Callon Petroleum Company Reports First Quarter 2009 Results of Operations

NATCHEZ, Miss.-- Callon Petroleum Company (NYSE: CPE) today reported results of operations for the quarter ended March 31, 2009.

First Quarter 2009 Net Income. For the quarter ended March 31, 2009, the company reported net income of $2.4 million, or $0.11 per share, exceeding analysis consensus which was a net loss of $0.07 per share. This compares to net income of $7.6 million, or $0.35 per share, for the same period in 2008.

First Quarter 2009 Operating Results. Oil and gas sales totaled $24.8 million from production of 33.6 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $45.0 million from production of 42.1 MMcfe/d during the same period in 2008. The average price received per thousand cubic feet of natural gas decreased to $6.13, compared to $9.50 during the first quarter of 2008, while the average price received per barrel of oil decreased to $60.59, compared to $86.66 during the same period in 2008. All average realized price amounts are after the impact of hedging, which added $7.9 million to oil and gas sales.

First Quarter 2009 Discretionary Cash Flow. Discretionary cash flow for the quarter ended March 31, 2009 totaled $14.2 million compared to $29.0 million during the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled $2.2 million and $35.1 million during the quarters ended March 31, 2009 and 2008, 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.


Production and Price Information:                        Three Months Ended

                                                         March 31,

                                                         2009         2008

Production:

Oil (MBbls)                                                263          290

Gas (MMcf)                                                 1,447        2,090

Gas equivalent (MMcfe)                                     3,026        3,828

Average daily (MMcfe)                                      33.6         42.1

Average prices:

Oil ($/Bbl)(a)                                           $ 60.59      $ 86.66

Gas ($/Mcf)                                              $ 6.13       $ 9.50

Gas equivalent ($/Mcfe)                                  $ 8.20       $ 11.75

Additional per Mcfe data:

Sales price                                              $ 8.20       $ 11.75

Lease operating expenses                                   1.33         1.35

Operating margin                                         $ 6.87       $ 10.40

Depletion                                                $ 3.11       $ 3.93

General and administrative (net of management fees)      $ 0.60       $ 0.69

(a) Below is a reconciliation of the average NYMEX
price to the average realized sales price per barrel of
oil:

Average NYMEX oil price                                  $ 43.08      $ 97.90

Basis differentials and quality adjustments                ( 4.01  )    ( 3.65 )

Transportation                                             ( 1.35  )    ( 1.25 )

Hedging                                                    22.87        ( 6.34 )

Averaged realized oil price                              $ 60.59      $ 86.66

Reconciliation of Non-GAAP Financial Measure:            Three Months Ended

(In thousands)                                           March 31,

                                                         2009         2008

Discretionary cash flow                                  $ 14,230     $ 29,043

Net working capital changes and other changes              (11,984 )    6,088

Net cash flow provided by operating activities           $ 2,246      $ 35,131




Callon Petroleum Company

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

                                                  March 31,       December 31,

                                                  2009            2008

ASSETS

Current assets:

Cash and cash equivalents                         $ 651           $ 17,126

Accounts receivable                                 21,472          44,290

Fair market value of derivatives                    14,857          21,780

Other current assets                                191             1,103

Total current assets                                37,171          84,299

Oil and gas properties, full-cost accounting
method:

Evaluated properties                                1,587,795       1,581,698

Less accumulated depreciation, depletion and        (1,464,687 )    (1,455,275 )
amortization

                                                    123,108         126,423

Unevaluated properties excluded from                28,595          32,829
amortization

Total oil and gas properties                        151,703         159,252

Other property and equipment, net                   2,419           2,536

Restricted investments                              4,775           4,759

Investment in Medusa Spar LLC                       12,183          12,577

Other assets, net                                   2,172           2,667

Total assets                                      $ 210,423       $ 266,090

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities          $ 23,375        $ 76,516

Asset retirement obligations                        9,456           9,151

Total current liabilities                           32,831          85,667

9.75% Senior Notes                                  195,065         194,420

Callon Entrada Credit Facility (non-recourse)       78,435          78,435

Total long-term debt                                273,500         272,855

Asset retirement obligations                        32,273          33,043

Callon Entrada Credit Facility interest payable     3,339           2,719
(non-recourse)

Other long-term liabilities                         1,638           1,610

Total liabilities                                   343,581         395,894

Stockholders' equity:

Preferred Stock, $.01 par value, 2,500,000          --              --
shares authorized;

Common Stock, $.01 par value, 30,000,000 shares
authorized; 21,637,470 and 21,621,142 shares        216             216
outstanding at March 31, 2009 and December 31,
2008, respectively

Capital in excess of par value                      228,968         227,803

Other comprehensive income                          7,234           14,157

Retained (deficit) earnings                         (369,576   )    (371,980   )

Total stockholders' equity                          (133,158   )    (129,804   )

Total liabilities and stockholders' equity        $ 210,423       $ 266,090




Callon Petroleum Company

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

                                                       Three Months Ended

                                                       March 31,

                                                       2009        2008

Operating revenues:

Oil sales                                              $ 15,952    $ 25,096

Gas sales                                                8,863       19,864

Total operating revenues                                 24,815      44,960

Operating expenses:

Lease operating expenses                                 4,039       5,178

Depreciation, depletion and amortization                 9,413       15,029

General and administrative                               1,819       2,652

Accretion expense                                        1,038       1,032

Total operating expenses                                 16,309      23,891

Income from operations                                   8,506       21,069

Other (income) expenses:

Interest expense                                         4,782       9,940

Callon Entrada Credit Facility interest expense          1,556       --
(non-recourse)

Other (income) expense                                   (95    )    (472   )

Total other (income) expenses                            6,243       9,468

Income before income taxes                               2,263       11,601

Income tax (benefit) expense                             (24    )    4,082

Income before equity in earnings of Medusa Spar LLC      2,287       7,519

Equity in earnings of Medusa Spar LLC, net of tax        117         113

Net income available to common shares                  $ 2,404     $ 7,632

Net income per common share:

Basic                                                  $ 0.11      $ 0.37

Diluted                                                $ 0.11      $ 0.35

Shares used in computing net income per common share:

Basic                                                    21,607      20,871

Diluted                                                  21,607      21,644




Callon Petroleum Company

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

                                                      Three Months Ended

                                                      March 31,    March 31,

                                                      2009         2008

Cash flows from operating activities:

Net income                                            $ 2,404      $ 7,632

Adjustments to reconcile net income to cash provided
by operating activities:

Depreciation, depletion and amortization                9,629        15,213

Accretion expense                                       1,038        1,032

Amortization of deferred financing costs                731          873

Equity in earnings of Medusa Spar LLC                   (117    )    (113    )

Deferred income tax expense                             (24     )    4,082

Non-cash charge related to compensation plans           569          371

Excess tax benefits from share-based payment            --           (47     )
arrangements

Changes in current assets and liabilities:

Accounts receivable                                     5,761        (648    )

Other current assets                                    912          4,702

Current liabilities                                     (19,614 )    (252    )

Change in gas balancing receivable                      319          923

Change in gas balancing payable                         30           557

Change in other long-term liabilities                   618          (4      )

Change in other assets, net                             (10     )    810

Cash provided by operating activities                   2,246        35,131

Cash flows from investing activities:

Capital expenditures                                    (19,295 )    (46,208 )

Distribution from Medusa Spar LLC                       574          108

Cash used in investing activities                       (18,721 )    (46,100 )

Cash flows from financing activities:

Equity issued related to employee stock plans           --           (16     )

Excess tax benefits from share-based payment            --           47
arrangements

Cash provided by financing activities                   --           31

Net decrease in cash and cash equivalents               (16,475 )    (10,938 )

Cash and cash equivalents:

Balance, beginning of period                            17,126       53,250

Balance, end of period                                $ 651        $ 42,312



Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties in the Gulf Coast region. The majority of Callon's properties and operations are concentrated in 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