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

FOR IMMEDIATE RELEASE

 

Callon Petroleum Company Reports Fourth Quarter, Year-End Results for 2004

 

   Natchez, MS (March 9, 2005)—Callon Petroleum Company (NYSE: CPE/CPE.PrA) today reported its results of operations for both the three-month period and year ended December 31, 2004.  

 

   Fourth Quarter 2004 Net Income.  For the three-month period ended December 31, 2004, Callon reported net income of $9.1 million, or $0.45 per diluted share.  The company had an income tax benefit of $6.7 million or $0.33 per diluted share, which resulted from the reversal of the valuation allowance that was established in the fourth quarter of 2003.  (See “SFAS 109 Accounting for Income Taxes” section for more details.)  For the fourth quarter of 2003, the company reported a net loss of $16.7 million, or $1.24 per share on a diluted basis, which included charges of $11.5 million to income tax expense as the result of establishing a valuation allowance against its net deferred tax asset in accordance with SFAS 109, and $5.6 million to expense for the write-off of deferred financing costs, pre-payment premiums and bond discounts associated with early extinguishment of debt.

 

Fourth Quarter 2004 Operating Results.   Oil and gas sales totaled $25.1 million from average production of 51.6 million cubic feet of natural gas equivalent per day (MMcfe/d).  This corresponds to sales of $18.9 million from average daily production of 40.4 MMcfe/d during the same period in 2003.  During the fourth quarter of 2004, natural gas represented approximately 52 percent of the company’s total production. The average price received per thousand cubic feet of natural gas in the fourth quarter of 2004 increased by 22 percent to $6.27 compared to $5.15 during the fourth quarter of 2003, while the average price received per barrel of oil in the fourth quarter of 2004 decreased by 13 percent to $25.44 compared to $29.28 during the same period a year earlier.

 

  2004 Net Income.  For the 12 months ended December 31, 2004, the company reported net income of $21.5 million, or $1.22 per diluted share after an income tax benefit of $6.7 million or $0.38 per diluted share. The income tax benefit resulted from the reversal of the valuation allowance that was established in 2003.  Charges to expense of $3.0 million for the early extinguishment of debt during 2004 had an impact on net income per diluted share of $0.17.  For the 12 months ended December 31, 2003, the company reported a net loss of $18.0 million, or $1.41 per share on a diluted basis.  During this period, Callon charged $11.5 million to income tax expense after establishing a valuation allowance against its net deferred tax asset, and $5.6 million to expense for the write-off of deferred financing costs, pre-payment premiums and bond discounts associated with the early extinguishment of debt.

 

2004 Operating Results.  For the year ended December 31, 2004, oil and gas sales totaled $119.8 million from average production of 59.6 MMcfe/d.  This corresponds to sales of $73.7 million from average daily production of 38.1 MMcfe/d during the same period in 2003.  The average price received per thousand cubic feet of natural gas for the year ended December 31, 2004 increased by 15 percent to $6.15 compared to $5.36 during the same period in 2003, while the average price received per barrel of oil remained constant at $28.71 compared to $28.72 for the same period a year earlier.

 

2004 Discretionary Cash Flow.  For the year ended December 31, 2004, discretionary cash flow totaled $71.2 million compared to $34.7 million during the 12 months of the previous year.  Net cash flow provided by operating activities, as defined by GAAP, totaled $70.9 million and $34.6 million during the year ended December 31, 2004 and 2003, 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.)

 

   SFAS 109 “Accounting for Income Taxes.”  SFAS 109 provides for the weighing of positive and negative evidence in determining whether it is more likely than not that a deferred tax asset is recoverable. The company incurred losses in 2002 and 2003 and had losses on an aggregate basis for the three-year period ended December 31, 2003. Because of these cumulative losses the company established a full valuation allowance of $11.5 million as of December 31, 2003. As a result of production from the company’s first two deepwater projects starting in November 2003, as well as refinancing its highest cost debt in 2004, the company achieved profitable operations and has income on an aggregate basis for the three-year period ended December 31, 2004.  Callon also expects 2005 production levels to exceed 2004 levels and expects to utilize most if not all of the deferred tax asset in 2005.  As a result, the company reversed the valuation allowance which had a balance of $7.0 million as of December 31, 2004. 

 

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:

Three Months Ended

 

Twelve Months Ended

(In thousands)                                                                   

December 31,

 

December 31,

 

2004                2003

 

2004                  2003

Discretionary cash flow

  $14,290

 

  $7,466

 

$71,221

 

$34,744

Net working capital changes and other changes

     1,949

 

(4,034)

 

     (313)

 

    (115)

Net cash flow provided by operating activities

  $16,239

 

  $3,432

 

 $70,908

 

 $34,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Balance Sheets:

       December 31,

    December 31,

(In thousands)

         2004

     2003

 

            

 

Cash and cash equivalents

                 $   3,266

            $    8,700

Restricted cash*

                        ---

                63,345

Oil and gas properties, net

                  406,690

              390,163

All other assets

                    47,567

                33,824

      Total assets

                $457,523

            $496,032

 

 

 

Long-term debt including current maturities*

                $192,927   

            $308,108

All other liabilities

                    66,284

                54,663

Stockholders’ equity

                  198,312

              133,261

      Total liabilities and stockholders’ equity

                $457,523

            $496,032

 

 

 

 

 

*Restricted cash was used to pay off 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,

 

    2004

     2003

    2004

    2003

Production:

 

 

 

 

   Oil (MBbls)

      381

     128

    1,736

     268

   Gas (MMcf)

   2,462

  2,950

  11,387

12,315

   Total Production (MMcfe)

   4,751  

  3,718

  21,801

13,923

   Average daily (MMcfe)

     51.6

    40.4

      59.6

    38.1

 

 

 

 

 

Average prices:

 

 

 

 

   Oil ($/Bbl)

 $25.44

 $29.28

  $28.71

$28.72

   Gas ($/Mcf)

 $  6.27

 $  5.15

  $  6.15

$  5.36

   Gas equivalent ($/Mcfe)

 $  5.29

 $  5.09

  $  5.50

$  5.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                   Callon Petroleum Company

                                                                                       Consolidated Statements of Operations

                                                                                                               (Unaudited)

                                                                                         (In thousands, except share amounts)

 

 

 

 

 

      Three Months Ended 

 

      Twelve Months Ended

 

 

            December 31,

 

           December 31,

 

    2004