Callon Petroleum Company Reports Increased Earnings For Third Quarter, First Nine Months of 2008
NATCHEZ, Miss.--
Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and the nine-month periods ended September 30, 2008.
Third Quarter and Nine Months 2008 Net Income. For the quarter ended September 30, 2008, the company reported net income of $5.9 million, which was 156% higher than the $2.3 million reported for the same period in 2007. Net income per share was $0.27 and $0.11 for the quarters ended September 30, 2008 and 2007, respectively. For the nine months ended September 30, 2008, Callon reported net income of $18.6 million, or $0.85 per share after a one-time charge of $11.9 million, or $0.35 per share, net of tax, related to the early extinguishment of debt under the company's $200 million Senior Revolving Credit Facility which was retired in April 2008. This compares with net income of $10.7 million, or $0.50 per share during the same period of 2007. All per share amounts are on a diluted basis.
Third Quarter and Nine Months 2008 Operating Results. Operating results for the third quarter of 2008 were impacted by two back-to-back Hurricanes. On August 30, 2008 several of the company's fields were shut-in due to the approach of Hurricane Gustav and, subsequently, Hurricane Ike. Primarily as a result of damage caused by those two storms to third-party transmission lines and downstream facilities which process Callon's crude oil and natural gas, production of approximately 12.6 million cubic feet of natural gas equivalent per day (MMcfe/d) was deferred during the third quarter of 2008. Average daily production in the third quarter was 25.9 MMcfe/d. Operating results for the three months ended September 30, 2008 include oil and gas sales of $32.8 million. This corresponds to sales of $37.9 million from average production of 45.4 MMcfe/d during the comparable 2007 period. The average price received per thousand cubic feet of natural gas (Mcf) in the third quarter of 2008, after the impact of hedging, increased to $10.77 compared to $7.73 during the third quarter of 2007. The average price received per barrel of oil (Bbl) in the third quarter of 2008, after the impact of hedging, increased to $99.40, compared to $71.29 during the same period a year earlier. Oil and natural gas sales for the first nine months of 2008 totaled $125.8 million from average production of 35.0 MMcfe/d. This corresponds to sales of $126.8 million from average production of 53.2 MMcfe/d during the same period in 2007. The average price received per Mcf in the nine-month period of 2008, after the impact of hedging, increased to $10.53, compared to $7.97 during the first nine months of 2007. The average price received per Bbl in the nine months of 2008, after the impact of hedging, increased to $94.89, compared to $62.09 during the same period in 2007.
Third Quarter and Nine Months 2008 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended September 30, 2008 totaled $21.9 million compared to $21.0 million during the comparable prior year period. Net cash flow provided by operating activities, as defined by GAAP, totaled $60.9 million and $19.8 million during the quarters ended September 30, 2008 and 2007, respectively. Discretionary cash flow for the first nine months of 2008 totaled $81.2 million compared to $79.4 million during the same period in 2007. Net cash flow provided by operating activities, as defined by GAAP, totaled $124.8 million and $89.9 million during the nine-month periods ended September 30, 2008 and 2007, 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 Nine Months Measure: Ended Ended ------------------------------------ (In thousands) September 30, September 30, ---------------- ---------------- 2008 2007 2008 2007 ------- -------- -------- ------- Discretionary cash flow $21,873 $21,012 $81,161 $79,404 Net working capital changes and other changes 38,993 (1,248) 43,614 10,516 ------- -------- -------- ------- Net cash flow provided by operating activities $60,866 $19,764 $124,775 $89,920 ======= ======== ======== =======
Three Months Nine Months Production and Price Information: Ended Ended ------------------------------------ September 30, September 30, ---------------- ---------------- 2008 2007 2008 2007 -------- ------- -------- ------- Production: Oil (MBbls) 205 223 780 774 Gas (MMcf) 1,153 2,840 4,913 9,883 Gas equivalent (MMcfe) 2,383 4,179 9,593 14,527 Average daily (MMcfe) 25.9 45.4 35.0 53.2 Average prices: Oil ($/Bbl)(a) $99.40 $71.29 $94.89 $62.09 Gas ($/Mcf) $10.77 $7.73 $10.53 $7.97 Gas equivalent ($/Mcfe) $13.76 $9.06 $13.11 $8.73 Additional per Mcfe data: Sales price $13.76 $9.06 $13.11 $8.73 Lease operating expenses 1.55 1.28 1.43 1.41 -------- ------- -------- ------- Operating margin $12.21 $7.78 $11.68 $7.32 ======== ======= ======== ======= Depletion $4.83 $3.81 $4.35 $3.90 General and administrative (net of management fees) $0.61 $0.62 $0.73 $0.49 (a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil: Average NYMEX oil price $117.98 $75.37 $113.29 $66.21 Basis differentials and quality adjustments 1.32 ( 2.96) ( 3.07) ( 4.45) Transportation ( 1.34) ( 1.12) ( 1.30) ( 1.13) Hedging (18.56) -- (14.03) 1.46 -------- ------- -------- ------- Averaged realized oil price $99.40 $71.29 $94.89 $62.09 ======== ======= ======== =======
Callon Petroleum Company Consolidated Balance Sheets (In thousands, except share data) September 30, December 31, 2008 2007 ------------- ------------ ASSETS (Unaudited) ----------------------------------------- Current assets: Cash and cash equivalents $101,549 $53,250 Accounts receivable 50,148 22,073 Restricted investments -- 100 Fair market value of derivatives 5,066 -- Other current assets 3,498 6,592 ------------- ------------ Total current assets 160,261 82,015 ------------- ------------ Oil and gas properties, full-cost accounting method: Evaluated properties 1,345,841 1,349,904 Less accumulated depreciation, depletion and amortization (780,134) (738,374) ------------- ------------ 565,707 611,530 Unevaluated properties excluded from amortization 51,401 70,176 ------------- ------------ Total oil and gas properties 617,108 681,706 ------------- ------------ Other property and equipment, net 2,547 1,986 Restricted investments 4,733 4,525 Investment in Medusa Spar LLC 12,679 12,673 Other assets, net 4,934 9,577 ------------- ------------ Total assets $802,262 $792,482 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------------- Current liabilities: Accounts payable and accrued liabilities $112,295 $37,180 Advances from joint interest owners 12,966 518 Asset retirement obligations 3,935 9,810 Fair market value of derivatives 1,345 5,205 ------------- ------------ Total current liabilities 130,541 52,713 ------------- ------------ Long-term debt 272,227 392,012 Asset retirement obligations 36,187 27,027 Deferred tax liability 43,998 32,190 Other long-term liabilities 2,995 1,465 ------------- ------------ Total liabilities 485,948 505,407 ------------- ------------ Stockholders' equity: Preferred Stock, $.01 par value, 2,500,000 shares authorized; -- -- Common Stock, $.01 par value, 30,000,000 shares authorized; 21,611,847 and 20,891,145 shares outstanding at September 30, 2008 and December 31, 2007, respectively 216 209 Capital in excess of par value 226,639 223,336 Other comprehensive income 3,905 (3,383) Retained earnings 85,554 66,913 ------------- ------------ Total stockholders' equity 316,314 287,075 ------------- ------------ Total liabilities and stockholders' equity $802,262 $792,482 ============= ============
Callon Petroleum Company Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2008 2007 2008 2007 --------- -------- -------- -------- Operating revenues: Oil sales $20,366 $15,912 $74,016 $48,058 Gas sales 12,417 21,957 51,756 78,769 --------- -------- -------- -------- Total operating revenues 32,783 37,869 125,772 126,827 --------- -------- -------- -------- Operating expenses: Lease operating expenses 3,701 5,338 13,749 20,550 Depreciation, depletion and amortization 11,513 15,931 41,760 56,597 General and administrative 1,451 2,606 7,046 7,098 Accretion expense 1,092 904 3,076 2,959 Derivative expense 1,386 -- 1,386 -- --------- -------- -------- -------- Total operating expenses 19,143 24,779 67,017 87,204 --------- -------- -------- -------- Income from operations 13,640 13,090 58,755 39,623 --------- -------- -------- -------- Other (income) expenses: Interest expense 5,014 10,148 19,709 23,905 Loss on early extinguishment of debt -- -- 11,871 -- Other (income) expense (89) (387) (940) (814) --------- -------- -------- -------- Total other (income) expenses 4,925 9,761 30,640 23,091 --------- -------- -------- -------- Income before income taxes 8,715 3,329 28,115 16,532 Income tax expense 2,919 1,165 9,731 6,283 --------- -------- -------- -------- Income before Medusa Spar LLC 5,796 2,164 18,384 10,249 Income from Medusa Spar LLC, net of tax 60 104 257 403 --------- -------- -------- -------- Net income $5,856 $2,268 $18,641 $10,652 ========= ======== ======== ======== Net income per common share: Basic $0.27 $0.11 $0.88 $0.51 ========= ======== ======== ======== Diluted $0.27 $0.11 $0.85 $0.50 ========= ======== ======== ======== Shares used in computing net income per common share: Basic 21,460 20,800 21,078 20,728 ========= ======== ======== ======== Diluted 22,028 21,230 21,893 21,220 ========= ======== ======== ========
Callon Petroleum Company Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended --------------------------- September 30, September 30, 2008 2007 ------------- ------------- Cash flows from operating activities: Net income $18,641 $10,652 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 42,333 57,270 Accretion expense 3,076 2,959 Amortization of deferred financing costs 2,308 2,153 Non-cash loss on early extinguishment of debt 5,598 -- Equity in earnings of Medusa Spar LLC (257) (403) Non-cash derivative expense 690 -- Deferred income tax expense 9,731 6,283 Non-cash charge related to compensation plans 1,026 490 Excess tax benefits from share-based payment arrangements (1,985) -- Changes in current assets and liabilities: Accounts receivable 13,094 7,891 Other current assets 3,094 (413) Current liabilities 26,039 896 Change in gas balancing receivable 806 (160) Change in gas balancing payable 356 564 Change in other long-term liabilities 1,174 (7) Change in other assets, net (949) 1,745 ------------ ------------ Cash provided by operating activities 124,775 89,920 ------------ ------------ Cash flows from investing activities: Capital expenditures (123,626) (106,899) Entrada acquisition -- (150,000) Proceeds from sale of Entrada working interest 167,493 -- Distribution from Medusa Spar LLC 389 559 ------------ ------------ Cash provided by (used in) investing activities 44,256 (256,340) ------------ ------------ Cash flows from financing activities: Change in accrued liabilities to be refinanced -- 10,000 Increases in debt 94,435 213,000 Payments on debt (216,000) (48,000) Deferred financing costs -- (6,429) Equity issued related to employee stock plans (1,152) -- Excess tax benefits from share-based payment arrangements 1,985 -- Capital leases -- (872) ------------ ------------ Cash (used in) provided by financing activities (120,732) 167,699 ------------ ------------ Net increase in cash and cash equivalents 48,299 1,279 Cash and cash equivalents: Balance, beginning of period 53,250 1,896 ------------ ------------ Balance, end of period $101,549 $3,175 ============ ============
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 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 10, 2008