Callon Petroleum Company Reports Results for Third Quarter, First Nine Months of 2007
NATCHEZ, Miss.--
Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and the nine-month periods ended September 30, 2007.
Third Quarter and Nine Months 2007 Net Income. For the quarter ended September 30, 2007, the company reported net income of $2.3 million, or $0.11 per share. This compares to net income of $9.6 million, or $0.45 per share, for the same period in 2006. For the nine months ended September 30, 2007, Callon reported net income of $10.7 million, or $0.50 per share. This compares with net income of $34.7 million, or $1.64 per share during the same period of 2006. The declines in net income for the three and nine months ended September 30, 2007, when compared to 2006, are primarily attributable to an increase in interest expense associated with the financing of the previously announced acquisition of BP's interest in the Entrada Field, lower 2007 oil production at the Medusa Field after the completion of remedial work on the Medusa A-1 well in late 2006 restored production at a lower rate, and an increase in the depletion, depreciation and amortization rate. All per share amounts are on a diluted basis.
Third Quarter and Nine Months 2007 Operating Results. Operating results for the three months ended September 30, 2007 include oil and gas sales of $37.9 million from average production of 45.4 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $44.9 million from average production of 54.3 MMcfe/d during the comparable 2006 period. The average price, after the impact of hedging, received per thousand cubic feet of natural gas (Mcf) for the quarter ended September 30, 2007 decreased to $7.73, compared to $7.79 for the quarter ended September 30, 2006. The average price, after the impact of hedging, received per barrel of oil (Bbl) in the third quarter of 2007 increased to $71.29, compared to $62.31 during 2006. Oil and gas sales for the first nine months of 2007 totaled $126.8 million from average production of 53.2 MMcfe/d. This corresponds to sales of $137.5 million from average production of 56.0 MMcfe/d during the same period in 2006. The average price, after the impact of hedging, received per Mcf in the nine-month period ended September 30, 2007 decreased to $7.97, compared to $8.20 during the first nine months of 2006, while the average price, after the impact of hedging, received per Bbl in the first nine months of 2007 increased to $62.09, compared to $58.33 during the same period in 2006.
Third Quarter and Nine Months 2007 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended September 30, 2007 totaled $21.0 million compared to $31.2 million during the comparable prior year period. Net cash flow provided by operating activities, as defined by GAAP, totaled $19.8 million and $31.4 million during the quarters ended September 30, 2007 and 2006, respectively. Discretionary cash flow for the first nine months of 2007 totaled $79.4 million compared to $100.1 million during the same period in 2006. Net cash flow provided by operating activities, as defined by GAAP, totaled $89.9 million and $106.7 million during the nine-month periods ended September 30, 2007 and 2006, 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 Measure: Three Months Ended Nine Months Ended --------------------------------- (In thousands) September 30, September 30, ------------------ ----------------- 2007 2006 2007 2006 ---------- ------- -------- -------- Discretionary cash flow $21,012 $31,230 $79,404 $100,110 Net working capital changes and other changes (1,248) 151 10,516 6,613 ---------- ------- -------- -------- Net cash flow provided by operating activities $19,764 $31,381 $89,920 $106,723 ========== ======= ======== ========
Production and Price Information: Three Months Ended Nine Months Ended --------------------------------- September 30, September 30, ------------------ ----------------- 2007 2006 2007 2006 --------- -------- -------- -------- Production: Oil (MBbls) 223 381 774 1,340 Gas (MMcf) 2,840 2,710 9,883 7,241 Gas equivalent (MMcfe) 4,179 4,998 14,527 15,278 Average daily (MMcfe) 45.4 54.3 53.2 56.0 Average prices: Oil ($/Bbl) (a) $ 71.29 $ 62.31 $ 62.09 $ 58.33 Gas ($/Mcf) $ 7.73 $ 7.79 $ 7.97 $ 8.20 Gas equivalent ($/Mcfe) $ 9.06 $ 8.98 $ 8.73 $ 9.00 Additional per Mcfe data: Sales price $ 9.06 $ 8.98 $ 8.73 $ 9.00 Lease operating expenses 1.28 1.61 1.41 1.40 --------- -------- -------- -------- Operating margin $ 7.78 $ 7.37 $ 7.32 $ 7.60 ========= ======== ======== ======== Depletion $ 3.81 $ 3.00 $ 3.90 $ 2.85 General and administrative (net of management fees) $ 0.62 $ 0.58 $ 0.49 $ 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 $ 75.37 $ 70.51 $ 66.21 $ 68.23 Basis differentials and quality adjustments ( 2.96) ( 6.91) ( 4.45) ( 7.81) Transportation ( 1.12) ( 1.29) ( 1.13) ( 1.28) Hedging -- -- 1.46 ( 0.81) --------- -------- -------- -------- Averaged realized oil price $ 71.29 $ 62.31 $ 62.09 $ 58.33 ========= ======== ======== ========
Callon Petroleum Company Consolidated Balance Sheets (In thousands, except share data) (Unaudited) September 30, December 31, 2007 2006 ------------- ------------ ASSETS ------------------------------------------- Current assets: Cash and cash equivalents $ 3,175 $ 1,896 Accounts receivable 21,664 32,166 Restricted investments 604 4,306 Fair market value of derivatives 2,185 13,311 Other current assets 6,385 5,973 ------------- ------------ Total current assets 34,013 57,652 ------------- ------------ Oil and gas properties, full-cost accounting method: Evaluated properties 1,313,382 1,096,907 Less accumulated depreciation, depletion and amortization (661,279) (604,682) ------------- ------------ 652,103 492,225 Unevaluated properties excluded from amortization 67,394 54,802 ------------- ------------ Total oil and gas properties 719,497 547,027 ------------- ------------ Other property and equipment, net 2,014 1,996 Restricted investments 3,959 1,935 Investment in Medusa Spar LLC 12,641 12,580 Other assets, net 8,289 4,337 ------------- ------------ Total assets $ 780,413 $ 625,527 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------------- Current liabilities: Accounts payable and accrued liabilities $ 27,035 $ 46,611 Asset retirement obligations 7,175 14,355 Current maturities of long-term debt -- 213 ------------- ------------ Total current liabilities 34,210 61,179 ------------- ------------ Long-term debt 391,451 225,521 Asset retirement obligations 25,286 26,824 Deferred tax liability 32,330 30,054 Accrued liabilities to be refinanced 10,000 -- Other long-term liabilities 1,265 586 ------------- ------------ Total liabilities 494,542 344,164 ------------- ------------ Stockholders' equity: Preferred Stock, $.01 par value, 2,500,000 shares authorized; -- -- Common Stock, $.01 par value, 30,000,000 shares authorized; 20,879,220 and 20,747,773 shares outstanding at September 30, 2007 and December 31, 2006, respectively 209 207 222,448 220,785 Other comprehensive income 843 8,652 Retained earnings 62,371 51,719 ------------- ------------ Total stockholders' equity 285,871 281,363 ------------- ------------ Total liabilities and stockholders' equity $ 780,413 $ 625,527 ============= ============
Callon Petroleum Company Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 2007 2006 2007 2006 --------- -------- --------- --------- Operating revenues: Oil sales $15,912 $23,754 $ 48,058 $ 78,133 Gas sales 21,957 21,124 78,769 59,383 --------- -------- --------- --------- Total operating revenues 37,869 44,878 126,827 137,516 --------- -------- --------- --------- Operating expenses: Lease operating expenses 5,338 8,070 20,550 21,340 Depreciation, depletion and amortization 15,931 14,973 56,597 43,600 General and administrative 2,606 2,908 7,098 6,558 Accretion expense 904 1,082 2,959 3,832 Derivative expense -- 30 -- 150 --------- -------- --------- --------- Total operating expenses 24,779 27,063 87,204 75,480 --------- -------- --------- --------- Income from operations 13,090 17,815 39,623 62,036 --------- -------- --------- --------- Other (income) expenses: Interest expense 10,148 4,027 23,905 12,303 Other (income) (387) (354) (814) (1,354) --------- -------- --------- --------- Total other (income) expenses 9,761 3,673 23,091 10,949 --------- -------- --------- --------- Income before income taxes 3,329 14,142 16,532 51,087 Income tax expense 1,165 4,856 6,283 17,700 --------- -------- --------- --------- Income before Medusa Spar LLC 2,164 9,286 10,249 33,387 Income from Medusa Spar LLC net of tax 104 344 403 1,313 --------- -------- --------- --------- Net income $ 2,268 $ 9,630 $ 10,652 $ 34,700 ========= ======== ========= ========= Net income per common share: Basic $ 0.11 $ 0.47 $ 0.51 $ 1.74 ========= ======== ========= ========= Diluted $ 0.11 $ 0.45 $ 0.50 $ 1.64 ========= ======== ========= ========= Shares used in computing net income: Basic 20,800 20,650 20,728 19,919 ========= ======== ========= ========= Diluted 21,230 21,326 21,220 21,154 ========= ======== ========= =========
Callon Petroleum Company Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended --------------------------- September 30, September 30, 2007 2006 ------------- ------------- Cash flows from operating activities: Net income $ 10,652 $ 34,700 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 57,270 44,105 Accretion expense 2,959 3,832 Amortization of deferred financing costs 2,153 1,667 Non-cash derivative expense -- 150 Equity in earnings of Medusa Spar LLC (403) (1,313) Deferred income tax expense 6,283 17,700 Non-cash charge related to compensation plans 490 718 Excess tax benefits from share-based payment arrangements -- (1,449) Changes in current assets and liabilities: Accounts receivable 7,891 4,569 Other current assets (413) (687) Current liabilities 896 5,404 Change in gas balancing receivable (160) (131) Change in gas balancing payable 564 149 Change in other long-term liabilities (7) 1 Change in other assets, net 1,745 (2,692) ------------- ------------- Cash provided by operating activities 89,920 106,723 ------------- ------------- Cash flows from investing activities: Capital expenditures (106,899) (122,002) Entrada acquisition (150,000) -- Distribution from Medusa Spar LLC 559 849 ------------- ------------- Cash used by investing activities (256,340) (121,153) ------------- ------------- Cash flows from financing activities: Change in accrued liabilities to be refinanced 10,000 2,000 Increases in debt 213,000 63,000 Payments on debt (48,000) (51,000) Deferred financing costs (6,429) -- Equity issued related to employee stock plans -- (438) Excess tax benefits from share-based payment arrangements -- 1,449 Capital leases (872) (200) ------------- ------------- Cash provided by financing activities 167,699 14,811 ------------- ------------- Net increase (decrease) in cash and cash equivalents 1,279 381 Cash and cash equivalents: Balance, beginning of period 1,896 2,565 ------------- ------------- Balance, end of period $ 3,175 $ 2,946 ============= =============
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 November 5, 2007