For further information contact John Weatherly, CFO 1-800-451-1294
FOR IMMEDIATE RELEASE
Natchez, MS (January 3, 2002)--Callon Petroleum Company ( NYSE: CPE/CPE.PrA) disclosed today that it expects to be required to record a fourth quarter non-cash charge to recognize potential impairment of the value of its hedging transactions with Enron.
In December 2001, the company announced, following consultation with its independent public accountants, that it did not expect to have a charge in the fourth quarter as the unrealized appreciation in the fair value of the 2002 swap contracts had not been previously recorded in Callon's operating results.
Callon has been advised that members of the accounting profession reached an informal consensus in late December 2001 as to the accounting treatment of credit losses on cash flow hedges. This position is not consistent with the company's previously announced intentions.
In order to comply with the current consensus accounting treatment, the company will:
1. Record a non-cash charge in the fourth quarter of 2001 for the estimated value of the Enron derivatives,
2. Record a non-cash increase in revenues during 2002 equal to the amount charged off in the fourth quarter of 2001, and
3. Record any ultimate realization of proceeds or liability incurred under the outstanding hedges as additional adjustments to income at the time such proceeds or liabilities are determinable.
As of September 30, 2001 the estimated pretax value of the company's outstanding 2002 hedges with Enron was $9.2 million.
Callon Petroleum Company has been engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region since 1950.
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. Factors which could cause results to differ from those set forth above are discussed in the company's Form 10-K and other filings with the SEC, and also include possible future changes in accounting practices and the results of Enron's bankruptcy proceedings.