Quarterly report pursuant to Section 13 or 15(d)

Change in Accounting Principle

v3.23.2
Change in Accounting Principle
 6 Months Ended
Jun. 30, 2023
Accounting Changes and Error Corrections [Abstract]  
Change in Accounting Principle Change in Accounting PrincipleIn the first quarter of 2023, the Company voluntarily changed its method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods has been recast to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration costs such as exploratory dry holes, exploratory geophysical and geological costs, delay rentals, unproved leasehold impairments and
exploration overhead are expensed as incurred as opposed to being capitalized under the full cost method of accounting. The successful efforts method also provides for the assessment of potential proved oil and gas property impairments by comparing the net book value of proved oil and gas properties to associated estimated undiscounted future net cash flows. If the net book value exceeds the estimated undiscounted future net cash flows, an impairment is recorded to reduce the net book value to fair value. Under the full cost method of accounting, an impairment would be required if the net book value of oil and natural gas properties exceeds a full cost ceiling using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are recognized more frequently on the divestitures of oil and gas properties under the successful efforts method, as opposed to an adjustment to the net book value of the oil and gas properties under the full cost method.
The “Assets held for sale” and “Impairment of oil and gas properties” line items presented in the tables below are in connection with the agreement to sell all of the Company’s interests of Callon (Eagle Ford) LLC to Ridgemar Energy Operating, LLC. See “Note 5 — Acquisitions and Divestitures” for additional details.
The following tables present the effects of the change to the successful efforts method in the consolidated balance sheets:
As of June 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Current assets:
Assets held for sale $—  $606,614  $606,614 
Oil and natural gas properties:
Proved properties 10,949,991  (2,442,302) 8,507,689 
Accumulated depreciation, depletion, amortization and impairments (6,597,479) 2,306,431  (4,291,048)
Unproved properties 1,784,428  (581,260) 1,203,168 
Total oil and gas properties, net 6,136,940  (717,131) 5,419,809 
Deferred income taxes 157,629  40,905  198,534 
Total assets $6,666,704  ($101,146) $6,565,558 
Stockholders’ equity:
Accumulated deficit (383,141) (101,146) (484,287)
Total stockholders' equity 3,643,818  (101,146) 3,542,672 
Total liabilities and stockholders' equity $6,666,704  ($101,146) $6,565,558 
As of December 31, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Oil and natural gas properties:
Proved properties $10,367,478  ($1,099,343) $9,268,135 
Accumulated depreciation, depletion, amortization and impairments (6,343,875) 1,927,269  (4,416,606)
Unproved properties 1,711,306  (485,538) 1,225,768 
Total oil and gas properties, net 5,734,909  342,388  6,077,297 
Total assets $6,146,081  $342,388  $6,488,469 
Deferred income taxes (1)
4,279  2,029  6,308 
Stockholders’ equity:
Accumulated deficit (937,388) 340,359  (597,029)
Total stockholders' equity 3,085,422  340,359  3,425,781 
Total liabilities and stockholders' equity $6,146,081  $342,388  $6,488,469 
(1)    Included in “Other long-term liabilities” in the consolidated balance sheets.
The following tables present the effects of the change to the successful efforts method in the consolidated statements of operations:
Three Months Ended June 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share data)
Operating Expenses:
Exploration $—  $1,882  $1,882 
Depreciation, depletion and amortization 135,135  (7,787) 127,348 
Impairment of oil and gas properties —  406,898  406,898 
General and administrative 17,149  12,619  29,768 
Income (Loss) From Operations 190,856  (413,612) (222,756)
Other Expenses:
Interest expense 19,520  27,719  47,239 
Income (Loss) Before Income Taxes 177,223  (441,331) (264,108)
Income tax benefit 88,653  67,559  156,212 
Net Income (Loss) $265,876  ($373,772) ($107,896)
Net Income (Loss) Per Common Share:
Basic $4.30  ($1.74)
Diluted $4.30  ($1.74)
Three Months Ended June 30, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share data)
Operating Expenses:
Exploration $—  $2,410  $2,410 
Depreciation, depletion and amortization 109,409  6,547  115,956 
General and administrative 10,909  9,266  20,175 
Income From Operations 496,825  (18,223) 478,602 
Other Expenses:
Interest expense 20,691  26,304  46,995 
Income Before Income Taxes 351,018  (44,527) 306,491 
Income tax expense (3,009) (231) (3,240)
Net Income $348,009  ($44,758) $303,251 
Net Income Per Common Share:
Basic $5.64  $4.92 
Diluted $5.62  $4.90 
Six Months Ended June 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share data)
Operating Expenses:
Exploration $—  $4,114  $4,114 
Depreciation, depletion and amortization 258,035  (4,722) 253,313 
Impairment of oil and gas properties —  406,898  406,898 
General and administrative 34,290  23,276  57,566 
Income (Loss) From Operations 391,001  (429,567) (38,566)
Other Expenses:
Interest expense 38,673  54,872  93,545 
Income (Loss) Before Income Taxes 390,273  (484,438) (94,165)
Income tax benefit 163,973  42,934  206,907 
Net Income $554,246  ($441,504) $112,742 
Net Income Per Common Share:
Basic $8.98  $1.83 
Diluted $8.95  $1.82 
Six Months Ended June 30, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share data)
Operating Expenses:
Exploration $—  $4,295  $4,295 
Depreciation, depletion and amortization 212,388  17,211  229,599 
General and administrative 28,030  19,202  47,232 
Income From Operations 916,122  (40,708) 875,414 
Other Expenses:
Interest expense 42,249  51,842  94,091 
Income Before Income Taxes 391,239  (92,550) 298,689 
Income tax expense (3,493) 340  (3,153)
Net Income $387,746  ($92,210) $295,536 
Net Income Per Common Share:
Basic $6.30  $4.80 
Diluted $6.26  $4.77 
The following tables present the effects of the change to the successful efforts method in the consolidated statements of cash flows:
Six Months Ended June 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Cash flows from operating activities:
Net income $554,246  ($441,504) $112,742 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 258,035  (4,722) 253,313 
Impairment of oil and gas properties —  406,898  406,898 
Amortization of non-cash debt related items, net 2,168  3,077  5,245 
Deferred income tax benefit (161,907) (42,934) (204,841)
Non-cash expense related to share-based awards 2,124  3,445  5,569 
Net cash provided by operating activities 603,175  (75,740) 527,435 
Cash flows from investing activities:
Capital expenditures (570,223) 71,626  (498,597)
Acquisition of oil and gas properties (18,564) 4,114  (14,450)
Net cash used in investing activities (624,312) 75,740  (548,572)
Net change in cash and cash equivalents 255  —  255 
Balance, beginning of period 3,395  —  3,395 
Balance, end of period $3,650  $—  $3,650 
Six Months Ended June 30, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Cash flows from operating activities:
Net income $387,746  ($92,210) $295,536 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 212,388  17,211  229,599 
Amortization of non-cash debt related items, net 3,201  3,920  7,121 
Non-cash expense related to share-based awards 956  1,730  2,686 
Changes in current assets and liabilities:
Accounts payable and accrued liabilities (18,940) (340) (19,280)
Net cash provided by operating activities 653,595  (69,689) 583,906 
Cash flows from investing activities:
Capital expenditures (413,939) 69,058  (344,881)
Acquisition of oil and gas properties (15,945) 631  (15,314)
Net cash used in investing activities (435,756) 69,689  (366,067)
Net change in cash and cash equivalents (3,782) —  (3,782)
Balance, beginning of period 9,882  —  9,882 
Balance, end of period $6,100  $—  $6,100 
The following tables present the effects of the change to the successful efforts method in the consolidated statements of stockholders’ equity:
As of June 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Accumulated deficit ($383,141) ($101,146) ($484,287)
Total stockholders’ equity $3,643,818  ($101,146) $3,542,672 
As of December 31, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Accumulated deficit ($937,388) $340,359  ($597,029)
Total stockholders’ equity $3,085,422  $340,359  $3,425,781