Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, welcome to the Callon Petroleum Second Quarter 2023 Earnings Conference Call. [Operator instructions] Just to remind you today’s conference is being recorded. [Operator Instructions]

I will now turn the call over Callon’s Head of Investor Relations, Kevin Smith.

Kevin Smith

Good morning everyone and thanks for dialing in today. our CFO, Gatto; Kevin by Parker; COO, joined our and Haggard. am CEO, our Joe Russell I

During our both prepared second available quarter remarks our today, we release on our will and supplemental at slides, website, of are earnings which www.callon.com. reference our

include presentation will refer that and results SEC statements plans. risk factors to due differ filings. materially forward-looking to and noted Actual call Today's estimates could in our

and measures also that non-GAAP help with refer our across comparisons will peers. We financial periods to facilitate some

reconciliation a slide provide the we our reference, website. measures non-GAAP the which our any GAAP corresponding to earnings of in our deck to measure available both For nearest in on are press appendix release, and

the our for Q&A. remarks, will Following prepared open call we

like would over the I now Joe? to turn Gatto. call to Joe

Joe Gatto

everyone. morning Good Kevin. you, Thank

like Parker, recently He and operations partnership and CEO started, of introduce Russell for formally EP and Officer. Operating Energy. the get Callon our industry. the Chief leadership more we than most years Russell brings oil a served and experience as to Before I'd President XX new strategic of to gas

a off joined know I June; working since you'll start enjoy We’re in that with he him. great to

sequentially the posted of turning in guidance. the came results our spending above in while X% Now as low to guidance, production operational strong end of capital we quarter, increasing came by the midpoint at

Boe also progressing in coming both below for with structure guidance. GP&T are We and initiatives to cost reduce LOE our

his to which key flow. margins Later in further free increase priorities, of and to Russell our costs and operational some remarks, steps discuss reduce we prepared includes will plan take cash

asset divestiture Delaware compelling of in simultaneous Basin, the closed position. we a on the July, acquisition In our Eagle Ford and bolt-on

enabled expertise with the return on almost us program. footprint in solely to of balance Delaware putting also to our Basins. XXX,XXX us funding the the status net the core acres, sheet, launch We both Midland transactions position shareholder and are improve These now focused areas, in our

metrics. well, extremely are better operating financial of our few line and this key key executing summarize call, results highlights a were all second To or we in quarter across

our drilling content. had lateral completion scale team cash a the are that conversion have into level and premium our and operations, improve free We realizing and base. pumping increased also which right asset field more the the We’ve long the The and improved structure is our operations and per our contiguous positions cycle of large stages faster, base. organization base, and of flows a day assets, scale We now have cash knowledge to code focused premium inventory development combination projects plus right benefits having cost us ultimately of flow.

program commitment return this a we stock buyback quarter. Lastly, start proud shareholders we delivering two have are program. a say, launching eager initiated on of to year our $XXX to I'm to shareholder million program. Needless by this

buying the Given our our of shares our uses back attractive the is current in cash valuation one economically of market, most flow.

place So three wells the highlights, including operating quarter, the second during Eagle Ford. moving to in online we wells XX

of targeting successful Delaware our six. spring the on slide development Xrd bone expanding our part As extent we the of formation, shown another aerial well program, as of zone had a

The date. wells is our are performing best spring Xrd expectations share well bone and to

EUR's wells spring our oil A bone Xrd similar results. throughput as delivering Wolfcamp Our are

are economics incremental play, adding the are core zone. inventory the carrying So improving also the we of we currently not only the we as expand but in inventory that

spud bit delivered contribution to XX% to by Xrd both Operationally, and improvements an its operation. we release bone to time spring across design, have Delaware, drilling our of rig the development continues of to some, Delaware elevate completions. our in plans improved due In portion lowered the we In expanding footprint. have consistency our from

across day substantial side, stages forced completion the we gains in per completed the Permian. a On

time down combine from our One moving of reduced simultaneous operations. projects the the D&C with This large Permian singular operations optimized the will also on These only forward are improvements focus improve scheduling. cyclones. drivers on a of gains benefiting

I of thoughts early call at opportunities will sees he Russell now his Callon. over on for turn some the

Russell Parker

I'm the team Basin Deep I walking you, joined at home happy Texas. right West around oil Permian to Thank Callon. very have have the of Joe. fields at feel and I roots

to For per majority operators, but for cash necessary those the career that survival. barrel me, the with you the is free my been private of not you flow optimizing know familiar with where of only has key culture,

innovation such, lifting my costs efficiency, per free per increase constant inventory. and development As to and focus barrel, flow barrel, is cash

and company's competitive done advantages. to joined to the a near-term through improving inventory Boe’s advantage efficiency our in Callon compared to further of and in on base My build the the time this peers. and focused further asset Joe the produce that I capital innovation. exciting reductions deleveraging position, rest are unique, the an also priorities of is us the our while increasing build history. The margins company, and work our cost on have This puts team we strong

of capital all-in In natural to field per investments We barrel. and performance our efficiency. addition, evolution previous infrastructure co-development look of improve costs and overall well minimize while downtime artificial well also model systems to will we we to life continue lift the as leverage reducing optimize further improve

unleashing deliver cash help increased of team, real-time area, our a ownership the adoption provide singular responses increased Perhaps most margins, of to our and technology down needed Basin. will ability drive increased the tools potential These results. free about ultimately with increase flow. full now us improved combined steps what costs, operations, drive will provide and help to Streamlining is an of focus the I'm on Permian excited our

will not at exact savings meaningful. this I ready it to on the know be cost point, discuss While numbers I'm

bit. our As Joe are mentioned, we by adding innovation position to on focused drill peer-leading through the inventory

meeting the progress will I inventory organically about a in quarters We to opportunity recoveries, we Permian our increase have blessed Basin financial the excited performance, know we on be increase formations, hydrocarbon-bearing many you priorities. these here, I well and I'm with to our are in performance, the to and make improve position. future look updating our forward with tremendous and and you

it back With over that, now I'll Joe. Joe? to turn

Joe Gatto

pick Thanks, with the and development acquisition discussion the to recent half after new year program. Russell. transitioning the integrating of optimized the up a second of I'll

plan a operating We rigs; month, rig six to maintaining this program of are year. release remainder the currently a the five-rig for

application Wolfcamp August, West we full co-development the Delaware area The our example coming online that of of yet is development the of as targeting is Zone scaled model. enter just another

acquisition, that bring date you the with our on bone the base our zones, and expanded of optimization to singular three were wanted Xrd addition, our focus. Delaware In operator will I half also Permian an cadence acquired up production the to second for program and in wells the we co-develop including Basin previous asset five the in by D&C drilled following spring.

a the As more the with a starting point, brought Eagleford of assets three second in oil per April. Boe were XX% the quarter than online acquired just wells new as day in cut produced over similar X,XXX Eagleford

that previous we As ducts scheduled the wells of to which are on Eagleford on than XXXX round required slide line now shown five the next plans. bring part of eight, October, the is were in later

to new profile will bit the As production now weighted a our fourth more a quarter. result, be

of inventory to despite acquiring length the second long In net Eagleford be feet from well lateral count. wells, addition, our half the the given advantage lateral relative lower net similar will completing we lateral in amount a

the guidance we majeure our lasted the event, of started large range impact part for production extent, gas as oil facility gas both Basin in have Also, an To and reducing of quarter, power our for June in [Ph] into third-party extended the the third the included processing that to lesser services lingered volumes. weeks, that July. incorporates midstream a and disruptions related two weather-related and force

downtime is on on to a approximately X,XXX our third is basis. standard the total, quarterly assumptions day Boe guidance In impact incremental quarter per

for strong As we quarter, Boe with these and past Boe XXX we per trajectory day XX a per see the XX in to to transitory XXX fourth [Ph] day. production look estimates issues

often is equipment. chemicals, casing, like steel items This on other and sand, service

market XX% XX%. priced items and casing down like being are steel Specifically, sand between and spot

relief chemicals. We are to items like in price also realize starting

recontracted recently rates rates. rigs two our were below drilling As at point another that data we previous

half, dollar later that similar activity design with impacts year Overall, is we activity assets incremental non-operated realize earmarked in newly have been not of the and $XX to has This from the amount operator. expect XXXX structural savings funding the of and second early both this in These non-operated associated to savings costs, acquired D&C by the early of modifications. benefit recently a anticipated for been an million a service accelerated is production.

Russell and additional quarters we the have this increase in not team for we capital working related So, are complement plans, previous be formally captured our service while savings our in expenditures the design related savings that to and estimate coming activity due to year expect on. the the reduced

program. six D&C times progress Operationally, or made schedule amount debt our in of last we've milestone tremendous a results drive we meeting exceeding that regarding financially. to cost unlocking closing, months, base and ahead both on improvements about our of and In production the We model improvements are This expectations. our marks operationally development are initial delivering potential under excited we're efficiency further looking the -- and capital forward take making our leadership. happy concludes are share-by-back and progress starting I'm prepared of full questions. focus-Permian update to our further asset the what basin over achieved continues code to life-of-field and Russell's and gains

you. Operator, turn back it to

Operator

from comes Derrick Whitfield Stifel. question first with Your Instructions] [Operator

line Your is open.

He question longer JPMorgan. next The is comes from Parham with there. no Zach

Zach Parham

first, I taking Hey return. my question. thanks cash guess on guys, just for

accelerate on as debt starting of be be in half. but Your said past, in lower free cash the the programs, we flow is between color that going moves half with a should split – draw-back buybacks CapEx know the the about wouldn't going be how second second program. in and and the you're thinking performing to out you I year you reduction to any

Kevin Haggard

as here. signal I Kevin. of additional this. call is Yes, this know formula well I’ll take to the you and here, it might a to all the Zach, want information like many answer I into get know

more first, other free take repurchase guide hopefully in repurchase price use volatility any to cash talked about out those the we've to one-quartered couple and stock. We flow rails XX% that some So going And count of share of to forums. intend second shares. don't support in a we’re the use help of than programs

targeted our let call know for models repurchase is So the our percentage regarding guidance to going quarter. earnings we're the during you your

quarter, instance, that to XX% the intend percentage ultimate are some That For third quarter the items bit, repurchase to because little few booked out a flex closest. plus probably cash minus points, flow free a this will of of around percentage use the we shares. quarter, our or

valuation. market assistance the a Regarding a starts costs, price our assumptions, planning, under or NAF, and significant with price our we target, a disconnect share at of limit current see and Callon, repurchase view for

other to debt hand to with intend about that the debt do want to equity, $XXX additional hand the million do and Now, in point paid how remind that your purchase we intend we to $XXX between out. you split program, we million

So to over both we want them eight that same quarter or accomplish of time. period of

surrounding wanted, answers answers answer. in that but hopefully gives the more So the purchase all program it than you one

Zach Parham

Thanks, for Kevin. Russell, one you. maybe

I accomplish can thoughts you give First a those? little off, new how to the of then, you’ve seen than on there some this cost you've you role. month us produce been some can a what more but know at on the congrats opportunities already only point,

Russell Parker

years reductions Absolutely. several we've in Yes, the especially reduce invested over time, the which the cost total that think do can on a we I DC&F yet. but is meaningful now be news upside. infrastructure our lot no the over good will start specifics leveraging, last will

lie through design that through downtime production design but the the of the change, of other base not cost only improving The around base opportunities changes. production, amount

are both our be I'm production a to we a but you help infrastructure, that our over F&D time. spacing and that I'm all our base new artificial wealth? going So wealth? give fresh are Purely you, I How all all field our numbers and to also very innovation. completing we're to landing approach to set. Where costs confident we How that, on taking approach and things opportunity our things wealth? in will just fresh our clean, lift, just are that improve of exact lifting telling our we

Operator

Stifel. next with The call Derrick comes from Whitfield

open. is line Your

Derrick Whitfield

good earlier. Hey, On sorry morning. about

Kevin Haggard

hear to you. Thanks, Derrick. Good

Derrick Whitfield

cost and deflation? as on the of XXXX speak In a capital to portfolio improving also five. high level current the cost you and slide transformation Perhaps, maintenance capital your scenarios of light for range first efficiency question. Could perhaps shown for assuming of the benefit

Joe Gatto

this Joe. Derrick, is

whether moving we've as Russell's to that. real I the time of think But bit the but right I mean, a got service if structural to pinning back that, expect will capital online for month real it's are be you a start flow free little he cost could or hopefully said things I cost, it be conversion for premature premature. it's on the going a, we design that side we cash back say last like bit Russell but costs lead lot will to EBITDA, a improve, of Not on that on before on a that. things be impactful. efficiency in of basis right seat get were answer, a CapEx another on just equation. the XX. now going

Derrick Whitfield

productivity with similar up you as up as of comment bone the on my as Xrd QX reference that's completion in that in -- Campaign? All six. right, the Could my my shale the Russell, slide Wolf to follow spring your change to approach you're leading in

Russell Parker

techniques. improve looks help but see will economics more what are And this and barrel. our would per what just as more tried seen already but seeing progresses, in and some and of only you've to I'm terms a be, interval, both sand just have ultimate say copy optimization different the we drawdown and wells. to to improvement amount was and intense the look here ultimate the that experimentation encouraged one Boe's flow both not we to out or the still like cash of reduced more that tweaks to in do inventory we're produce say other and and more going we've I'd the fluid work on same design us loading few for our loading. see figuring So less This I of

Derrick Whitfield

you co-development, if shale Xrd bone clarification the do part And the of one tank Campaign. Russell, Wolf I pressure spring so the to as could respect with same view as

Russell Parker

which whether folks blanket but that bone we're what both talking it on there's like the that. you make say that. the different shale operators, think the we seeing area, the certain Xrd sand places, Xrd in shale so are can don't early I'll different across blanket to one answer top about bone well considered also or Xrd pick and not you're I answer depends bone bone Xrd time, But by

Derrick Whitfield

Thanks guys. for time. Great, great update your

Russell Parker

Derrick. Thanks

Operator

comes line Dingmann Your next Truist with Neal Securities. question from the of

Your line open. is

Neal Dingmann

way, bone Maybe Morning guys. just a wondering. is ask I'm of just Xrd I shale a bit little different that

that, large maps, I be success how when Now, area, you there, perspective can after be to, the just nice on area to that run trying that, in large an look quarter, that? seems at in confidence have can we how add your a start it with to a very this

Joe Gatto

this Neal, is Joe. Yes,

give to that areas on But are either only talked ads, about inventory wells work is where certainly say process see representation that's we we and there's in haven't you But speak swath think by here we'll six, only further good now talk going expand of are and to term the page but by some broad on I current map down think now Wolfcamp we not be additional co-development or able covers that we'll to us others, south. in focused been zones near that. Xrd and that this down a on you here or can the this has I things we we work where the it we right and today that the not and are process here. good something we're about As bone C work of that as that on continue doing like a done feel there other our in about have

question, some on talk more can time where the Xrd substantial this to that about Delaware inventory on it's a have. and we little answer of bit think your little end to I us bone provide bit give your page But think and get But we plan go a into more part position next. we to

Neal Dingmann

downtime passed, cycling sort believe. of is of then wondering, middle of on facility business out the the in to and now that sounds the that natural weather disruptions, like I more Well, on And of just that? [Indiscernible] guys, that's can part just then gas it hear. just mitigate secondly, there? else great infrastructure a talked go-forward, about all midstream Or do you just related you anything has that And what and I'm to sort the

Joe Gatto

Yes, so utilization have multiple it's that of The to work so the Neal, off just with different is a at takes question. yes, to over. gas parties long-term, good And we're passed. It One, and on looking situation variety location. also has different take of options. the gas, we a

help time, that us base And robust downtime. have so reduce just all and and more that will of production between a

Neal Dingmann

much, so Thanks guys. Awesome.

Joe Gatto

Neal. Thanks,

Operator

[Operator questions. no Gatto. this back I'll turn Joe Instructions] more over time, At there to call are the

Joe Gatto

Great. on talking Thank updates things to update to us Again, you. Again, please more obviously for our Any some have, a feel you. A to we joining call. you to free give lot call. good additional on, and of today. come questions forward look thanks you you. to everyone Thank to next

Operator

conference This call. concludes today's

You can now disconnect.

Callon Petroleum (CPE) 3 Aug 232023 Q2 Earnings call transcript