Callon Petroleum Company Announces Fourth Quarter and Full Year 2021 Results and Provides 2022 Plan Focused on Free Cash Flow and Debt Reduction Initiatives
Callon Petroleum Company (CPE) reported its 2021 financial results, highlighting production of 95.6 MBoe/d, with 64% from oil. Year-end proved reserves totaled 484.6 MMBoe worth $6.3 billion, with 57% being proved developed reserves. Key metrics include a net income of $365.2 million ($7.26 per diluted share) and adjusted EBITDA of $998.8 million, marking significant operational success. The company achieved a 141% increase in operating margin, reaching $42.05 per Boe. In 2022, Callon plans a capital budget of $725 million, focusing on efficient development in the Permian Basin, with expected production growth of over 10%.
- Net income increased to $365.2 million in 2021, up from losses in 2020.
- Adjusted EBITDA rose to $998.8 million, demonstrating over 40% growth year-over-year.
- Operating margin improved by 141%, reaching $42.05 per Boe.
- Production for fourth quarter 2021 hit 112.4 MBoe/d, surpassing guidance.
- Full-year production saw a 6% decrease from 2020 levels.
- Lease operating expenses increased to $7.11 per Boe, up from $5.82 in Q4 2020 due to inflation and new acquisitions.
HOUSTON, Feb. 23, 2022 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported results of operations for the three months and full-year ended December 31, 2021.
Presentation slides accompanying this earnings release are available on the Company's website at www.callon.com located on the "Presentations" page within the Investors section of the site.
2021 Highlights
- Full-year 2021 production of 95.6 MBoe/d (
64% oil) - Year-end proved reserves of 484.6 MMBoe (
60% oil) with a standardized measure of future discounted cash flows of total proved reserves of$6.3 billion - PV-10 of total proved reserves of
$7.1 billion ; Proved developed reserves represent57% of total reserve volumes with an associated PV-10 of$4.5 billion - Generated net cash provided by operating activities of
$974.1 million and adjusted free cash flow of$274.2 million - Net income of
$365.2 million , or$7.26 per diluted share, adjusted EBITDA of$998.8 million , and adjusted income of$437.4 million or$8.69 per diluted share - Achieved a full year operating margin of
$42.05 per Boe, a141% increase over last year - Announced approximately
$210 million in non-core asset sales - Asset monetization proceeds, debt exchanges, and free cash flow contributed to a reduction in total debt of approximately
$760 million , excluding cash consideration paid for acquisitions - Exited the year with a net debt / last twelve months EBITDA ratio of 2.3x pro forma for the Primexx acquisition and a net debt / fourth quarter annualized EBITDA of 2.0x
Fourth Quarter 2021 Highlights
- Fourth quarter 2021 production of 112.4 MBoe/d (
64% oil) with 16.8 net wells placed on production - Generated
$366.3 million of net cash provided by operating activities and adjusted free cash flow of$123.6 million - Net income of
$285.4 million , or$4.78 per diluted share, adjusted EBITDA of$339.2 million , and adjusted income of$159.2 million or$2.66 per diluted share - Achieved an operating margin of
$48.71 per Boe, a130% increase over last year - Closed the acquisition of 35,000 net acres and approximately 18,000 net barrels of oil equivalent per day in the Delaware Basin
- Realized
$153 million in proceeds through the divestiture of non-core Eagle Ford and Midland producing assets and water infrastructure assets
2022 Capital Plan Highlights
- Operational capital budget of
$725 million , with approximately85% allocated to the Permian Basin - Annual production guidance of 101 - 105 MBoe/d (
64% oil) - Transition to more efficient, larger scale development on recently acquired southern Delaware properties with an expanded drilled and uncompleted well inventory and execute on identified opportunities to reduce lifting costs by
30% - Maintenance capital spending program driving stable production profile relative to 2021 after adjusting for acquisitions and divestitures
- Expected adjusted free cash flow generation of greater than
$500 million and an estimated reinvestment rate1 of less than60% at$75 /Bbl oil (WTI benchmark)
Joe Gatto, President and Chief Executive Officer commented, "During the fourth quarter and throughout the year, our team has outperformed expectations and set new records, all the while dealing with pandemic-related workplace challenges and a dynamic industry environment. Our operations team once again delivered solid results with production for the fourth quarter and the full year coming in at the high end of guidance while delivering our program under budget for the year.
"In 2021, Callon successfully completed a large acquisition that was both accretive and deleveraging. We followed through on our monetization targets for the year, announcing approximately
"Our 2022 capital budget reflects both our continued commitment to capital discipline and a greater focus on Callon's high rate of return Permian Basin assets. Inclusive of capitalized expenses, our capital budget implies a reinvestment rate1 of approximately
"The industry continues to face inflationary cost pressures in items like steel tubulars and fuel, as well as overall labor and service costs. These inflationary pressures have increased estimated spot market well costs by over
"Based on our planned operational activity and leading operating margins, we expect to generate over
Environmental, Social, and Governance ("ESG") Updates
Callon advanced its sustainability initiatives during 2021 with the Company achieving numerous milestones as detailed below:
- Issued its second sustainability report, aligned with SASB and TCFD frameworks
- Completed the second series of field electrification projects in the Eagle Ford and Delaware Basin
- Improved its carbon footprint through flaring reduction initiatives
- Reduced its spill occurrences and total fluid spill rate
- Invested in employee development and wellness with the initiation of the Employee Development Program and Employee Wellness Program
- Expanded community engagement through employee volunteering and financial support of education, social, and environmental initiatives
The Company remains committed to continued GHG emission reductions. As a result of these achievements, Callon made significant progress in environmental performance in 2021 and is announcing the adoption of more aggressive reduction goals:
- End routine flaring by end of 2022, an acceleration of three years versus the previous goal
50% reduction in GHG intensity by 2024, targeting the high end of previous guidance and accelerating the achievement timeline by one year- Reduce all flaring to less than
1% by 2024 - Reduce methane intensity to less than
0.2% by 2024
To advance these goals, Callon will be investing nearly
Operations Update and Outlook
At December 31, 2021, Callon had 1,326 gross (1,187.1 net) horizontal wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended December 31, 2021 grew
For the three months ended December 31, 2021, Callon drilled 27 gross (24.9 net) horizontal wells and placed a combined 19 gross (16.8 net) horizontal wells on production. Wells placed on production during the quarter were completed in the Lower Spraberry and Wolfcamp A in the Midland Basin and the 3rd Bone Spring, Wolfcamp A and Wolfcamp C in the Delaware Basin.
Currently, the Company has seven active rigs with four in the Delaware Basin, one in the Eagle Ford, and two in the Midland Basin. Callon plans to release one of the Delaware rigs in late April. The Company is operating two completion crews with operations currently in the Delaware Basin.
2022 Capital Expenditures Budget
Callon has established an operational capital expenditure budget of
The Permian development plan is characterized by large multi-bench project developments as the Company employs the life of field development philosophy. Permian development activity will predominantly feature co-development of the Wolfcamp A and B in the Delaware Basin and the Lower Spraberry and Wolfcamp A and B in the Midland Basin. The Eagle Ford program remains focused on the well-established target zone, the Lower Eagle Ford Shale, with the Company also planning to test the Austin Chalk in the second half of the year. In total, Callon expects to drill 125 to 130 gross wells and complete 113 to 118 gross wells.
The 2022 capital plan will leverage the structural savings and operational efficiencies that result from an integrated supply chain management focus and extensive experience operating in the Permian Basin and Eagle Ford. In particular, the Company believes that overlaying its development model on the newly acquired Delaware acreage will yield significant improvements in capital efficiency and operating cost structure. A repeatable program of moderated development activity, combined with service agreements to manage capital costs and strong operating cash margins, are expected to provide a foundation of durable free cash flow in 2022 and beyond.
The remainder of Callon's full year 2022 outlook is provided later in this release under the section titled "2022 Guidance."
Capital Expenditures
For the year ended December 31, 2021, Callon incurred
Three Months Ended December 31, 2021 | ||||||||
Operational | Capitalized | Capitalized | Total Capital | |||||
Capital (a) | Interest | G&A | Expenditures | |||||
(In thousands) | ||||||||
Cash basis (b) | ||||||||
Timing adjustments (c) | 46,357 | 193 | — | 46,550 | ||||
Non-cash items | (4,073) | 3,001 | 2,588 | 1,516 | ||||
Accrual basis | ||||||||
(a) | Includes drilling, completions, facilities and equipment, but excludes land, seismic, and asset retirement costs. |
(b) | Cash basis is presented here to help users of financial information reconcile amounts from the cash flow statement to the balance sheet by accounting for timing related changes in working capital that align with our development pace and rig count. |
(c) | Includes timing adjustments related to cash disbursements in the current period for capital expenditures incurred in the prior period. |
Hedge Portfolio Summary
As of February 18, 2022, Callon had the following outstanding oil, natural gas and NGL derivative contracts:
For the Full Year | For the Full Year | ||
Oil Contracts (WTI) | 2022 | 2023 | |
Swap Contracts | |||
Total volume (Bbls) | 5,891,000 | 905,000 | |
Weighted average price per Bbl | |||
Collar Contracts | |||
Total volume (Bbls) | 7,097,500 | 2,096,500 | |
Weighted average price per Bbl | |||
Ceiling (short call) | |||
Floor (long put) | |||
Short Call Swaption Contracts a | |||
Total volume (Bbls) | — | 1,825,000 | |
Weighted average price per Bbl | $— | ||
Oil Contracts (Midland Basis Differential) | |||
Swap Contracts | |||
Total volume (Bbls) | 2,372,500 | — | |
Weighted average price per Bbl | $— | ||
Oil Contracts (Argus Houston MEH) | |||
Collar Contracts | |||
Total volume (Bbls) | 452,500 | — | |
Weighted average price per Bbl | |||
Ceiling (short call) | $— | ||
Floor (long put) | $— |
(a) | The 2023 short call swaption contracts have exercise expiration dates of December 30, 2022. |
For the Full Year | For the Full Year | ||
Natural Gas Contracts (Henry Hub) | 2022 | 2023 | |
Swap Contracts | |||
Total volume (MMBtu) | 11,600,000 | — | |
Weighted average price per MMBtu | $— | ||
Collar Contracts | |||
Total volume (MMBtu) | 9,100,000 | 1,800,000 | |
Weighted average price per MMBtu | |||
Ceiling (short call) | |||
Floor (long put) | |||
Natural Gas Contracts (Waha Basis Differential) | |||
Swap Contracts | |||
Total volume (MMBtu) | 1,220,000 | 6,080,000 | |
Weighted average price per MMBtu | ( | ( |
For the Full Year | |
NGL Contracts (OPIS Mont Belvieu Purity Ethane) | 2022 |
Swap Contracts | |
Total volume (Bbls) | 378,000 |
Weighted average price per Bbl | |
NGL Contracts (OPIS Mont Belvieu Non-TET Propane) | |
Swap Contracts | |
Total volume (Bbls) | 252,000 |
Weighted average price per Bbl | |
NGL Contracts (OPIS Mont Belvieu Non-TET Butane) | |
Swap Contracts | |
Total volume (Bbls) | 99,000 |
Weighted average price per Bbl | |
NGL Contracts (OPIS Mont Belvieu Non-TET Isobutane) | |
Swap Contracts | |
Total volume (Bbls) | 54,000 |
Weighted average price per Bbl |
Operating and Financial Results The following table presents summary information for the periods indicated: | ||||||||
Three Months Ended | Year Ended | |||||||
December 31, | September 30, | December 31, | December 31, | |||||
Total production | ||||||||
Oil (MBbls) | ||||||||
Permian | 4,727 | 3,428 | 3,445 | 14,475 | ||||
Eagle Ford | 1,839 | 2,447 | 1,980 | 7,749 | ||||
Total oil | 6,566 | 5,875 | 5,425 | 22,224 | ||||
Natural gas (MMcf) | ||||||||
Permian | 9,183 | 7,153 | 7,474 | 29,682 | ||||
Eagle Ford | 2,090 | 2,242 | 2,264 | 7,704 | ||||
Total natural gas | 11,273 | 9,395 | 9,738 | 37,386 | ||||
NGLs (MBbls) | ||||||||
Permian | 1,549 | 1,315 | 1,331 | 5,155 | ||||
Eagle Ford | 344 | 417 | 353 | 1,284 | ||||
Total NGLs | 1,893 | 1,732 | 1,684 | 6,439 | ||||
Total production (MBoe) | ||||||||
Permian | 7,806 | 5,936 | 6,022 | 24,577 | ||||
Eagle Ford | 2,532 | 3,237 | 2,710 | 10,317 | ||||
Total barrels of oil equivalent | 10,338 | 9,173 | 8,732 | 34,894 | ||||
Total daily production (Boe/d) | ||||||||
Permian | 84,848 | 64,517 | 65,459 | 67,334 | ||||
Eagle Ford | 27,517 | 35,186 | 29,455 | 28,265 | ||||
Total barrels of oil equivalent | 112,365 | 99,703 | 94,914 | 95,599 | ||||
Oil as % of total daily production | ||||||||
Average realized sales price (excluding impact of derivative settlements) | ||||||||
Oil (per Bbl) | ||||||||
Permian | ||||||||
Eagle Ford | 77.84 | 69.76 | 41.12 | 68.27 | ||||
Total oil | ||||||||
Natural gas (per Mcf) | ||||||||
Permian | ||||||||
Eagle Ford | 6.00 | 4.22 | 2.65 | 4.13 | ||||
Total natural gas | ||||||||
NGL (per Bbl) | ||||||||
Permian | ||||||||
Eagle Ford | 34.00 | 30.81 | 16.16 | 28.12 | ||||
Total NGL | ||||||||
Average realized sales price (per Boe) | ||||||||
Permian | ||||||||
Eagle Ford | 66.10 | 59.63 | 34.36 | 57.86 | ||||
Total average realized sales price | ||||||||
Average realized sales price (including impact of derivative settlements) | ||||||||
Oil (per Bbl) | ||||||||
Natural gas (per Mcf) | 3.81 | 2.21 | 1.89 | 2.84 | ||||
NGLs (per Bbl) | 34.56 | 31.71 | 15.24 | 28.54 | ||||
Total average realized sales price (per Boe) | ||||||||
Three Months Ended | Year Ended | |||||||
December 31, | September 30, | December 31, | December 31, | |||||
Revenues (in thousands)(a) | ||||||||
Oil | ||||||||
Permian | ||||||||
Eagle Ford | 143,139 | 170,711 | 81,413 | 529,030 | ||||
Total oil | ||||||||
Natural gas | ||||||||
Permian | ||||||||
Eagle Ford | 12,541 | 9,454 | 6,001 | 31,853 | ||||
Total natural gas | ||||||||
NGLs | ||||||||
Permian | ||||||||
Eagle Ford | 11,697 | 12,848 | 5,704 | 36,104 | ||||
Total NGLs | ||||||||
Total revenues | ||||||||
Permian | ||||||||
Eagle Ford | 167,377 | 193,013 | 93,118 | 596,987 | ||||
Total revenues | ||||||||
Additional per Boe data | ||||||||
Sales price (b) | ||||||||
Permian | ||||||||
Eagle Ford | 66.10 | 59.63 | 34.36 | 57.86 | ||||
Total sales price | ||||||||
Lease operating expense | ||||||||
Permian | ||||||||
Eagle Ford | 6.77 | 5.51 | 6.77 | 7.13 | ||||
Total lease operating expense | ||||||||
Production and ad valorem taxes | ||||||||
Permian | ||||||||
Eagle Ford | 3.60 | 2.89 | 2.29 | 3.16 | ||||
Total production and ad valorem taxes | ||||||||
Gathering, transportation and processing | ||||||||
Permian | ||||||||
Eagle Ford | 1.76 | 1.49 | 2.25 | 1.80 | ||||
Total gathering, transportation and processing | ||||||||
Operating margin | ||||||||
Permian | ||||||||
Eagle Ford | 53.97 | 49.74 | 23.05 | 45.77 | ||||
Total operating margin | ||||||||
Depletion, depreciation and amortization | ||||||||
General and administrative | ||||||||
Adjusted G&A | ||||||||
Cash component (c) | ||||||||
Non-cash component | ||||||||
(a) | Excludes sales of oil and gas purchased from third parties. |
(b) | Excludes the impact of settled derivatives. |
(c) | Excludes the change in fair value and amortization of share-based incentive awards and other non-recurring expenses. |
Revenue. For the quarter ended December 31, 2021, Callon reported total revenue of
Commodity Derivatives. For the quarter ended December 31, 2021, the net (gain) loss on commodity derivative contracts includes the following (in thousands):
Three Months Ended | ||
December 31, 2021 | ||
(Gain) loss on oil derivatives | ||
(Gain) loss on natural gas derivatives | (14,918) | |
(Gain) loss on NGL derivatives | (8,346) | |
(Gain) loss on commodity derivative contracts |
For the quarter ended December 31, 2021, the cash (paid) received for commodity derivative settlements includes the following (in thousands):
Three Months Ended | ||
December 31, 2021 | ||
Cash (paid) received on oil derivatives | ( | |
Cash (paid) received on natural gas derivatives | (21,709) | |
Cash (paid) received on NGL derivatives | (5,782) | |
Cash (paid) received for commodity derivative settlements | ( |
Lease Operating Expenses, including workover ("LOE"). LOE per Boe for the three months ended December 31, 2021 was
Production and Ad Valorem Taxes. Production and ad valorem taxes were
Gathering, Transportation and Processing. Gathering, transportation and processing for the three months ended December 31, 2021 were
Depreciation, Depletion and Amortization ("DD&A"). DD&A for the three months ended December 31, 2021 was
General and Administrative Expense ("G&A"). G&A for the three months ended December 31, 2021 and September 30, 2021 was
The following table reconciles total G&A to Adjusted G&A - cash component, and full cash G&A (in thousands):
Three Months Ended | Year Ended | |||||||
December 31, | September 30, | December 31, | December 31, | |||||
Total G&A | ||||||||
Change in the fair value of liability share-based awards | 296 | 2,492 | (2,500) | (6,710) | ||||
Adjusted G&A – total | 13,412 | 11,995 | 8,114 | 43,773 | ||||
Equity settled, share-based compensation (non-cash) and | (1,230) | (1,589) | (580) | (6,208) | ||||
Adjusted G&A – cash component | ||||||||
Capitalized cash G&A | 11,035 | 9,034 | 6,465 | 34,386 | ||||
Full cash G&A | ||||||||
Income Tax. Callon provides for income taxes at a federal statutory rate of
Adjusted EBITDA. Net income was
Proved Reserves
DeGolyer and MacNaughton prepared the estimates of Callon's proved reserves as of December 31, 2021. As of December 31, 2021, Callon's estimated net proved reserves were 484.6 MMBoe and included 290.3 MMBbls of oil, 577.3 Bcf of natural gas, and 98.1 MMBbls of NGLs with a standardized measure of discounted future net cash flows of
Oil constituted approximately
The changes in Callon's estimated net proved reserves are as follows:
Total | ||
Proved reserves at December 31, 2020 | 475,879 | |
Extensions and discoveries | 36,180 | |
Revisions to previous estimates | (14,181) | |
Purchase of reserves in place | 57,652 | |
Sales of reserves in place | (36,015) | |
Production | (34,894) | |
Proved reserves at December 31, 2021 | 484,621 |
2021 Full Year Actuals
Full Year | |
2021 Actual | |
Total production (MBoe/d) | 95.6 |
Oil | |
NGL | |
Natural gas | |
Income statement expenses (in millions, except where noted) | |
LOE, including workovers | |
Gathering, transportation and processing | |
Production and ad valorem taxes (% of total oil, natural gas, and NGL revenues) | |
Adjusted G&A - cash component (a) | |
Adjusted G&A - non-cash component (b) | |
Cash interest expense, net | |
Capital expenditures (in millions, accrual basis) | |
Total operational capital (c) | |
Capitalized interest and G&A | |
Gross operated wells drilled / completed | 68 / 112 |
(a) | Excludes the change in fair value and amortization of share-based incentive awards and other non-recurring expenses. |
(b) | Amortization of equity-settled, share based incentive awards and other non-recurring expenses. |
(c) | Includes facilities, equipment, seismic, land and other items, excludes capitalized expenses. |
2022 Guidance
Full Year | |
2022 Guidance | |
Total production (MBoe/d) | 101 - 105 |
Oil | |
NGL | |
Natural gas | |
Income statement expenses (in millions except where noted) | |
LOE, including workovers | |
Gathering, transportation and processing | |
Production and ad valorem taxes (% of total oil, natural gas, and NGL revenues) | |
Adjusted G&A: cash component (a) | |
Adjusted G&A: non-cash component (b) | |
Cash interest expense, net | |
Estimated effective income tax rate | |
Capital expenditures (in millions, accrual basis) | |
Total operational capital (c) | |
Cash capitalized interest | |
Cash capitalized G&A | |
Gross operated wells drilled / completed | 125 - 130 / 113 - 118 |
(a) | Excludes the change in fair value and amortization of share-based incentive awards and other non-recurring expenses. |
(b) | Amortization of equity-settled, share based incentive awards and other non-recurring expenses. |
(c) | Includes facilities, equipment, seismic, land and other items, excludes capitalized expenses. |
For the first quarter, the Company expects to produce between 100 and 102 Boe/d (
Adjusted Income and Adjusted EBITDA. The Company reported net income of
Three Months Ended | Year Ended | |||||||
December 31, | September 30, | December 31, | December 31, | |||||
(In thousands except per share data) | ||||||||
Net income (loss) | ( | |||||||
Loss on derivatives contracts | 10,145 | 107,169 | 125,739 | 522,300 | ||||
Loss on commodity derivative settlements, net | (149,938) | (110,960) | (7,938) | (423,306) | ||||
Non-cash expense (benefit) related to share-based awards | 939 | (903) | 2,968 | 12,923 | ||||
Impairment of evaluated oil and gas properties | — | — | 585,767 | — | ||||
Merger, integration and transaction | 11,271 | 3,018 | 2,120 | 14,289 | ||||
Other (income) expense | 1,072 | 4,305 | 5,328 | 7,655 | ||||
(Gain) loss on extinguishment of debt | 43,460 | (2,420) | (170,370) | 41,040 | ||||
Tax effect on adjustments above(a) | 17,441 | (44) | (114,159) | (36,729) | ||||
Change in valuation allowance | (60,585) | (34,190) | 118,388 | (65,972) | ||||
Adjusted income | ||||||||
Adjusted income per diluted share | ||||||||
Basic WASO | 59,143 | 46,290 | 39,752 | 48,612 | ||||
Diluted WASO (GAAP) | 59,737 | 47,096 | 39,752 | 50,311 | ||||
Effective of potentially dilutive instruments | — | — | 2,892 | — | ||||
Adjusted Diluted WASO | 59,737 | 47,096 | 42,644 | 50,311 | ||||
(a) | Calculated using the federal statutory rate of |
Three Months Ended | Year Ended | |||||||
December 31, | September 30, | December 31, | December 31, | |||||
(In thousands) | ||||||||
Net income (loss) | ( | |||||||
Loss on derivatives contracts | 10,145 | 107,169 | 125,739 | 522,300 | ||||
Loss on commodity derivative settlements, net | (149,938) | (110,960) | (7,938) | (423,306) | ||||
Non-cash expense (benefit) related to share-based awards | 939 | (903) | 2,968 | 12,923 | ||||
Impairment of evaluated oil and gas properties | — | — | 585,767 | — | ||||
Merger, integration and transaction | 11,271 | 3,018 | 2,120 | 14,289 | ||||
Other (income) expense | 1,072 | 4,305 | 5,328 | 7,655 | ||||
Income tax (benefit) expense | (837) | 2,416 | 6,755 | 180 | ||||
Interest expense, net | 25,226 | 27,736 | 26,486 | 102,012 | ||||
Depreciation, depletion and amortization | 112,551 | 89,890 | 96,037 | 356,556 | ||||
(Gain) loss on extinguishment of debt | 43,460 | (2,420) | (170,370) | 41,040 | ||||
Adjusted EBITDA | ||||||||
Adjusted Free Cash Flow. The following table reconciles the Company's net cash provided by operating activities to adjusted EBITDA and adjusted free cash flow:
Three Months Ended | ||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||
(In thousands) | ||||||||||
Net cash provided by operating activities | ||||||||||
Changes in working capital and other | (67,390) | (30,355) | 13,520 | 30,913 | 12,011 | |||||
Changes in accrued hedge settlements | 6,781 | (153) | (14,719) | (20,117) | (5,055) | |||||
Cash interest expense, net | 22,268 | 25,078 | 22,383 | 22,159 | 24,167 | |||||
Merger, integration and transaction | 11,271 | 3,018 | — | — | 2,120 | |||||
Adjusted EBITDA | ||||||||||
Less: Operational capital expenditures (accrual) | 159,786 | 114,964 | 138,321 | 95,545 | 87,488 | |||||
Less: Capitalized interest | 22,591 | 23,590 | 21,740 | 21,817 | 23,015 | |||||
Less: Interest expense, net of capitalized amounts | 22,268 | 25,078 | 22,383 | 22,159 | 26,486 | |||||
Less: Capitalized cash G&A | 11,035 | 9,034 | 7,404 | 6,913 | 6,465 | |||||
Adjusted free cash flow (a) | ||||||||||
(a) | Effective January 1, 2021, non-cash interest expense amounts consisting primarily of amortization of debt issuance costs, premiums, and discounts associated with our long-term debt are excluded from our calculation of adjusted free cash flow. |
Adjusted Discretionary Cash Flow. The following table reconciles the Company's net cash provided by operating activities to adjusted discretionary cash flow:
Three Months Ended | ||||||
December 31, 2021 | September 30, 2021 | December 31, 2020 | ||||
(In thousands) | ||||||
Cash flows from operating activities: | ||||||
Net income (loss) | ( | |||||
Adjustments to reconcile net income (loss) to net cash provided | ||||||
Depreciation, depletion and amortization | 112,551 | 89,890 | 96,037 | |||
Impairment of evaluated oil and gas properties | — | — | 585,767 | |||
Amortization of non-cash debt related items, net | 2,958 | 2,658 | 2,319 | |||
Deferred income tax expense | — | — | 3,308 | |||
Loss on derivative contracts | 10,145 | 107,169 | 125,739 | |||
Cash paid for commodity derivative settlements, net | (156,719) | (110,807) | (2,884) | |||
(Gain) loss on extinguishment of debt | 43,460 | (2,420) | (170,370) | |||
Non-cash expense (benefit) related to share-based awards | 939 | (903) | 2,968 | |||
Merger, integration and transaction | 11,271 | 3,018 | 2,120 | |||
Other, net | 31 | 6,495 | 1,347 | |||
Adjusted discretionary cash flow | ||||||
Changes in working capital | 67,594 | 30,581 | (4,582) | |||
Merger, integration and transaction | (11,271) | (3,018) | (2,120) | |||
Net cash provided by operating activities | ||||||
Adjusted Total Revenue. Adjusted total revenue is reconciled to total operating revenues, which excludes revenue from sales of commodities purchased from a third-party, in the following table:
Three Months Ended | ||||||
December 31, | September 30, | December 31, | ||||
(In thousands) | ||||||
Operating Revenues | ||||||
Oil | ||||||
Natural gas | 56,674 | 36,519 | 18,561 | |||
Natural gas liquids | 69,782 | 58,097 | 25,668 | |||
Total operating revenues | ||||||
Impact of settled derivatives | (149,938) | (110,960) | (7,938) | |||
Adjusted total revenue | ||||||
Net Debt. The following table reconciles the Company's total debt to net debt:
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||
(In thousands) | ||||||||||
Total debt | ||||||||||
Unamortized premiums, discount, and deferred | 43,377 | 40,402 | 37,487 | 48,311 | 28,806 | |||||
Adjusted total debt | ||||||||||
Less: Cash and cash equivalents | 20,236 | 24,350 | 3,800 | 3,699 | 9,882 | |||||
Net debt | ||||||||||
PV-10. PV-10 as of December 31, 2021 is reconciled below to the standardized measure of discounted future net cash flows:
As of December 31, 2021 | ||
(In millions) | ||
Standardized measure of discounted future net cash flows | ||
Add: present value of future income taxes discounted at | ||
Total proved reserves - PV-10 | ||
Total proved developed reserves - PV-10 | ||
Total proved undeveloped reserves - PV-10 |
Callon Petroleum Company Consolidated Balance Sheets (in thousands, except par and share amounts) | |||
December 31, | |||
2021 | 2020 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | |||
Accounts receivable, net | 232,436 | 133,109 | |
Fair value of derivatives | 22,381 | 921 | |
Other current assets | 30,745 | 24,103 | |
Total current assets | 295,444 | 178,369 | |
Oil and natural gas properties, full cost accounting method: | |||
Evaluated properties, net | 3,352,821 | 2,355,710 | |
Unevaluated properties | 1,812,827 | 1,733,250 | |
Total oil and natural gas properties, net | 5,165,648 | 4,088,960 | |
Other property and equipment, net | 28,128 | 31,640 | |
Deferred financing costs | 18,125 | 23,643 | |
Other assets, net | 40,158 | 40,256 | |
Total assets | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable and accrued liabilities | |||
Fair value of derivatives | 185,977 | 97,060 | |
Other current liabilities | 116,523 | 58,529 | |
Total current liabilities | 872,491 | 497,108 | |
Long-term debt | 2,694,115 | 2,969,264 | |
Asset retirement obligations | 54,458 | 57,209 | |
Fair value of derivatives | 11,409 | 88,046 | |
Other long-term liabilities | 49,262 | 40,239 | |
Total liabilities | 3,681,735 | 3,651,866 | |
Commitments and contingencies | |||
Stockholders' equity: | |||
Common stock, 61,370,684 and 39,758,817 shares outstanding, respectively | 614 | 398 | |
Capital in excess of par value | 4,012,358 | 3,222,959 | |
Accumulated deficit | (2,147,204) | (2,512,355) | |
Total stockholders' equity | 1,865,768 | 711,002 | |
Total liabilities and stockholders' equity | |||
Callon Petroleum Company Consolidated Statements of Operations (in thousands, except per share amounts) | |||||||
Three Months Ended December 31, | For the Year Ended December 31, | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Operating Revenues: | |||||||
Oil | |||||||
Natural gas | 56,674 | 18,561 | 141,493 | 51,866 | |||
Natural gas liquids | 69,782 | 25,668 | 193,861 | 81,295 | |||
Sales of purchased oil and gas | 59,287 | 29,006 | 193,451 | 49,319 | |||
Total operating revenues | 692,188 | 295,968 | 2,045,030 | 1,033,147 | |||
Operating Expenses: | |||||||
Lease operating | 73,522 | 45,010 | 203,141 | 194,101 | |||
Production and ad valorem taxes | 33,693 | 16,487 | 100,160 | 62,638 | |||
Gathering, transportation and processing | 22,083 | 20,694 | 80,970 | 77,309 | |||
Cost of purchased oil and gas | 61,530 | 30,484 | 201,088 | 51,766 | |||
Depreciation, depletion and amortization | 112,551 | 96,037 | 356,556 | 480,631 | |||
General and administrative | 13,116 | 10,614 | 50,483 | 37,187 | |||
Impairment of evaluated oil and gas properties | — | 585,767 | — | 2,547,241 | |||
Merger, integration and transaction | 11,271 | 2,120 | 14,289 | 28,482 | |||
Other operating | — | 2,084 | 3,366 | 10,644 | |||
Total operating expenses | 327,766 | 809,297 | 1,010,053 | 3,489,999 | |||
Income (Loss) From Operations | 364,422 | (513,329) | 1,034,977 | (2,456,852) | |||
Other (Income) Expenses: | |||||||
Interest expense, net of capitalized amounts | 25,226 | 26,486 | 102,012 | 94,329 | |||
Loss on derivative contracts | 10,145 | 125,739 | 522,300 | 27,773 | |||
(Gain) loss on extinguishment of debt | 43,460 | (170,370) | 41,040 | (170,370) | |||
Other (income) expense | 1,077 | 3,132 | 4,294 | 2,983 | |||
Total other (income) expense | 79,908 | (15,013) | 669,646 | (45,285) | |||
Income (Loss) Before Income Taxes | 284,514 | (498,316) | 365,331 | (2,411,567) | |||
Income tax benefit (expense) | 837 | (6,755) | (180) | (122,054) | |||
Net Income (Loss) | ( | ( | |||||
Net Income (Loss) Per Common Share: | |||||||
Basic | ( | ( | |||||
Diluted | ( | ( | |||||
Weighted Average Common Shares Outstanding: | |||||||
Basic | 59,143 | 39,752 | 48,612 | 39,718 | |||
Diluted | 59,737 | 39,752 | 50,311 | 39,718 | |||
Callon Petroleum Company Consolidated Statements of Cash Flows (in thousands) | |||||||
Three Months Ended December 31, | For the Year Ended December 31, | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Cash flows from operating activities: | |||||||
Net income (loss) | ( | ( | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 112,551 | 96,037 | 356,556 | 480,631 | |||
Impairment of evaluated oil and gas properties | — | 585,767 | — | 2,547,241 | |||
Amortization of non-cash debt related items, net | 2,958 | 2,319 | 10,124 | 3,901 | |||
Deferred income tax expense | — | 3,308 | — | 118,607 | |||
Loss on derivative contracts | 10,145 | 125,739 | 522,300 | 27,773 | |||
Cash received (paid) for commodity derivative settlements, net | (156,719) | (2,884) | (395,097) | 98,870 | |||
(Gain) loss on extinguishment of debt | 43,460 | (170,370) | 41,040 | (170,370) | |||
Non-cash expense related to share-based awards | 939 | 2,968 | 12,923 | 2,663 | |||
Other, net | 31 | 1,347 | 11,037 | 7,087 | |||
Changes in current assets and liabilities: | |||||||
Accounts receivable | (3,175) | (20,340) | (86,402) | 75,770 | |||
Other current assets | (1,698) | 6 | (10,399) | (6,550) | |||
Accounts payable and accrued liabilities | 72,467 | 15,752 | 146,910 | (92,227) | |||
Net cash provided by operating activities | 366,310 | 134,578 | 974,143 | 559,775 | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (150,935) | (109,408) | (578,487) | (664,231) | |||
Acquisition of oil and gas properties | (426,496) | — | (493,732) | (12,923) | |||
Proceeds from sales of assets | 152,686 | 29,152 | 188,101 | 178,970 | |||
Cash paid for settlements of contingent consideration arrangements, net | — | — | — | (40,000) | |||
Other, net | 3,512 | 40 | 7,718 | 8,301 | |||
Net cash used in investing activities | (421,233) | (80,216) | (876,400) | (529,883) | |||
Cash flows from financing activities: | |||||||
Borrowings on Credit Facility | 904,000 | 265,500 | 2,140,500 | 5,353,000 | |||
Payments on Credit Facility | (842,000) | (305,500) | (2,340,500) | (5,653,000) | |||
Issuance of | — | — | 650,000 | — | |||
Redemption of | — | — | (542,755) | — | |||
Issuance of | — | — | — | 300,000 | |||
Discount on the issuance of | — | — | — | (35,270) | |||
Issuance of September 2020 Warrants | — | — | — | 23,909 | |||
Payment of deferred financing costs and debt exchange costs | (504) | (4,499) | (12,672) | (10,811) | |||
Tax withholdings related to restricted stock units | — | (14) | (2,280) | (509) | |||
Other, net | (390) | (113) | (390) | (316) | |||
Net cash provided by (used in) financing activities | 61,106 | (44,626) | (108,097) | (22,997) | |||
Net change in cash and cash equivalents | 6,183 | 9,736 | (10,354) | 6,895 | |||
Balance, beginning of period | 3,699 | 10,500 | 20,236 | 13,341 | |||
Balance, end of period | |||||||
Non-GAAP Financial Measures
This news release refers to non-GAAP financial measures such as "adjusted free cash flow," "adjusted discretionary cash flow," "adjusted G&A," "full cash G&A," "adjusted income," "adjusted income per diluted share," "adjusted EBITDA," "adjusted total revenue," and "PV-10." These measures, detailed below, are provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our filings with the U.S. Securities and Exchange Commission (the "SEC") and posted on our website.
- Adjusted free cash flow is a supplemental non-GAAP measure that is defined by the Company as adjusted EBITDA less operational capital, cash capitalized interest, net cash interest expense and capitalized cash G&A (which excludes capitalized expense related to share-based awards). We believe adjusted free cash flow provides useful information to investors because it is a comparable metric against other companies in the industry and is a widely accepted financial indicator of an oil and natural gas company's ability to generate cash for the use of internally funding their capital development program and to service or incur debt. Adjusted free cash flow is not a measure of a company's financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities, or as a measure of liquidity, or as an alternative to net income (loss).
- Adjusted discretionary cash flow is a supplemental non-GAAP measure that Callon believes provides useful information to investors because it is a comparable metric against other companies in the industry and is a widely accepted financial indicator of an oil and natural gas company's ability to generate cash for the use of internally funding their capital development program and to service or incur debt. Adjusted discretionary cash flow is defined by Callon as net cash provided by operating activities before changes in working capital and merger, integration and transaction expenses. Callon 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 the cash flow effect may not be reflected the period in which the operating activities occurred. Adjusted discretionary cash flow is not a measure of a company's financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities, or as a measure of liquidity, or as an alternative to net income (loss).
- Adjusted G&A is a supplemental non-GAAP financial measure that excludes certain non-cash incentive share-based compensation valuation adjustments and non-recurring expenses. Callon believes that the non-GAAP measure of adjusted G&A is useful to investors because it provides a meaningful measure of our recurring G&A expense and provides for greater comparability period-over-period.
- Full cash G&A is a supplemental non-GAAP financial measure that Callon defines as adjusted G&A – cash component plus capitalized G&A excluding capitalized expense related to share-based awards. Callon believes that the non-GAAP measure of full cash G&A is useful to investors because it provides a meaningful measure of our total recurring cash G&A costs, whether expensed or capitalized, and provides for greater comparability on a period-over-period basis.
- Adjusted income and adjusted income per diluted share are supplemental non-GAAP measures that Callon believes are useful to investors because they provide readers with a meaningful measure of our profitability before recording certain items whose timing or amount cannot be reasonably determined. These measures exclude the net of tax effects of these items and non-cash valuation adjustments, which are detailed in the reconciliation provided. Adjusted income and adjusted income per diluted share are not measures of financial performance under GAAP. Accordingly, neither should be considered as a substitute for net income (loss), operating income (loss), or other income data prepared in accordance with GAAP. However, the Company believes that adjusted income and adjusted income per diluted share provide additional information with respect to our performance. Because adjusted income and adjusted income per diluted share exclude some, but not all, items that affect net income (loss) and may vary among companies, the adjusted income and adjusted income per diluted share presented above may not be comparable to similarly titled measures of other companies.
- Adjusted diluted weighted average common shares outstanding ("Adjusted Diluted WASO") is a non-GAAP financial measure which includes the effect of potentially dilutive instruments that, under certain circumstances described below, are excluded from diluted weighted average common shares outstanding ("Diluted WASO"), the most directly comparable GAAP financial measure. When a net loss exists, all potentially dilutive instruments are anti-dilutive to the net loss per common share and therefore excluded from the computation of Diluted WASO. The effect of potentially dilutive instruments are included in the computation of Adjusted Diluted WASO for purposes of computing adjusted income per diluted share.
- Callon calculates adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit), depreciation, depletion and amortization, (gains) losses on derivative instruments excluding net settled derivative instruments, impairment of evaluated oil and gas properties, non-cash share-based compensation expense, merger, integration and transaction expense, (gain) loss on extinguishment of debt, and other operating expenses. Adjusted EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with GAAP. However, the Company believes that adjusted EBITDA provides useful information to investors because it provides additional information with respect to our performance or ability to meet our future debt service, capital expenditures and working capital requirements. Because adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the adjusted EBITDA presented above may not be comparable to similarly titled measures of other companies.
- Callon believes that the non-GAAP measure of adjusted total revenue (which is revenue including the gain or loss from the settlement of derivative contracts) is useful to investors because it provides readers with a revenue value more comparable to other companies who engage in price risk management activities through the use of commodity derivative instruments and reflects the results of derivative settlements with expected cash flow impacts within total revenues. See the reconciliation provided above for further details.
- Callon believes that operating margin is a comparable metric against other companies in the industry and is an indicator of an oil and natural gas company's operating profitability per unit of production. Operating margin is a supplemental non-GAAP measure that is defined by the Company as oil, natural gas, and NGL revenues sales price less lease operating expense; production and ad valorem taxes; and gathering, transportation and processing fees divided by total production for the period.
- Net debt is a supplemental non-GAAP measure that is defined by the Company as total debt excluding unamortized premiums, discount, and deferred loan costs, less cash and cash equivalents. Net debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. We believe this metric is useful to analysts and investors in determining the Company's leverage position since the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt. This metric is sometimes presented as a ratio with Adjusted EBITDA in order to provide investors with another means of evaluating the Company's ability to service its existing debt obligations as well as any future increase in the amount of such obligations.
- Callon believes that the presentation of pre-tax PV-10 value is relevant and useful to its investors because it presents the discounted future net cash flows attributable to reserves prior to taking into account future corporate income taxes and the Company's current tax structure. The Company further believes investors and creditors use pre-tax PV-10 values as a basis for comparison of the relative size and value of its reserves as compared with other companies. The GAAP financial measure most directly comparable to pre-tax PV-10 is the standardized measure of discounted future net cash flows. Pre-tax PV-10 is calculated using the standardized measure of discounted future net cash flows before deducting future income taxes, discounted at 10 percent.
- Callon is unable to reconcile the projected adjusted free cash flow (non-GAAP) metric included in this release to projected net cash provided by operating activities (GAAP) because components of the calculation are inherently unpredictable, such as changes to current assets and liabilities, the timing of capital expenditures, movements in oil and gas pricing, unknown future events, and estimating future certain GAAP measures. The inability to project certain components of the calculation would significantly affect the accuracy of the reconciliation. Additionally, Callon does not provide guidance on the items used to reconcile forecasted Adjusted G&A and forecasted G&A due to the uncertainty regarding timing and estimates of certain items. Therefore, Callon cannot reconcile forecasted Adjusted G&A to forecasted G&A without unreasonable effort.
Earnings Call Information
The Company will host a conference call on Thursday, February 24, 2022, to discuss fourth quarter 2021 financial and operating results, reserves, inventory, 2022 outlook, and current corporate strategy and initiatives.
Please join Callon Petroleum Company via the Internet for a webcast of the conference call:
Date/Time: | Thursday, February 24, 2022, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) |
Webcast: | Select "News and Events" under the "Investors" section of the Company's website: www.callon.com. |
An archive of the conference call webcast will also be available at www.callon.com under the "Investors" section of the website.
About Callon Petroleum Company
Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and West Texas.
Cautionary Statement Regarding Forward Looking Information
This news release contains 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. Forward-looking statements include all statements regarding wells anticipated to be drilled and placed on production; future levels of development activity and associated production, capital expenditures and cash flow expectations; the Company's production and expenditure guidance; estimated reserve quantities and the present value thereof; future debt levels and leverage; and the implementation of the Company's business plans and strategy, as well as statements including the words "believe," "expect," "plans," "may," "will," "should," "could," and words of similar meaning. These statements reflect the Company's current views with respect to future events and financial performance based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. 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. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. 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 include the volatility of oil and natural gas prices; changes in the supply of and demand for oil and natural gas, including as a result of the COVID-19 pandemic and various governmental actions taken to mitigate its impact or actions by, or disputes among, members of OPEC and other oil and natural gas producing countries with respect to production levels or other matters related to the price of oil; our ability to drill and complete wells, operational, regulatory and environment risks; the cost and availability of equipment and labor; our ability to finance our development activities at expected costs or at expected times or at all; our inability to realize the benefits of recent transactions; currently unknown risks and liabilities relating to the newly acquired assets and operations; adverse actions by third parties involved with the transactions; risks that are not yet known or material to us; and other risks more fully discussed in our filings with the SEC, including our most recent Annual Reports on Form 10-K and subsequent Quarterly Reports on Form 10-Q, available on our website or the SEC's website at www.sec.gov. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Contact Information
Kevin Smith
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200
1) Callon defines "reinvestment rate" as capital expenditures divided by cash flow from operating activities.
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