For the Quarterly Period Ended September 30, 2005
|
||
Commission File Number 001-14039 |
Delaware | 64-0844345 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
2
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) | (Note 1) | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 25,797 | $ | 3,266 | ||||
Accounts receivable |
12,033 | 14,928 | ||||||
Deferred tax asset-current |
13,560 | 5,676 | ||||||
Restricted investments-current |
3,008 | 2,055 | ||||||
Fair market value of derivatives |
| 1,570 | ||||||
Other current assets |
839 | 581 | ||||||
Total current assets |
55,237 | 28,076 | ||||||
Oil and gas properties, full-cost accounting method: |
||||||||
Evaluated properties |
899,929 | 862,101 | ||||||
Less accumulated depreciation, depletion and amortization |
(532,845 | ) | (494,453 | ) | ||||
367,084 | 367,648 | |||||||
Unevaluated properties excluded from amortization |
57,671 | 39,042 | ||||||
Total oil and gas properties |
424,755 | 406,690 | ||||||
Other property and equipment, net |
1,639 | 1,541 | ||||||
Deferred tax asset |
| 2,986 | ||||||
Long-term gas balancing receivable |
711 | 725 | ||||||
Restricted investments |
4,989 | 5,687 | ||||||
Investment in Medusa Spar LLC |
11,311 | 9,787 | ||||||
Other assets, net |
1,888 | 2,031 | ||||||
Total assets |
$ | 500,530 | $ | 457,523 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 29,106 | $ | 15,728 | ||||
Fair market value of derivatives |
10,400 | 2,993 | ||||||
Undistributed oil and gas revenues |
1,367 | 1,162 | ||||||
Accrued net profits interest payable |
| 1,927 | ||||||
Suspended Medusa oil royalties (See Note 8) |
| 5,430 | ||||||
Asset retirement obligations-current |
16,244 | 13,300 | ||||||
Current maturities of long-term debt |
328 | 576 | ||||||
Total current liabilities |
57,445 | 41,116 | ||||||
Long-term debt |
188,429 | 192,351 | ||||||
Asset retirement obligations |
20,551 | 24,982 | ||||||
Deferred tax liability |
14,406 | | ||||||
Other long-term liabilities |
677 | 762 | ||||||
Total liabilities |
281,508 | 259,211 | ||||||
Stockholders equity: |
||||||||
Preferred Stock, $.01 par value, 2,500,000 shares authorized; 0 and 596,671 shares
of Convertible Exchangeable Preferred Stock, Series A, issued
and outstanding at September 30, 2005 and December 31, 2004. |
| 6 | ||||||
Common Stock, $.01 par value, 30,000,000 shares authorized; 19,264,084 and 17,616,596
shares outstanding at September 30, 2005 and December 31, 2004, respectively |
193 | 176 | ||||||
Capital in excess of par value |
220,227 | 220,664 | ||||||
Unearned compensation restricted stock |
(3,631 | ) | (5,352 | ) | ||||
Accumulated other comprehensive loss |
(4,619 | ) | (1,883 | ) | ||||
Retained earnings (deficit) |
6,852 | (15,299 | ) | |||||
Total stockholders equity |
219,022 | 198,312 | ||||||
Total liabilities and stockholders equity |
$ | 500,530 | $ | 457,523 | ||||
3
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Operating revenues: |
||||||||||||||||
Oil and gas sales |
$ | 31,722 | $ | 25,138 | $ | 116,402 | $ | 94,663 | ||||||||
Operating expenses: |
||||||||||||||||
Lease operating expenses |
5,649 | 5,771 | 18,382 | 17,062 | ||||||||||||
Depreciation, depletion and amortization |
9,313 | 10,147 | 38,392 | 36,458 | ||||||||||||
General and administrative |
1,598 | 1,509 | 6,093 | 6,839 | ||||||||||||
Accretion expense |
864 | 825 | 2,495 | 2,555 | ||||||||||||
Derivative expense |
5,606 | 1,519 | 6,518 | 1,608 | ||||||||||||
Total operating expenses |
23,030 | 19,771 | 71,880 | 64,522 | ||||||||||||
Income from operations |
8,692 | 5,367 | 44,522 | 30,141 | ||||||||||||
Other (income) expenses: |
||||||||||||||||
Interest expense |
4,050 | 4,511 | 12,884 | 15,838 | ||||||||||||
Other (income) expense |
(352 | ) | 65 | (650 | ) | (311 | ) | |||||||||
Loss on early extinguishment of debt |
| 532 | | 3,004 | ||||||||||||
Total other (income) expenses |
3,698 | 5,108 | 12,234 | 18,531 | ||||||||||||
Income before income taxes |
4,994 | 259 | 32,288 | 11,610 | ||||||||||||
Income tax expense |
1,558 | | 11,111 | | ||||||||||||
Income before Medusa Spar LLC |
3,436 | 259 | 21,177 | 11,610 | ||||||||||||
Income from Medusa Spar LLC, net of tax |
247 | 287 | 1,292 | 768 | ||||||||||||
Net income |
3,683 | 546 | 22,469 | 12,378 | ||||||||||||
Preferred stock dividends |
| 317 | 318 | 955 | ||||||||||||
Net income available to common shares |
$ | 3,683 | $ | 229 | $ | 22,151 | $ | 11,423 | ||||||||
Net income per common share: |
||||||||||||||||
Basic |
$ | 0.19 | $ | 0.01 | $ | 1.23 | $ | 0.75 | ||||||||
Diluted |
$ | 0.17 | $ | 0.01 | $ | 1.09 | $ | 0.74 | ||||||||
Shares used in computing net income: |
||||||||||||||||
Basic |
19,132 | 17,552 | 17,998 | 15,192 | ||||||||||||
Diluted |
21,235 | 18,815 | 20,545 | 16,762 | ||||||||||||
4
Nine Months Ended | ||||||||
September 30, | September 30, | |||||||
2005 | 2004 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 22,469 | $ | 12,378 | ||||
Adjustments to reconcile net income to cash provided by operating
activities: |
||||||||
Depreciation, depletion and amortization |
38,908 | 36,993 | ||||||
Accretion expense |
2,495 | 2,555 | ||||||
Amortization of deferred financing costs |
1,529 | 1,451 | ||||||
Non-cash loss on extinguishment of debt |
| 2,910 | ||||||
Non-cash derivative expense |
5,092 | 597 | ||||||
Income from investment in Medusa Spar LLC |
(1,292 | ) | (768 | ) | ||||
Deferred income tax expense |
11,111 | | ||||||
Non-cash charge related to compensation plans |
1,561 | 815 | ||||||
Changes in current assets and liabilities: |
||||||||
Accounts receivable |
4,132 | 1,911 | ||||||
Other current assets |
(279 | ) | (19 | ) | ||||
Current liabilities |
797 | (2,297 | ) | |||||
Change in gas balancing receivable |
14 | 470 | ||||||
Change in gas balancing payable |
(89 | ) | 197 | |||||
Change in other long-term liabilities |
4 | (16 | ) | |||||
Change in other assets, net |
(361 | ) | (2,508 | ) | ||||
Cash provided by operating activities |
86,091 | 54,669 | ||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(57,382 | ) | (43,284 | ) | ||||
Distribution from Medusa Spar LLC |
464 | 233 | ||||||
Cash used by investing activities |
(56,918 | ) | (43,051 | ) | ||||
Cash flows from financing activities: |
||||||||
Change in accounts payable and accrued liabilities to be refinanced |
| 2,800 | ||||||
Increase in debt |
7,000 | 82,000 | ||||||
Payments on debt |
(12,000 | ) | (202,915 | ) | ||||
Restricted cash |
| 63,345 | ||||||
Debt issuance cost |
| (984 | ) | |||||
Issuance of common stock |
2 | 44,050 | ||||||
Buyout of preferred stock |
(637 | ) | | |||||
Equity issued related to employee stock plans |
(241 | ) | 229 | |||||
Capital leases |
(448 | ) | (1,067 | ) | ||||
Cash dividends on preferred stock |
(318 | ) | (955 | ) | ||||
Cash used by financing activities |
(6,642 | ) | (13,497 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
22,531 | (1,879 | ) | |||||
Cash and cash equivalents: |
||||||||
Balance, beginning of period |
3,266 | 8,700 | ||||||
Balance, end of period |
$ | 25,797 | $ | 6,821 | ||||
5
1. | General | |
The financial information presented as of any date other than December 31 has been prepared from the books and records of Callon Petroleum Company (the Company or Callon) without audit. Financial information as of December 31, 2004 has been derived from the audited financial statements of the Company, but does not include all disclosures required by U.S. generally accepted accounting principles. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial information for the periods indicated, have been included. For further information regarding the Companys accounting policies, refer to the Consolidated Financial Statements and related notes for the year ended December 31, 2004 included in the Companys Annual Report on Form 10-K filed March 10, 2005. The results of operations for the three-month and nine-month periods ended September 30, 2005 are not necessarily indicative of future financial results. | ||
Accounting Pronouncements | ||
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), (SFAS 123R) Share-Based Payment, which is a revision of Statement of Financial Accounting Standards No. 123, (SFAS 123) Accounting for Stock-Based Compensation. SFAS 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends Statement of Financial Accounting Standards No. 95, Statement of Cash Flows. Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. | ||
In April 2005, the Securities and Exchange Commission (SEC) delayed the effective date of SFAS 123R for public companies to no later than the beginning of the first fiscal year beginning after June 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. SFAS 123R permits public companies to adopt its requirements using one of two methods below: |
| A modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date; or | ||
| A modified retrospective method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. |
6
7
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income available to common shares
as reported |
$ | 3,683 | $ | 229 | $ | 22,151 | $ | 11,423 | ||||||||
Add: Stock-based compensation expense
included in net income as reported,
net of tax |
157 | 156 | 1,119 | 156 | ||||||||||||
Deduct: Total stock-based compensation
expense under fair value based method,
net of tax |
(207 | ) | (226 | ) | (1,270 | ) | (319 | ) | ||||||||
Net income available to common shares
pro forma |
$ | 3,633 | $ | 159 | $ | 22,000 | $ | 11,260 | ||||||||
Net income per share available to
common: |
||||||||||||||||
Basic-as reported |
$ | 0.19 | $ | 0.01 | $ | 1.23 | $ | 0.75 | ||||||||
Basic-pro forma |
$ | 0.19 | $ | 0.01 | $ | 1.22 | $ | 0.74 | ||||||||
Diluted-as reported |
$ | 0.17 | $ | 0.01 | $ | 1.09 | $ | 0.74 | ||||||||
Diluted-pro forma |
$ | 0.17 | $ | 0.01 | $ | 1.09 | $ | 0.73 |
2. | Per Share Amounts | |
Basic net income per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share was determined on a weighted average basis using common shares issued and outstanding adjusted for the effect of common stock equivalents computed using the treasury stock method and the effect of the convertible preferred stock (if dilutive). |
8
A reconciliation of the basic and diluted earnings per share computation is as follows (in thousands, except per share amounts): |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(a) Net income available to common
shares |
$ | 3,683 | $ | 229 | $ | 22,151 | $ | 11,423 | ||||||||
Preferred dividends assuming
conversion of preferred stock
(if dilutive) |
| | 318 | 955 | ||||||||||||
(b) Income available to common
shares assuming conversion of
preferred stock (if dilutive) |
$ | 3,683 | $ | 229 | $ | 22,469 | $ | 12,378 | ||||||||
(c) Weighted average shares outstanding |
19,132 | 17,552 | 17,998 | 15,192 | ||||||||||||
Dilutive impact of stock options |
410 | 234 | 333 | 220 | ||||||||||||
Dilutive impact of warrants |
1,523 | 1,028 | 1,309 | 805 | ||||||||||||
Dilutive impact of restricted stock |
76 | 1 | 62 | 91 | ||||||||||||
Convertible preferred stock
(if dilutive) |
94 | | 843 | 454 | ||||||||||||
(d) Total diluted shares |
21,235 | 18,815 | 20,545 | 16,762 | ||||||||||||
Basic income per share (a¸c) |
$ | 0.19 | $ | 0.01 | $ | 1.23 | $ | 0.75 | ||||||||
Diluted income per share (b¸d) |
$ | 0.17 | $ | 0.01 | $ | 1.09 | $ | 0.74 | ||||||||
Stock options and warrants excluded due
to the exercise price being greater
than the stock price (in
thousands) |
| 65 | 12 | 536 |
3. | Derivatives | |
The Company periodically uses derivative financial instruments to manage oil and gas price risk. Settlements of gains and losses on commodity price contracts are generally based upon the difference between the contract price or prices specified in the derivative instrument and a NYMEX price or other cash or futures index price. | ||
The Companys derivative contracts that are accounted for as cash flow hedges under Statement of Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities, are recorded at fair market value and the changes in fair value are recorded through other comprehensive income (loss), net of tax, in stockholders equity. The cash settlements on these contracts are recorded as an increase or decrease in oil and gas sales. The changes in fair value related to ineffective derivative contracts are recognized as derivative expense (income). The cash settlements on these contacts are also recorded within derivative expense (income). |
9
Cash settlements on effective cash flow hedges during the three-month periods ended September 30, 2005 and 2004 resulted in a reduction of oil and gas sales of $3.6 million and $4.0 million, respectively. For the nine-month periods ended September 30, 2005 and 2004, cash settlements on effective cash flow hedges reduced oil and gas sales in the amount of $8.3 million and $7.2 million, respectively. | ||
Cash settlements on ineffective derivative contracts were recorded as derivative expense in the amount of $1.4 million and $716,000 for the three-month and nine-month periods ended September 30, 2005 and 2004, respectively. These contracts were deemed ineffective as a result of a shortfall in production volumes due to downtime from the tropical storm activity in the third quarter of 2005 and 2004. | ||
As a result of continued downtime due to damages caused by Hurricanes Katrina and Rita to oil and gas transmission lines and facilities owned by third parties, some of our derivative contracts for October and November 2005 have been deemed ineffective. Due to the fact that it is probable that the shortfall in production volumes will continue in October and November, we recognized a non-cash derivative expense of $3.8 million for the three-month and nine-month periods ended September 30, 2005 to reclassify the unrealized loss on these contracts, which was included in other comprehensive (loss) to earnings. A similar charge of $731,000 was recognized for the three-month and nine-month periods ended September 30, 2004 due to a production shortfall caused by Hurricane Ivan. | ||
The following table summarizes derivative expense for the periods presented (in thousands): |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Amortization of derivative contract
premiums |
$ | 394 | $ | | $ | 1,306 | $ | | ||||||||
Change in fair value and settlements of
ineffective derivative contracts |
5,212 | 1,447 | 5,212 | 1,447 | ||||||||||||
Change in fair value and settlements of
non-designated derivative contracts |
| 72 | | 161 | ||||||||||||
$ | 5,606 | $ | 1,519 | $ | 6,518 | $ | 1,608 | |||||||||
10
Volumes per | Quantity | Average | ||||||||||||||
Product | Month | Type | Price | Period | ||||||||||||
Oil |
15,000 | Bbls | $ | 55.00 | 10/05-06/06 |
Average | ||||||||||||||||
Volumes per | Quantity | Floor | ||||||||||||||
Product | Month | Type | Price | Period | ||||||||||||
Oil |
7,000 | Bbls | $ | 35.00 | 10/05-12/05 | |||||||||||
Natural Gas |
390,000 | MMBtu | $ | 5.00 | 10/05 | |||||||||||
Natural Gas |
100,000 | MMBtu | $ | 5.00 | 10/05-12/05 |
Average | Average | |||||||||||||||||||
Volumes per | Quantity | Floor | Ceiling | |||||||||||||||||
Product | Month | Type | Price | Price | Period | |||||||||||||||
Oil |
30,000 | Bbls | $ | 32.50 | $ | 40.00 | 10/05-12/05 | |||||||||||||
Oil |
15,000 | Bbls | $ | 35.00 | $ | 43.50 | 10/05-12/05 | |||||||||||||
Oil |
15,333 | Bbls | $ | 40.00 | $ | 50.00 | 10/05-12/05 | |||||||||||||
Oil |
15,000 | Bbls | $ | 40.00 | $ | 54.00 | 10/05-12/05 | |||||||||||||
Oil |
30,000 | Bbls | $ | 60.00 | $ | 77.10 | 01/06-12/06 | |||||||||||||
Natural Gas |
300,000 | MMBtu | $ | 5.50 | $ | 7.75 | 10/05 | |||||||||||||
Natural Gas |
100,000 | MMBtu | $ | 8.50 | $ | 12.16 | 10/05-09/06 | |||||||||||||
Natural Gas |
200,000 | MMBtu | $ | 10.00 | $ | 16.00 | 11/05-03/06 |
11
4. | Long-Term Debt | |
Long-term debt consisted of the following at: |
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
Senior Secured Credit Facility
(matures July 31, 2007) |
$ | | $ | 5,000 | ||||
9.75% Senior Notes (due 2010), net of discount |
187,493 | 186,216 | ||||||
Capital lease |
1,264 | 1,711 | ||||||
Total debt |
188,757 | 192,927 | ||||||
Less current portion: |
||||||||
Capital lease |
328 | 576 | ||||||
Long-term debt |
$ | 188,429 | $ | 192,351 | ||||
12
5. | Income Taxes | |
The Company follows the asset and liability method of accounting for deferred income taxes prescribed by Statement of Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income Taxes. The statement provides for the recognition of a deferred tax asset for deductible temporary timing differences, capital and operating loss carryforwards, statutory depletion carryforwards and tax credit carryforwards, net of a valuation allowance. The valuation allowance is provided for that portion of the deferred tax asset for which it is deemed more likely than not that the deferred tax asset will not be realized. | ||
SFAS 109 provides for the weighing of positive and negative evidence in determining whether it is more likely than not that a deferred tax asset is recoverable. The Company incurred losses in 2002 and 2003 and had losses on an aggregate basis for the three-year period ended December 31, 2003. Because of these cumulative losses the Company established a valuation allowance of $11.5 million against the Companys deferred tax asset as of December 31, 2003. | ||
As a result of production from the Companys first two deepwater projects starting in November 2003, as well as refinancing its highest cost debt in 2004, the Company achieved profitable operations and had income on an aggregate basis for the three-year period ended December 31, 2004. As a result, the Company reversed the valuation allowance, which had a balance of $7.0 million as of December 31, 2004. | ||
During the first nine months of 2004, the Company revised the valuation allowance as a result of current year ordinary income, the impact of which was included in the Companys effective tax rate and resulted in no net income tax expense (benefit) for the period. The Company had income tax expense of $11.1 million in the first nine months of 2005. |
6. | Comprehensive Income | |
A summary of the Companys comprehensive income (loss) is detailed below (in thousands): |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income |
$ | 3,683 | $ | 546 | $ | 22,469 | $ | 12,378 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Change in fair value of effective
cash flow hedges |
257 | (4,291 | ) | (2,736 | ) | (8,230 | ) | |||||||||
Total comprehensive income |
$ | 3,940 | $ | (3,745 | ) | $ | 19,733 | $ | 4,148 | |||||||
13
7. | Asset Retirement Obligations | |
In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, effective for fiscal years beginning after June 15, 2002. As more fully discussed in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2004, included in Callons Annual Report on Form 10-K filed March 10, 2005, SFAS No. 143 essentially requires entities to record the fair value of a liability for legal obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Changes to the present value of the asset retirement obligations due to the passage of time are recorded as accretion expense in the Consolidated Statements of Operations. | ||
Assets, primarily U.S. Government securities, of approximately $8.0 million at September 30, 2005, are recorded as restricted investments. These assets are held in abandonment trusts dedicated to pay future abandonment costs of oil and gas properties in which the Company had sold a net profits interest (NPI). In September 2005, Callon purchased the NPIs which included the abandonment trusts. See Note 10 to the Consolidated Financial Statements for more detail on the NPI transaction. | ||
The following table summarizes the activity for the Companys asset retirement obligation for the nine-month period ended September 30, 2005: |
Nine Months Ended | ||||
September 30, 2005 | ||||
Asset retirement obligation at beginning of
period |
$ | 38,282 | ||
Accretion expense |
2,495 | |||
Net profits interest accretion |
331 | |||
Liabilities incurred |
1,150 | |||
Liabilities settled |
(5,183 | ) | ||
Revisions to estimate |
(280 | ) | ||
Asset retirement obligation at end of period |
36,795 | |||
Less: current asset retirement obligation |
(16,244 | ) | ||
Long-term asset retirement obligation |
$ | 20,551 | ||
8. | Suspended Medusa Oil Royalties | |
In March 2005, pursuant to the Deepwater Royalty Relief Act, the Company was required to retroactively pay royalties for 2004 oil production to the Minerals Management Service (MMS) on the Medusa deepwater property, which were accrued during 2004, in the amount of $5.4 million. In addition, the Company is required to make monthly royalty payments in 2005. See Note 7 of Callons Consolidated Financial Statements for the year ended December 31, 2004 included in the Companys Annual Report on Form 10-K filed March 10, 2005 for a more detailed description of the Deepwater Royalty Relief Act. |
14
9. | Redemption of all Outstanding Shares of Preferred Stock | |
On June 13, 2005, Callon called for redemption all of the Companys outstanding shares of $2.125 Convertible Exchange Preferred Stock, Series A. A notice of redemption and letter of transmittal was mailed to all holders of record as of the close of business on June 10, 2005. Between June 13, 2005 and June 30, 2005, 180,173 shares of preferred stock were converted into 409,496 shares of the Companys common stock. Subsequent to June 30, 2005, 392,935 shares of preferred stock were converted into 893,076 shares of the Companys common stock. In addition, 23,563 shares of the Companys preferred stock were redeemed for $606,000 on July 14, 2005. |
10. | Net Profits Interest | |
From 1989 through 1994, the Company entered into separate agreements to purchase certain oil and gas properties, and in simultaneous transactions, entered into agreements to sell overriding royalty interest (ORRI) in the acquired properties. These ORRI are in the form of NPIs equal to a significant percentage of the excess gross proceeds over costs, as defined by the agreements, from the acquired oil and gas properties. In September 2005, the Company purchased the NPIs for $5 million before intervening operations. Included in the transaction were the abandonment trusts which were established at the inception of the NPIs for future plugging and abandonment liabilities. See Note 11 of Callons Consolidated Financial Statements for the year ended December 31, 2004 included in the Companys Annual Report on Form 10-K filed March 10, 2005 for a more detailed description of the NPIs. |
15
16
17
Contractual | Less Than | One-Three | Four-Five | After-Five | ||||||||||||||||
Obligations | Total | One Year | Years | Years | Years | |||||||||||||||
Senior Secured Credit Facility |
$ | | $ | | $ | | $ | | $ | | ||||||||||
9.75% Senior Notes |
200,000 | | | | 200,000 | |||||||||||||||
Capital Lease (future minimum payments) |
1,891 | 517 | 625 | 449 | 300 | |||||||||||||||
Throughput Commitments: |
||||||||||||||||||||
Medusa Spar |
13,680 | 3,940 | 5,908 | 3,832 | | |||||||||||||||
Medusa Oil Pipeline |
669 | 218 | 217 | 117 | 117 | |||||||||||||||
$ | 216,240 | $ | 4,675 | $ | 6,750 | $ | 4,398 | $ | 200,417 | |||||||||||
| the completion and development of six shelf wells; | ||
| the non-discretionary drilling of exploratory wells; | ||
| the acquisition of seismic and leases; and | ||
| capitalized interest and general and administrative costs. |
18
19
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net production : |
||||||||||||||||
Oil (MBbls) |
382 | 376 | 1,613 | 1,354 | ||||||||||||
Gas (MMcf) |
1,510 | 2,405 | 6,570 | 8,924 | ||||||||||||
Total production (MMcfe) |
3,804 | 4,659 | 16,246 | 17,050 | ||||||||||||
Average daily production (MMcfe) |
41.3 | 50.6 | 59.5 | 62.2 | ||||||||||||
Average sales price: |
||||||||||||||||
Oil (Bbls) (a) |
$ | 46.16 | $ | 27.83 | $ | 41.01 | $ | 29.63 | ||||||||
Gas (Mcf) |
9.32 | 6.11 | 7.65 | 6.11 | ||||||||||||
Total (Mcfe) |
8.34 | 5.40 | 7.16 | 5.55 | ||||||||||||
Oil and gas revenues: |
||||||||||||||||
Oil revenue |
$ | 17,649 | $ | 10,457 | $ | 66,142 | $ | 40,120 | ||||||||
Gas revenue |
14,073 | 14,681 | 50,260 | 54,543 | ||||||||||||
Total |
$ | 31,722 | $ | 25,138 | $ | 116,402 | $ | 94,663 | ||||||||
Oil and gas production costs: |
||||||||||||||||
Lease operating expense |
$ | 5,649 | $ | 5,771 | $ | 18,382 | $ | 17,062 | ||||||||
Additional per Mcfe data: |
||||||||||||||||
Sale price |
$ | 8.34 | $ | 5.40 | $ | 7.16 | $ | 5.55 | ||||||||
Lease operating expense |
1.49 | 1.24 | 1.13 | 1.00 | ||||||||||||
Operating margin |
$ | 6.85 | $ | 4.16 | $ | 6.03 | $ | 4.55 | ||||||||
Depletion, depreciation and amortization |
$ | 2.45 | $ | 2.18 | $ | 2.36 | $ | 2.14 | ||||||||
General and administrative (net of
management fees) |
$ | 0.42 | $ | 0.32 | $ | 0.38 | $ | 0.40 | ||||||||
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil: | ||||||||||||||||
Average NYMEX oil price |
$ | 63.19 | $ | 43.87 | $ | 55.40 | $ | 39.11 | ||||||||
Basis differential and quality adjustments |
(6.98 | ) | (4.77 | ) | (8.04 | ) | (3.40 | ) | ||||||||
Transportation |
(1.25 | ) | (1.27 | ) | (1.28 | ) | (1.27 | ) | ||||||||
Hedging |
(8.80 | ) | (10.00 | ) | (5.07 | ) | (4.81 | ) | ||||||||
Average realized oil price |
$ | 46.16 | $ | 27.83 | $ | 41.01 | $ | 29.63 | ||||||||
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Exhibits |
3. | Articles of Incorporation and By-Laws |
3.1 | Certificate of Incorporation of the Company, as amended (incorporated by reference from Exhibit 3.1 of the Companys Annual Report on Form 10-K for the year ended December 31, 2003 filed March 15, 2004, File No. 001-14039) | ||
3.2 | Bylaws of the Company (incorporated by reference from Exhibit 3.2 of the Companys Registration Statement on Form S-4, filed August 4, 1994, Reg. No. 33-82408) |
4. | Instruments defining the rights of security holders, including indentures |
4.1 | Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.1 of the Companys Registration Statement on Form S-4, filed August 4, 1994, Reg. No. 33-82408) | ||
4.2 | Rights Agreement between Callon Petroleum Company and American Stock Transfer & Trust Company, Rights Agent, dated March 30, 2000 (incorporated by reference from Exhibit 99.1 of the Companys Registration Statement on Form 8-A, filed April 6, 2000, File No. 001- 14039) | ||
4.3 | Warrant dated as of June 29, 2001 entitling Duke Capital Partners, LLC to purchase common stock from the Company (incorporated by reference to Exhibit 4.11 of the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2001, File No. 001-14039) |
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4.4 | Form of Warrant entitling certain holders of the Companys 10.125% Senior Subordinated Notes due 2002 to purchase common stock from the Company (incorporated by reference to Exhibit 4.13 of the Companys Form 10-Q for the period ended June 30, 2002, File No. 001-14039) | ||
4.5 | Form of Warrants dated December 8, 2003 and December 29, 2003 entitling lenders under the Companys $185 million amended and restated Senior Unsecured Credit Agreement, dated December 23, 2003, to purchase common stock from the Company (incorporated by reference to Exhibit 4.14 of the Companys Annual Report on Form 10-K for the year ended December 31, 2003, File No. 001-14039) | ||
4.6 | Indenture for the Companys 9.75% Senior Notes due 2010, dated March 15, 2004, between Callon Petroleum Company and American Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.16 of the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2004, File No. 001-14039) |
31. | Certifications |
31.1 | Certification of Chief Executive and Financial Officer pursuant to Rule 13(a)-14(a) |
32. | Section 1350 Certifications |
32.1 | Certification of Chief Executive and Financial Officer pursuant to Rule 13(a)-14(b) |
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CALLON PETROLEUM COMPANY | ||||
Date: November 8, 2005
|
By: /s/ Fred L. Callon | |||
Fred L. Callon, President and Chief | ||||
Executive Officer (on behalf of the | ||||
registrant and as the principal financial | ||||
officer) |
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Exhibit Number
|
Title of Document |
3. | Articles of Incorporation and By-Laws |
3.1 | Certificate of Incorporation of the Company, as amended (incorporated by reference from Exhibit 3.1 of the Companys Annual Report on Form 10-K for the year ended December 31, 2003 filed March 15, 2004, File No. 001-14039) | ||
3.2 | Bylaws of the Company (incorporated by reference from Exhibit 3.2 of the Companys Registration Statement on Form S-4, filed August 4, 1994, Reg. No. 33-82408) |
4. | Instruments defining the rights of security holders, including indentures |
4.1 | Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.1 of the Companys Registration Statement on Form S-4, filed August 4, 1994, Reg. No. 33-82408) | ||
4.2 | Rights Agreement between Callon Petroleum Company and American Stock Transfer & Trust Company, Rights Agent, dated March 30, 2000 (incorporated by reference from Exhibit 99.1 of the Companys Registration Statement on Form 8-A, filed April 6, 2000, File No. 001- 14039) | ||
4.3 | Warrant dated as of June 29, 2001 entitling Duke Capital Partners, LLC to purchase common stock from the Company (incorporated by reference to Exhibit 4.11 of the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2001, File No. 001-14039) | ||
4.4 | Form of Warrant entitling certain holders of the Companys 10.125% Senior Subordinated Notes due 2002 to purchase common stock from the Company (incorporated by reference to Exhibit 4.13 of the Companys Form 10-Q for the period ended June 30, 2002, File No. 001-14039) |
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4.5 | Form of Warrants dated December 8, 2003 and December 29, 2003 entitling lenders under the Companys $185 million amended and restated Senior Unsecured Credit Agreement, dated December 23, 2003, to purchase common stock from the Company (incorporated by reference to Exhibit 4.14 of the Companys Annual Report on Form 10-K for the year ended December 31, 2003, File No. 001-14039) | ||
4.6 | Indenture for the Companys 9.75% Senior Notes due 2010, dated March 15, 2004, between Callon Petroleum Company and American Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.16 of the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2004, File No. 001-14039) |
31. | Certifications |
31.1 | Certification of Chief Executive and Financial Officer pursuant to Rule 13(a)-14(a) |
32. | Section 1350 Certifications |
32.1 | Certification of Chief Executive and Financial Officer pursuant to Rule 13(a) 14(b) |
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