Callon Petroleum Company Reports Results For Fourth Quarter, Full Year 2006
NATCHEZ, Miss.--
Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the quarter and the year ended December 31, 2006. The Company reported record revenues, earnings and cash flow provided by operating activities for the full year of 2006.
Fourth Quarter and Full Year 2006 Net Income. For the year ended December 31, 2006, the company reported record net income of $40.6 million, or $1.90 per diluted share. This compares to net income of $26.8 million, or $1.28 per share on a diluted basis, for the same period in 2005. For the three months ended December 31, 2006, Callon reported net income of $5.9 million, or $0.27 per diluted share. This compares with net income of $4.3 million, or $0.20 per diluted share during the fourth quarter of 2005, which included production downtime because of tropical storms and hurricane activity ("inclement weather").
Fourth Quarter and Full Year 2006 Operating Results. Operating results for the year ended December 31, 2006 include record oil and gas sales of $182.3 million from average production of 56.9 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $141.3 million from average daily production of 51.5 MMcfe/d during 2005 which was impacted by inclement weather. The average price, after the impact of hedging, received per thousand cubic feet of natural gas for the year ended December 31, 2006 decreased to $8.07, compared to $8.35 for the year ended December 31, 2005, while the average price, after the impact of hedging, received per barrel of oil in 2006 increased to $57.33, compared to $41.61 during 2005. Fourth quarter of 2006 oil and gas sales totaled $44.8 million from production of 59.8 MMcfe/d. This corresponds to sales of $24.9 million from production of 27.6 MMcfe/d during the same period in 2005, which was impacted by inclement weather. The average price, after the impact of hedging, received per thousand cubic feet of natural gas in the fourth quarter of 2006 decreased to $7.82, compared to $12.20 during the fourth quarter of 2005, while the average price, after the impact of hedging, received per barrel of oil in the fourth quarter of 2006 increased to $52.77, compared to $45.93 during the same period in 2005.
Fourth Quarter and Full Year 2006 Discretionary Cash Flow. Discretionary cash flow for the year ended December 31, 2006 totaled $133.0 million compared to $93.5 million during the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled a record $135.5 million and $74.0 million during the years ended December 31, 2006 and 2005, respectively. Fourth quarter of 2006 discretionary cash flow totaled $32.9 million compared to $11.6 million during the same period in 2005. Net cash flow provided (used) by operating activities, as defined by GAAP, totaled $28.8 million and $(12.1) million during the three-month periods ended December 31, 2006 and 2005, respectively. (See "Non-GAAP Financial Measure" that follows and the accompanying reconciliation of discretionary cash flow 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 Measure: Three Months Ended Full Year Ended
---------------------------------
(In thousands) December 31, December 31,
------------------ ------------------
2006 2005 2006 2005
-------- --------- --------- --------
Discretionary cash flow $32,913 $11,579 $133,023 $93,452
Net working capital changes
and other changes (4,152) (23,660) 2,461 (19,442)
-------- --------- --------- --------
Net cash flow provided (used)
by operating activities $28,761 $(12,081) $135,484 $74,010
======== ========= ========= ========
Three Months Full Year
Production and Price Information: Ended Ended
---------------------------------------
December 31, December 31,
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Production:
Oil (MBbls) 294 224 1,634 1,837
Gas (MMcf) 3,736 1,198 10,977 7,768
Gas equivalent (MMcfe) 5,500 2,541 20,780 18,787
Average daily (MMcfe) 59.8 27.6 56.9 51.5
Average prices:
Oil ($/Bbl) (a) $52.77 $45.93 $57.33 $41.61
Gas ($/Mcf) $7.82 $12.20 $8.07 $8.35
Gas equivalent ($/Mcfe) $8.14 $9.79 $8.77 $7.52
Additional per Mcfe data:
Sales price $8.14 $9.79 $8.77 $7.52
Lease operating expenses 1.37 2.36 1.39 1.30
------- ------- ------- -------
Operating margin $6.77 $7.43 $7.38 $6.22
======= ======= ======= =======
Depletion $3.94 $2.58 $3.14 $2.39
General and administrative (net of
management fees) $0.37 $0.78 $0.41 $0.43
(a) Below is a reconciliation of the
average NYMEX price to the average
realized sales price per barrel of
oil:
Average NYMEX oil price $60.19 $60.02 $66.22 $56.57
Basis differentials and quality
adjustments ( 6.56) ( 6.44) ( 7.03) ( 8.45)
Transportation ( 1.16) ( 1.08) ( 1.25) ( 1.26)
Hedging 0.30 ( 6.57) ( 0.61) ( 5.25)
------- ------- ------- -------
Averaged realized oil price $52.77 $45.93 $57.33 $41.61
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Callon Petroleum Company
Consolidated Balance Sheets
(In thousands, except share data)
December 31,
--------------------
2006 2005
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents $1,896 $2,565
Accounts receivable 32,166 33,195
Deferred tax asset -- 26,770
Restricted investments 4,306 4,110
Fair market value of derivatives 13,311 889
Other current assets 5,973 1,998
---------- ---------
Total current assets 57,652 69,527
---------- ---------
Oil and gas properties, full-cost accounting
method:
Evaluated properties 1,096,907 937,698
Less accumulated depreciation, depletion and
amortization (604,682) (539,399)
---------- ---------
492,225 398,299
Unevaluated properties excluded from
amortization 54,802 49,065
---------- ---------
Total oil and gas properties 547,027 447,364
---------- ---------
Other property and equipment, net 1,996 1,605
Long-term gas balancing receivable 714 403
Restricted investments 1,935 1,858
Investment in Medusa Spar LLC 12,580 11,389
Other assets, net 3,623 1,630
---------- ---------
Total assets $625,527 $533,776
========== =========
Current liabilities:
Accounts payable and accrued liabilities $43,086 $39,323
Fair market value of derivatives -- 1,247
Undistributed oil and gas revenues 3,525 721
Asset retirement obligations 14,355 21,660
Current maturities of long-term debt 213 263
---------- ---------
Total current liabilities 61,179 63,214
---------- ---------
Long-term debt 225,521 188,813
Asset retirement obligations 26,824 16,613
Deferred tax liability 30,054 31,633
Accrued liabilities to be refinanced -- 5,000
Other long-term liabilities 586 455
---------- ---------
Total liabilities 344,164 305,728
---------- ---------
Stockholders' equity:
Preferred Stock, $.01 par value; 2,500,000
shares authorized; -- --
Common Stock, $.01 par value; 30,000,000
shares authorized; 20,747,773 shares and
19,357,138 shares issued and outstanding at
December 31, 2006 and 2005, respectively 207 194
Unearned compensation-restricted stock -- (3,334)
Capital in excess of par value 220,785 220,360
Other comprehensive income (loss) 8,652 (331)
Retained earnings 51,719 11,159
---------- ---------
Total stockholders' equity 281,363 228,048
---------- ---------
Total liabilities and
stockholders' equity $625,527 $533,776
========== =========
Callon Petroleum Company
Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- --------
Operating revenues:
Oil Sales $15,532 $10,283 $93,665 $76,425
Gas Sales 29,220 14,605 88,603 64,865
--------- -------- --------- --------
Total operating revenues 44,752 24,888 182,268 141,290
--------- -------- --------- --------
Operating expenses:
Lease operating expenses 7,541 5,995 28,881 24,377
Depreciation, depletion and
amortization 21,683 6,554 65,283 44,946
General and administrative 2,033 1,992 8,591 8,085
Accretion expense 1,128 1,054 4,960 3,549
Derivative expense -- (490) 150 6,028
--------- -------- --------- --------
Total operating expenses 32,385 15,105 107,865 86,985
--------- -------- --------- --------
Income from operations 12,367 9,783 74,403 54,305
--------- -------- --------- --------
Other (income) expenses:
Interest expense 4,177 3,776 16,480 16,660
Other (income) (515) (348) (1,869) (998)
--------- -------- --------- --------
Total other (income)
expenses 3,662 3,428 14,611 15,662
--------- -------- --------- --------
Income before income taxes 8,705 6,355 59,792 38,643
Income tax expense (benefit) 3,007 2,098 20,707 13,209
--------- -------- --------- --------
Income before equity in
earnings of Medusa Spar LLC 5,698 4,257 39,085 25,434
Equity in earnings of Medusa
Spar LLC, net of tax 162 50 1,475 1,342
--------- -------- --------- --------
Net income 5,860 4,307 40,560 26,776
Preferred stock dividends -- -- -- 318
--------- -------- --------- --------
Net income available to common
shares $5,860 $4,307 $40,560 $26,458
========= ======== ========= ========
Net income per common share:
Basic $0.28 $0.22 $2.00 $1.43
========= ======== ========= ========
Diluted $0.27 $0.20 $1.90 $1.28
========= ======== ========= ========
Shares used in computing net
income per share amounts:
Basic 20,719 19,272 20,270 18,453
========= ======== ========= ========
Diluted 21,350 21,276 21,363 20,883
========= ======== ========= ========
Callon Petroleum Company
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2006, 2005 and 2004
(In thousands)
2006 2005 2004
--------- -------- ---------
Cash flows from operating activities:
Net income $40,560 $26,776 $21,501
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation, depletion and
amortization 65,929 45,657 48,164
Accretion expense 4,960 3,549 3,400
Amortization of deferred financing
costs 2,221 2,062 1,929
Non-cash loss on extinguishment of
debt -- -- 2,910
Equity earnings of Medusa Spar, LLC (1,475) (1,342) (1,076)
Non-cash derivative expense 150 1,635 (135)
Deferred income tax expense
(benefit) 20,707 13,209 (6,697)
Non-cash charge related to
compensation plans 1,420 1,906 1,225
Excess tax benefits from share-based
payment arrangements (1,449) -- --
Changes in current assets and
liabilities:
Accounts receivable, trade (2,107) (11,169) (4,495)
Other current assets (3,975) 670 971
Current liabilities 11,311 (8,666) 2,903
Change in gas balancing receivable (311) 322 376
Change in gas balancing payable 133 (289) 400
Change in other long-term
liabilities (2) (18) (20)
Change in other assets, net (2,588) (292) (448)
--------- -------- ---------
Cash provided by operating
activities 135,484 74,010 70,908
--------- -------- ---------
Cash flows from investing activities:
Capital expenditures (167,979) (73,072) (64,649)
Distribution from Medusa Spar, LLC 1,078 463 339
--------- -------- ---------
Cash used by investing activities (166,901) (72,609) (64,310)
--------- -------- ---------
Cash flows from financing activities:
Change in accrued liabilities to be
refinanced (5,000) 5,000 --
Increase in debt 88,000 7,000 90,000
Payments on debt (53,000) (12,000) (205,915)
Restricted cash -- -- 63,345
Debt issuance cost -- -- (984)
Issuance of common stock -- 2 44,047
Buyout of preferred stock -- (637) --
Equity issued related to employee stock
plans (438) (573) 199
Excess tax benefits from share-based
payment arrangements 1,449 -- --
Capital leases (263) (576) (1,452)
Cash dividends on preferred stock -- (318) (1,272)
--------- -------- ---------
Cash provided (used) by financing
activities 30,748 (2,102) (12,032)
--------- -------- ---------
Net decrease in cash and cash equivalents (669) (701) (5,434)
Cash and cash equivalents:
Balance, beginning of period 2,565 3,266 8,700
--------- -------- ---------
Balance, end of period $1 ,896 $2,565 $3,266
========= ======== =========
Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region. The majority of Callon's properties and operations are concentrated in Louisiana, Alabama 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 March 9, 2007