Callon Petroleum Company Reports Results of Operations For Third Quarter, First Nine Months of 2009
NATCHEZ, Miss.-- Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and the nine-month periods ended September 30, 2009.
Third Quarter and Nine Months 2009 Net Income. For the quarter ended September 30, 2009, the company reported a net loss of $1.0 million, or $0.04 per share. Net income for the comparable period of 2008 was $5.9 million, or $0.27 per share. For the nine months ended September 30, 2009, Callon reported net income of $0.5 million, or $0.02 per share. This compares with net income of $18.6 million, or $0.85 per share during the same period of 2008. All per share amounts are on a diluted basis.
Third Quarter and Nine Months 2009 Operating Results. Operating results for the three months ended September 30, 2009 include oil and gas sales of $21.3 million from average production of 27.4 million cubic feet of natural gas equivalent per day (MMcfe/d), which was within the company's published guidance range of 25 MMcfe/d to 28 MMcfe/d. This corresponds to sales of $32.8 million from average production of 25.9 MMcfe/d during the comparable 2008 period. The average price received, after the impact of hedging, per thousand cubic feet of natural gas (Mcf) for the quarter ended September 30, 2009 decreased to $3.64, compared to $10.77 for the quarter ended September 30, 2008. The average price received, after the impact of hedging, per barrel of oil (Bbl) in the third quarter of 2009 decreased to $83.38, compared to $99.40 during the third quarter of 2008. Oil and gas sales for the first nine months of 2009 totaled $71.2 million from average production of 31.3 MMcfe/d. This corresponds to sales of $125.8 million from average production of 35.0 MMcfe/d during the same period in 2008. The average price, after the impact of hedging, received per Mcf in the nine-month period of 2009 decreased to $4.69, compared to $10.53 during the first nine months of 2008, while the average price received, after the impact of hedging, per Bbl in the first nine months of 2009 decreased to $71.03, compared to $94.89 during the same period in 2008.
Third Quarter and Nine Months 2009 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended September 30, 2009 totaled $9.8 million compared to $21.9 million during the comparable prior year period. As defined by U.S. generally accepted accounting principles (GAAP), net cash flow used in operating activities totaled $14.9 million during the quarter ended September 30, 2009 and net cash flow provided by operating activities totaled $60.9 million during the quarter ended September 30, 2008. Discretionary cash flow for the first nine months of 2009 totaled $35.4 million compared to $81.2 million during the same period in 2008. Net cash flow provided by operating activities, as defined by GAAP, totaled $17.0 million and $124.8 million during the nine-month periods ended September 30, 2009 and 2008, respectively. (See "Non-GAAP Financial Measure" that follows and the accompanying 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 that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. The company also has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.
Reconciliation of Non-GAAP Financial Three Months Ended Nine Months Ended
Measure:
(In thousands) September 30, September 30,
2009 2008 2009 2008
Discretionary cash flow $ 9,802 $ 21,873 $ 35,416 $ 81,161
Net working capital changes and 5,142 38,993 (18,419 ) 43,614
other changes
Net cash flow provided by operating $ 14,944 $ 60,866 $ 16,997 $ 124,775
activities
Three Months Nine Months
Production and Price Information:
Ended Ended
September 30, September 30,
2009 2008 2009 2008
Production:
Oil (MBbls) 197 205 723 780
Gas (MMcf) 1,336 1,153 4,216 4,913
Gas equivalent (MMcfe) 2,520 2,383 8,556 9,593
Average daily (MMcfe) 27.4 25.9 31.3 35.0
Average prices:
Oil ($/Bbl) (a) $ 83.38 $ 99.40 $ 71.03 $ 94.89
Gas ($/Mcf) $ 3.64 $ 10.77 $ 4.69 $ 10.53
Gas equivalent ($/Mcfe) $ 8.46 $ 13.76 $ 8.32 $ 13.11
Additional per Mcfe data:
Sales price $ 8.46 $ 13.76 $ 8.32 $ 13.11
Lease operating expenses 1.97 1.55 1.60 $ 1.43
Operating margin $ 6.49 $ 12.21 $ 6.72 $ 11.68
Depletion $ 2.72 $ 4.83 $ 2.89 $ 4.35
General and administrative (net of $ 1.19 $ 0.61 $ 1.19 $ 0.73
management fees)
(a) Below is a reconciliation of
the average NYMEX price to the
average realized sales price per
barrel of oil:
Average NYMEX oil price $ 68.27 $ 117.98 $ 56.99 $ 113.29
Basis differentials and quality (2.60 ) 1.32 (4.40 ) (3.07 )
adjustments
Transportation (1.32 ) (1.34 ) (1.35 ) (1.30 )
Hedging 19.03 (18.56 ) 19.79 (14.03 )
Averaged realized oil price $ 83.38 $ 99.40 $ 71.03 $ 94.89
Callon Petroleum Company
Consolidated Balance Sheets
(In thousands, except share data)
September 30, December 31,
2009 2008
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 1,062 $ 17,126
Accounts receivable 17,796 44,290
Fair market value of derivatives 3,630 21,780
Other current assets 2,681 1,103
Total current assets 25,169 84,299
Oil and gas properties, full-cost accounting
method:
Evaluated properties 1,576,267 1,581,698
Less accumulated depreciation, depletion and (1,480,000 ) (1,455,275 )
amortization
96,267 126,423
Unevaluated properties excluded from 29,315 32,829
amortization
Total oil and gas properties 125,582 159,252
Other property and equipment, net 2,498 2,536
Restricted investments 4,057 4,759
Investment in Medusa Spar LLC 11,688 12,577
Other assets, net 2,174 2,667
Total assets $ 171,168 $ 266,090
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 15,589 $ 76,516
Asset retirement obligations 4,283 9,151
19,872 85,667
Callon Entrada non-recourse credit facility 84,450 --
Total current liabilities 104,322 85,667
9.75% Senior Notes 196,412 194,420
Callon Entrada non-recourse credit facility -- 78,435
Total long-term debt 196,412 272,855
Asset retirement obligations 12,503 33,043
Callon Entrada non-recourse credit facility -- 2,719
interest payable
Other long-term liabilities 1,685 1,610
Total liabilities 314,922 395,894
Stockholders' equity (deficit):
Preferred Stock, $.01 par value, 2,500,000 -- --
shares authorized;
Common Stock, $.01 par value, 30,000,000 shares
authorized; 21,805,311 and 21,621,142 shares 218 216
outstanding at September 30, 2009 and December
31, 2008, respectively
Capital in excess of par value 231,540 227,803
Other comprehensive income (loss) (4,056 ) 14,157
Retained (deficit) earnings (371,456 ) (371,980 )
Total stockholders' equity (deficit) (143,754 ) (129,804 )
Total liabilities and stockholders' equity $ 171,168 $ 266,090
(deficit)
Callon Petroleum Company
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Operating revenues:
Oil sales $ 16,451 $ 20,366 $ 51,374 $ 74,016
Gas sales 4,869 12,417 19,786 51,756
Total operating revenues 21,320 32,783 71,160 125,772
Operating expenses:
Lease operating expenses 4,962 3,701 13,657 13,749
Depreciation, depletion and 6,861 11,513 24,726 41,760
amortization
General and administrative 3,000 1,451 10,210 7,046
Derivative expense -- 1,386 -- 1,386
Accretion expense 698 1,092 2,531 3,076
Total operating expenses 15,521 19,143 51,124 67,017
Income from operations 5,799 13,640 20,036 58,755
Other (income) expenses:
Interest expense 4,919 4,152 14,555 18,526
Callon Entrada non-recourse 1,882 862 5,373 1,183
credit facility interest expense
Other (income) expense 110 (89 ) 76 (940 )
Loss on early extinguishment of -- -- -- 11,871
debt
Total other (income) expenses 6,911 4,925 20,004 30,640
Income (loss) before income taxes (1,112 ) 8,715 32 28,115
Income tax expense -- 2,919 -- 9,731
Income (loss) before equity in (1,112 ) 5,796 32 18,384
earnings of Medusa Spar LLC
Equity in earnings of Medusa Spar 157 60 492 257
LLC
Net income (loss) available to $ (955 ) $ 5,856 $ 524 $ 18,641
common shares
Net income (loss) per common
share:
Basic $ (0.04 ) $ 0.27 $ 0.02 $ 0.88
Diluted $ (0.04 ) $ 0.27 $ 0.02 $ 0.85
Shares used in computing net
income per common share:
Basic 21,705 21,460 21,631 21,078
Diluted 21,705 22,028 21,665 21,893
Callon Petroleum Company
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30, September 30,
2009 2008
Cash flows from operating activities:
Net income $ 524 $ 18,641
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation, depletion and amortization 25,359 42,333
Accretion expense 2,531 3,076
Amortization of deferred financing costs 2,251 2,308
Callon Entrada non-recourse credit facility 3,296 --
interest expense
Non-cash loss on early extinguishment of debt -- 5,598
Equity in earnings of Medusa Spar LLC (492 ) (257 )
Non-cash derivative expense -- 690
Deferred income tax expense -- 9,731
Non-cash charge related to compensation plans 1,947 1,026
Excess tax benefits from share-based payment -- (1,985 )
arrangements
Changes in current assets and liabilities:
Accounts receivable 8,355 13,094
Other current assets (841 ) 3,094
Current liabilities (25,709 ) 26,039
Change in gas balancing receivable 454 806
Change in gas balancing payable (201 ) 356
Change in other long-term liabilities 54 1,174
Change in other assets, net (531 ) (949 )
Cash provided by operating activities 16,997 124,775
Cash flows from investing activities:
Capital expenditures (34,442 ) (123,626 )
Proceeds from sale of mineral interests -- 167,493
Distribution from Medusa Spar LLC 1,381 389
Cash (used in) provided by investing (33,061 ) 44,256
activities
Cash flows from financing activities:
Proceeds from senior secured credit facility 9,337 94,435
Payments on senior secured credit facility (9,337 ) (216,000 )
Equity issued related to stock incentive plans -- (1,152 )
Excess tax benefits from share-based payment -- 1,985
arrangements
Cash used in financing activities -- (120,732 )
Net change in cash and cash equivalents (16,064 ) 48,299
Cash and cash equivalents:
Balance, beginning of period 17,126 53,250
Balance, end of period $ 1,062 $ 101,549
Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties primarily in the Gulf Coast region. Callon's properties and operations are geographically concentrated in Louisiana, Texas and the offshore waters of the Gulf of Mexico.
This news release is posted on the company's website at www.callon.com and will be archived there for subsequent review. It can be accessed from the "News Releases" link on the left side of the homepage.
It should be noted that 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. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements are discussed in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, available on our website or the SEC's website at www.sec.gov.
Source: Callon Petroleum Company
Released November 5, 2009