Quarterly report pursuant to Section 13 or 15(d)

Change in Accounting Principle

v3.23.3
Change in Accounting Principle
 9 Months Ended
Sep. 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 “Impairment of oil and gas properties” and “Gain on sale of oil and gas properties” line items presented in the tables below are in connection with the sale of 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 September 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Oil and natural gas properties:
Proved properties $11,191,350  ($1,947,545) $9,243,805 
Accumulated depreciation, depletion, amortization and impairments (6,734,174) 2,306,145  (4,428,029)
Unproved properties 1,807,300  (520,281) 1,287,019 
Total oil and gas properties, net 6,264,476  (161,681) 6,102,795 
Deferred income taxes 170,001  29,733  199,734 
Total assets $6,860,471  ($131,948) $6,728,523 
Stockholders’ equity:
Accumulated deficit (232,855) (131,948) (364,803)
Total stockholders' equity 3,993,006  (131,948) 3,861,058 
Total liabilities and stockholders' equity $6,860,471  ($131,948) $6,728,523 
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 September 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share amounts)
Operating Expenses:
Exploration $—  $3,588  $3,588 
Depreciation, depletion and amortization 138,313  285  138,598 
Gain on sale of oil and gas properties
 —  (20,570) (20,570)
General and administrative 22,016  7,323  29,339 
Income From Operations
 211,554  9,374  220,928 
Other Expenses:
Interest expense 14,145  29,004  43,149 
Income Before Income Taxes 139,623  (19,630) 119,993 
Income tax benefit (expense)
 10,663  (11,172) (509)
Net Income $150,286  ($30,802) $119,484 
Net Income Per Common Share:
Basic $2.21  $1.76 
Diluted $2.21  $1.75 
Three Months Ended September 30, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share amounts)
Operating Expenses:
Exploration $—  $2,942  $2,942 
Depreciation, depletion and amortization 122,833  7,062  129,895 
General and administrative 14,022  10,231  24,253 
Income From Operations 440,597  (20,235) 420,362 
Other Expenses:
Interest expense 19,468  27,461  46,929 
Income Before Income Taxes 553,118  (47,696) 505,422 
Income tax expense (3,515) 132  (3,383)
Net Income $549,603  ($47,564) $502,039 
Net Income Per Common Share:
Basic $8.91  $8.14 
Diluted $8.88  $8.11 
Nine Months Ended September 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share amounts)
Operating Expenses:
Exploration $—  $7,702  $7,702 
Depreciation, depletion and amortization 396,348  (4,437) 391,911 
Impairment of oil and gas properties —  406,898  406,898 
Gain on sale of oil and gas properties
 —  (20,570) (20,570)
General and administrative 56,305  30,600  86,905 
Income From Operations
 602,555  (420,193) 182,362 
Other Expenses:
Interest expense 52,818  83,876  136,694 
Income Before Income Taxes 529,897  (504,069) 25,828 
Income tax benefit 174,636  31,762  206,398 
Net Income $704,533  ($472,307) $232,226 
Net Income Per Common Share:
Basic $11.04  $3.64 
Diluted $11.01  $3.63 
Nine Months Ended September 30, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands, except per share amounts)
Operating Expenses:
Exploration $—  $7,237  $7,237 
Depreciation, depletion and amortization 335,221  24,273  359,494 
General and administrative 42,052  29,433  71,485 
Income From Operations 1,356,719  (60,943) 1,295,776 
Other Expenses:
Interest expense 61,717  79,303  141,020 
Income Before Income Taxes 944,357  (140,246) 804,111 
Income tax expense (7,008) 472  (6,536)
Net Income $937,349  ($139,774) $797,575 
Net Income Per Common Share:
Basic $15.21  $12.94 
Diluted $15.14  $12.88 
The following tables present the effects of the change to the successful efforts method in the consolidated statements of cash flows:

 Nine Months Ended September 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Cash flows from operating activities:
Net income $704,533  ($472,307) $232,226 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 396,348  (4,437) 391,911 
Impairment of oil and gas properties —  406,898  406,898 
Amortization of non-cash debt related items, net 3,064  4,915  7,979 
Deferred income tax benefit (174,279) (31,762) (206,041)
Gain on sale of oil and gas properties
 —  (20,570) (20,570)
Non-cash expense related to share-based awards 3,848  5,676  9,524 
Net cash provided by operating activities 905,850  (111,587) 794,263 
Cash flows from investing activities:
Capital expenditures (854,889) 103,885  (751,004)
Acquisition of oil and gas properties (286,136) 7,702  (278,434)
Net cash used in investing activities (592,429) 111,587  (480,842)
Net change in cash and cash equivalents 61  —  61 
Balance, beginning of period 3,395  —  3,395 
Balance, end of period $3,456  $—  $3,456 
Nine Months Ended September 30, 2022
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Cash flows from operating activities:
Net income $937,349  ($139,774) $797,575 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 335,221  24,273  359,494 
Amortization of non-cash debt related items, net 4,263  5,417  9,680 
Deferred income tax expense
 1,626  (516) 1,110 
Non-cash expense related to share-based awards 1,055  3,372  4,427 
Changes in current assets and liabilities:
Accounts payable and accrued liabilities (8,693) 44  (8,649)
Net cash provided by operating activities 1,128,870  (107,184) 1,021,686 
Cash flows from investing activities:
Capital expenditures (754,225) 106,076  (648,149)
Acquisition of oil and gas properties (18,114) 1,108  (17,006)
Net cash used in investing activities (768,700) 107,184  (661,516)
Net change in cash and cash equivalents (5,532) —  (5,532)
Balance, beginning of period 9,882  —  9,882 
Balance, end of period $4,350  $—  $4,350 
The following tables present the effects of the change to the successful efforts method in the consolidated statements of stockholders’ equity:
As of September 30, 2023
Under
Full Cost		 Changes Under Successful Efforts
(In thousands)
Accumulated deficit ($232,855) ($131,948) ($364,803)
Total stockholders’ equity $3,993,006  ($131,948) $3,861,058 
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