Annual report pursuant to Section 13 and 15(d)

Description of Business, Basis of Presentation and Correction of a Prior Period Error

v2.4.0.6
Description of Business, Basis of Presentation and Correction of a Prior Period Error
 12 Months Ended
Dec. 31, 2011
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business, Basis of Presentation and Correction of a Prior Period Error
Description of Business, Basis of Presentation and Correction of a Prior Period Error

Callon Petroleum Company has been engaged in the exploration, development, acquisition and production of oil and natural gas properties since 1950.  The Company was incorporated under the laws of the state of Delaware in 1994 and succeeded to the business of a publicly traded limited partnership, a joint venture with a consortium of European investors and an independent energy company partially owned by a member of current management.  As used herein, the “Company,” “Callon,” “we,” “us,” and “our” refer to Callon Petroleum Company and its predecessors and subsidiaries unless the context requires otherwise.

The Consolidated Financial Statements include the accounts of the Company, and its subsidiary, Callon Petroleum Operating Company (“CPOC”).  CPOC also has subsidiaries, namely Callon Offshore Production, Inc. and Mississippi Marketing, Inc.  Fiscal years prior to 2010, CPOC also included Callon Entrada Company (“Callon Entrada”), which as discussed in Note 3 was deconsolidated from the Company’s Consolidated Financial Statements effective January 1, 2010. Effective April 29, 2011 and as discussed in Note 3, Callon Entrada was reconsolidated in the Company's financial statements. All intercompany accounts and transactions have been eliminated.  Certain prior year amounts have been reclassified to conform to presentation in the current year.  To the extent these amounts are material, we have either footnoted them within the Company's disclosures or have noted the items within this footnote. 

Unless otherwise indicated, all amounts included within the footnotes to the financial statements are presented in thousands, except for per-share and per-hedge data.

Correction of a Prior Period Error

In conjunction with the preparation of the Company's 2011 financial statements, we determined that prior reporting period financial statements included a misstatement caused by an error in the recording of income tax expense for the year ended December 31, 2009. Management has concluded that the impact of this error is material to previously issued 2009 and 2010 financial statements, and in order to properly report amounts within the Company's stockholders' equity, has restated the prior periods in the current Form 10-K in accordance with SEC guidance.

This restatement results in the reclassification of approximately $7.6 million from other comprehensive income to income tax provision within the Company's 2009 financial statements. The amount of the provision was not the result of any cash taxes that the Company was obligated to pay. Rather the provision relates to the accounting for the required increase in the Company's valuation allowance related to the recoverability of its deferred tax assets, which increased due to the reduction in the associated deferred tax liability from the turnaround of the Company's hedge assets during 2009, which were accounted for through comprehensive income. The Company first established its valuation allowance at December 31, 2008 through its income tax provision related to continuing operations. The restatement does not change the amount of the valuation allowance that was recorded, but instead correctly presents the classification of the income tax provision for the change in the valuation allowance. As a result of the restatement, the Company's 2009 net income was reduced by $7.6 million and its other comprehensive income increased by $7.6 million with no change to the Company's total comprehensive income or total stockholders' equity, total assets or total liabilities for the year then ended.

The information included in this Form 10-K sets forth the effects of these corrections on the previously reported financial statements and accompanying information for the years ended December 31, 2010 and 2009. The net effect of the corrections on the individual financial statement line items for the periods presented are as follows:

 
 
Year ended December 31, 2010
 
Year ended December 31, 2009
 
 
As Reported
 
Adjustment
 
Restated
 
As Reported
 
Adjustment
 
Restated
Consolidated Balance Sheets:
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive loss
 
$
(8,560
)
 
$
7,623

 
$
(937
)
 
$
(7,478
)
 
$
7,623

 
$
145

Retained deficit
 
(224,080
)
 
(7,623
)
 
(231,703
)
 
(317,561
)
 
(7,623
)
 
(325,184
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Operations:
 
 
 
 
 
 
 
 
 
 
 
 
Income tax (benefit) expense
 
$
(174
)
 
$
—

 
$
(174
)
 
$
—

 
$
7,623

 
$
7,623

Income before equity in earnings of Medusa Spar LLC
 
7,959

 
—

 
7,959

 
53,759

 
(7,623
)
 
46,136

Net income available to common shares
 
8,386

 
—

 
8,386

 
54,419

 
(7,623
)
 
46,796

Net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
0.29

 
—

 
0.29

 
2.47

 
(0.35
)
 
2.12

Diluted
 
0.28

 
—

 
0.28

 
2.45

 
(0.34
)
 
2.11

 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
8,386

 
$
—

 
$
8,386

 
$
54,419

 
$
(7,623
)
 
$
46,796

Valuation allowance
 
(1,503
)
 
—

 
(1,503
)
 
(18,816
)
 
7,623

 
(11,193
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
     Net income
 
$
8,386

 
$
—

 
$
8,386

 
$
54,419

 
$
(7,623
)
 
$
46,796

     Other comprehensive loss
 
(1,082
)
 
—

 
(1,082
)
 
(21,635
)
 
7,623

 
(14,012
)
Retained deficit
 
(224,080
)
 
(7,623
)
 
(231,703
)
 
(317,561
)
 
(7,623
)
 
(325,184
)
Other comprehensive income (loss)
 
(8,560
)
 
7,623

 
(937
)
 
(7,478
)
 
7,623

 
145