provided by operating activities | | | 55,668 | | | | 2,246 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Capital expenditures | | | (6,974 | ) | | | (19,295 | ) |
| MMS bond for plugging and abandonment | | | (262 | ) | | | -- | |
| Distribution from Medusa Spar LLC | | | 473 | | | | 574 | |
| Cash used in investing activities | | | (6,763 | ) | | | (18,721 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Payments on senior secured credit facility | | | (10,000 | ) | | | -- | |
| Cash used in financing activities | | | (10,000 | ) | | | -- | |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | 38,905 | | | | (16,475 | ) |
| Cash and cash equivalents: | | | | | | | | |
| Balance, beginning of period | | | 3,635 | | | | 17,126 | |
| Less: Cash held by subsidiary deconsolidated at January 1, 2010 | | | (311 | ) | | | -- | |
| Balance, end of period | | $ | 42,229 | | | $ | 651 | |
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.
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 and quarterly reports on Form 10-Q, available on our website or the SEC’s website at www.sec.gov.
