For further information contact

John S. Weatherly, CFO   1-800-451-1294

FOR IMMEDIATE RELEASE

 

Callon Petroleum Company Reports Fourth Quarter, Year-End Results for 2003

     

      Natchez, MS (March 9, 2004)—Callon Petroleum Company (NYSE: CPE/CPE.PrA)

today reported its results of operations for both the three-month period and year ended December 31, 2003.  

 

      Fourth Quarter 2003 Net Loss.  For the three-month period ended December 31, 2003, Callon reported a net loss of $16.7 million, or $1.24 per diluted share after charges of $5.6 million attributable to early extinguishment of debt and $11.5 million resulting from a valuation allowance against Callon’s deferred tax asset.  These charges had an impact on net loss per diluted share of $1.10.  The company reported a net loss of $258,000, or $0.04 per share on a diluted basis, for the same period in 2002.

 

          Fourth Quarter 2003 Charges.  During the fourth quarter of 2003, Callon charged $11.5 million to income tax expense as the result of establishing a valuation allowance against its deferred tax asset as required by SFAS 109 “Accounting for Income Taxes.” This charge was taken as a result of aggregate losses incurred for the three-year period ending December 31, 2003. Despite the expectations of future earnings, relevant accounting guidance suggests that positive future expectations about income are diminished by such losses.  On December 30, 2003, Callon announced the borrowing of $185 million pursuant to a senior unsecured credit facility.  The borrowings bear interest at 9.75 percent and mature in seven years. Proceeds of the borrowing were used to restructure a major portion of the company’s long-term debt, including the early extinguishment of $85 million of its outstanding 12% multiple advance term loan which resulted in a $5.6 million charge for pre-payment premium and unamortized debt issuance costs.

 

Fourth Quarter 2003 Operating Results.   Oil and gas sales totaled $18.9 million from average production of 40.4 million cubic feet of natural gas equivalent per day (MMcfe/d).  This corresponds to sales of $19.1 million from average daily production of 45.5 MMcfe/d during the same period in 2002.  During the fourth quarter of 2003, natural gas represented approximately 79 percent of the company’s total production. The average price received per thousand cubic feet of natural gas in the fourth quarter of 2003 increased by 13 percent to $5.15 compared to $4.57 during the fourth quarter of 2002, while the average price received per barrel of oil in the fourth quarter of 2003 increased by 15 percent to $29.28 compared to $25.57 during the same period a year earlier.

 

  2003 Net Loss.  For the 12 months ended December 31, 2003, the company reported a net loss of $18.0 million, or $1.41 per diluted share after charges of $5.6 million for the early extinguishment of debt and an $11.5 million valuation allowance against Callon’s deferred tax asset.  These charges had an impact on net loss per diluted share of $1.11.  This compares to a net loss of $1.7 million, or $0.22 per share on a diluted basis for the same period in 2002. 

 

2003 Operating Results.  For the year ended December 31, 2003, oil and gas sales totaled $73.7 million from average production of 38.1 MMcfe/d.  This corresponds to sales of $61.2 million from average daily production of 42.7 MMcfe/d during the same period in 2002.  The average price received per thousand cubic feet of natural gas for the year ended December 31, 2003 increased by 36 percent to $5.36 compared to $3.94 during the same period in 2002, while the average price received per barrel of oil increased by 24 percent to $28.72 compared to $23.11 during the same period a year earlier.

 

2003 Discretionary Cash Flow.  For the year ended December 31, 2003, discretionary cash flow totaled $34.7 million compared to $18.7 million during the 12 months of the previous year.  Net cash flow provided by operating activities, as defined by GAAP, totaled $34.6 million and $12.2 million during the year ended December 31, 2003 and 2002, respectively. (See “Non-GAAP Financial Measure” that follows and the accompanying financial information for a 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 this measure is a financial indicator of the company’s ability to fund capital expenditures and service debt.  Callon also believes this non-GAAP financial measure of cash flow is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry.  Many investors use the published research of these analysts in making their investment decisions.  Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.

 

 

 

Reconciliation Non-GAAP Financial Measure:                                                                                  

    (In thousands)                                                                                                                                                      

 

Three Months Ended

Twelve Months Ended

 

December 31,

December 31,

 

2003

 

2002

2003

 

2002

Discretionary cash flow

$7,466

 

$8,067

$34,744

 

$18,653

Net working capital changes and other changes

 (4,034)

 

    334)

    (115)

 

  (6,486)

Net cash flow provided by operating activities

$3,432

 

$7,733

$34,629

 

$12,167

 

 

 

Consolidated Condensed Balance Sheets:

       December 31,

    December 31,

(In thousands)

         2003

     2002

 

            

 

Cash and cash equivalents

                 $   8,700

            $    5,807

Restricted cash**

                    63,345

                  ----

Oil and gas properties, net*

                  390,163

              377,661

All other assets

                    33,824

                27,145

      Total assets

                $496,032

            $410,613

 

 

 

Long-term debt including current maturities**

                $308,108   

            $249,589

All other liabilities*

                    54,663

                20,064

Stockholders’ equity

                  133,261

              140,960

      Total liabilities and stockholders’ equity

                $496,032

            $410,613

 

 

 

  *Impacted by the adoption of SFAS No. 143 on January 1, 2003

 

**Restricted cash was used to payoff 2004 Senior Subordinated Notes on January 8, 2004 which are included in long-term debt including current maturities above.      

 

 

 

Production and Price Information:

Three Months Ended

Twelve Months Ended

 

December 31,

December 31,

 

    2003

     2002

    2003

         2002

Production:

 

 

 

 

   Oil (MBbls)

      128

       56

       268

          226

   Gas (MMcf)

   2,950

  3,853

  12,315

     14,215

   Total Production (MMcfe)

   3,718  

  4,187

  13,923

     15,571

   Average daily (MMcfe)

     40.4

    45.5

      38.1

         42.7

 

 

 

 

 

Average prices:

 

 

 

 

   Oil ($/Bbl)

 $29.28

 $25.57

  $28.72

     $23.11

   Gas ($/Mcf)

 $  5.15

 $  4.57

  $  5.36

     $  3.94

   Gas equivalent ($/Mcfe)

 $  5.09

 $  4.55

  $  5.29

     $  3.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callon Petroleum Company

Consolidated Statements of Operations

(Unaudited)

(In thousands, except share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,

 

December 31,

 

    2003

 

    2002

 

    2003

 

     2002

Operating revenues:

          

 

 

 

 

 

 

  Oil and gas sales

$   18,938 

 

$ 19,050

 

$  73,697

 

$ 61,171

    

 

 

         

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

  Lease operating expenses

3,298

 

2,829

 

11,301

 

11,030

  Depreciation, depletion and amortization

7,484

 

8,256

 

28,253

 

27,096

  General and administrative

1,009

 

1,197

 

4,713

 

4,705

  Accretion expense

670

 

 --

 

2,884

 

--

  Loss on mark-to-market commodity derivative contracts

200         

 

(80)

 

535

 

708

     Total operating expenses

12,661

 

12,202