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