Callon Petroleum Company Announces Third Quarter 2022 Results
Callon Petroleum Company (CPE) reported robust third quarter 2022 results, achieving 8% sequential growth in daily oil production and a net income of $549.6 million ($8.88 per diluted share). The company generated $475.3 million in operating cash flow and $148.4 million in adjusted free cash flow, with a total debt reduction of $150 million, bringing the debt-to-adjusted EBITDA ratio below 1.5x. Callon expects continued strength in production and operational capital expenditures of $180-$195 million in the fourth quarter, alongside an extended credit facility maturing in 2027.
- 8% sequential growth in daily oil production volumes.
- 7% sequential growth in total daily production volumes.
- $475.3 million in net cash provided by operating activities.
- $148.4 million in adjusted free cash flow for Q3.
- Net income of $549.6 million ($8.88 per share) for Q3.
- Debt reduction of approximately $150 million.
- Average realized oil prices decreased to $94.22 per Bbl from $110.90 in Q2.
- Increased lease operating expenses to $7.71 per Boe.
HOUSTON, Nov. 2, 2022 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported results of operations for the three and nine months ended September 30, 2022.
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.
Third Quarter 2022 and Recent Highlights
- Delivered
8% sequential growth in daily oil production volumes and7% sequential growth in total daily production volumes (66.4 MBbls/d and 107.3 MBoe/d, respectively) - Achieved Midland Basin well productivity gains in 2022 of over
25% compared to the 2019 - 2021 average - Generated net cash provided by operating activities of
$475.3 million and adjusted free cash flow of$148.4 million for the third quarter - For the first nine months of the year, generated net cash provided by operating activities of
$1.1 billion and adjusted free cash flow of$457.3 million - For the third quarter, Callon reported net income of
$549.6 million ($8.88 per diluted share), adjusted EBITDA of$458.5 million , and adjusted income of$249.8 million , ($4.04 per diluted share) - For the first nine months of the year, Callon reported net income of
$937.3 million ($15.14 per diluted share), adjusted EBITDA of$1.3 billion , and adjusted income of$690.3 million ($11.15 per diluted share) - During the quarter, reduced total debt-to-adjusted EBITDA ratio to under 1.5x and total debt by approximately
$150 million - Extended the maturity of the revolving credit facility to October 2027 with a borrowing base of
$2.0 billion and an elected commitment of$1.5 billion - Issued the Company's third annual sustainability report which provides a comprehensive overview of the continued progress on sustainability initiatives
"Callon's strong production growth this quarter was the product of increased well productivity and completion efficiencies that improved cycle times of larger scale projects," said Joe Gatto, President and Chief Executive Officer. "Top line growth combined with a reduction in per unit lease operating expenses and capital cost controls drove a sequential
Callon Operations Update
At September 30, 2022, Callon had 1,420 gross (1,264.1 net) wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended September 30, 2022 was 107.3 MBoe/d (
Operated drilling and completion activity for the three months ended September 30, 2022 are summarized in the table below:
Three Months Ended September 30, 2022 | ||||||||||||
Drilled | Completed | Placed on Production | ||||||||||
Region | Gross | Net | Gross | Net | Gross | Net | ||||||
Delaware Basin | 10 | 8.7 | 12 | 10.0 | 10 | 7.1 | ||||||
Midland Basin | 14 | 13.4 | 23 | 20.9 | 22 | 19.9 | ||||||
Eagle Ford | 3 | 3.0 | 11 | 10.4 | 11 | 10.4 | ||||||
Total | 27 | 25.1 | 46 | 41.3 | 43 | 37.4 |
For the three months ended September 30, 2022, Callon drilled 27 gross (25.1 net) wells and placed a combined 43 gross (37.4 net) wells on production. Completions operations for the quarter included 12 gross (10.0 net) wells in the Delaware Basin, 23 gross (20.9 net) wells in the Midland Basin, and 11 gross (10.4 net) wells in the Eagle Ford. Callon placed 10 gross (7.1 net) wells on production in the Delaware Basin, 22 gross (19.9 net) wells in the Midland Basin, and 11 gross (10.4 net) wells in the Eagle Ford. The average lateral length for all wells completed during the third quarter was 7,791 feet. Operated completions during the third quarter consisted of 3 Upper Wolfcamp A wells, 3 Lower Wolfcamp A wells, 2 Wolfcamp A wells, and 4 Wolfcamp B wells in the Delaware Basin; 10 Lower Spraberry wells, 1 Middle Spraberry well, 8 Wolfcamp A wells and 4 Wolfcamp B wells in the Midland Basin; and 10 Lower Eagle Ford Shale wells and 1 Austin Chalk well.
Financial Update
As of September 30, 2022, the drawn balance on the Credit Facility was
In addition, Callon has entered into agreements for the divestiture of approximately
Fourth Quarter Activity Outlook and Guidance
Callon entered the fourth quarter running five drilling rigs, with four rigs in the Delaware Basin and one rig in the Midland Basin. A sixth drilling rig was contracted in early October and is anticipated to commence drilling in the fourth quarter. The sixth rig was added earlier than scheduled to secure high-quality drilling services in support of operational plans for early 2023. These plans were recently modified to include numerous larger scale Permian projects that will employ simultaneous operations to benefit overall cycle times and efficiencies. Callon intends to utilize one completion crew in the fourth quarter, supporting new production in the Midland and Delaware Basins, before adding a second dedicated crew for simultaneous completion operations in early 2023.
For the fourth quarter, the Company expects to produce 105 - 108 MBoe/d (
Capital Expenditures
For the three months ended September 30, 2022, Callon incurred
Three Months Ended September 30, 2022 | ||||||||
Operational | Capitalized | Capitalized | Total Capital | |||||
Capital (a) | Interest | G&A | Expenditures | |||||
(In thousands) | ||||||||
Cash basis (b) | ||||||||
Timing adjustments (c) | (42,247) | 5,563 | — | (36,684) | ||||
Non-cash items | (11,923) | 1,497 | 1,642 | (8,784) | ||||
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 October 28, 2022, Callon had the following outstanding oil and natural gas derivative contracts:
For the Remainder | For the Full Year | For the Full Year | |||
Oil Contracts (WTI) | 2022 | 2023 | 2024 | ||
Swap Contracts | |||||
Total volume (Bbls) | 1,748,000 | 1,541,500 | — | ||
Weighted average price per Bbl | $— | ||||
Collar Contracts (Three-Way Collars) | |||||
Total volume (Bbls) | — | 1,825,000 | — | ||
Weighted average price per Bbl | |||||
Ceiling (short call) | $— | $— | |||
Floor (long put) | $— | $— | |||
Floor (short put) | $— | $— | |||
Collar Contracts (Two-Way Collars) | |||||
Total volume (Bbls) | 1,104,000 | 2,365,000 | — | ||
Weighted average price per Bbl | |||||
Ceiling (short call) | $— | ||||
Floor (long put) | $— | ||||
Short Call Swaption Contracts (a) | |||||
Total volume (Bbls) | — | — | 1,830,000 | ||
Weighted average price per Bbl | $— | $— | |||
Oil Contracts (Midland Basis Differential) | |||||
Swap Contracts | |||||
Total volume (Bbls) | 598,000 | — | — | ||
Weighted average price per Bbl | $— | $— |
(a) | The 2024 short call swaption contracts have exercise expiration dates of December 29, 2023. | |||||
For the Remainder | For the Full Year | ||
Natural Gas Contracts (Henry Hub) | 2022 | 2023 | |
Swap Contracts | |||
Total volume (MMBtu) | 1,550,000 | — | |
Weighted average price per MMBtu | $— | ||
Collar Contracts | |||
Total volume (MMBtu) | 3,670,000 | 6,640,000 | |
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 | ( | ( |
Operating and Financial Results
The following table presents summary information for the periods indicated:
Three Months Ended | ||||||
September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||
Total production | ||||||
Oil (MBbls) | ||||||
Permian | 4,567 | 4,290 | 3,428 | |||
Eagle Ford | 1,545 | 1,299 | 2,447 | |||
Total oil | 6,112 | 5,589 | 5,875 | |||
Natural gas (MMcf) | ||||||
Permian | 9,041 | 8,875 | 7,153 | |||
Eagle Ford | 1,616 | 1,437 | 2,242 | |||
Total natural gas | 10,657 | 10,312 | 9,395 | |||
NGLs (MBbls) | ||||||
Permian | 1,702 | 1,622 | 1,315 | |||
Eagle Ford | 283 | 232 | 417 | |||
Total NGLs | 1,985 | 1,854 | 1,732 | |||
Total production (MBoe) | ||||||
Permian | 7,776 | 7,391 | 5,936 | |||
Eagle Ford | 2,097 | 1,771 | 3,237 | |||
Total barrels of oil equivalent | 9,873 | 9,162 | 9,173 | |||
Total daily production (Boe/d) | ||||||
Permian | 84,517 | 81,216 | 64,517 | |||
Eagle Ford | 22,799 | 19,469 | 35,186 | |||
Total barrels of oil equivalent | 107,316 | 100,685 | 99,703 | |||
Oil as % of total daily production | 62 % | 61 % | 64 % | |||
Average realized sales price (excluding impact of settled derivatives) | ||||||
Oil (per Bbl) | ||||||
Permian | ||||||
Eagle Ford | 94.31 | 111.53 | 69.76 | |||
Total oil | ||||||
Natural gas (per Mcf) | ||||||
Permian | ||||||
Eagle Ford | 8.01 | 7.27 | 4.22 | |||
Total natural gas | ||||||
NGLs (per Bbl) | ||||||
Permian | ||||||
Eagle Ford | 33.49 | 38.53 | 30.81 | |||
Total NGLs | ||||||
Average realized sales price (per Boe) | ||||||
Permian | ||||||
Eagle Ford | 80.18 | 92.75 | 59.63 | |||
Total average realized sales price | ||||||
Average realized sales price (including impact of settled derivatives) | ||||||
Oil (per Bbl) | ||||||
Natural gas (per Mcf) | 4.86 | 3.91 | 2.21 | |||
NGLs (per Bbl) | 34.03 | 40.74 | 31.71 | |||
Total average realized sales price (per Boe) | ||||||
Three Months Ended | ||||||
September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||
Revenues (in thousands) (a) | ||||||
Oil | ||||||
Permian | ||||||
Eagle Ford | 145,707 | 144,876 | 170,711 | |||
Total oil | ||||||
Natural gas | ||||||
Permian | ||||||
Eagle Ford | 12,943 | 10,444 | 9,454 | |||
Total natural gas | ||||||
NGLs | ||||||
Permian | ||||||
Eagle Ford | 9,479 | 8,938 | 12,848 | |||
Total NGLs | ||||||
Total revenues | ||||||
Permian | ||||||
Eagle Ford | 168,129 | 164,258 | 193,013 | |||
Total revenues | ||||||
Additional per Boe data | ||||||
Sales price (b) | ||||||
Permian | ||||||
Eagle Ford | 80.18 | 92.75 | 59.63 | |||
Total sales price | ||||||
Lease operating expense | ||||||
Permian | ||||||
Eagle Ford | 8.31 | 10.59 | 5.51 | |||
Total lease operating expense | ||||||
Production and ad valorem taxes | ||||||
Permian | ||||||
Eagle Ford | 4.79 | 5.89 | 2.89 | |||
Total production and ad valorem taxes | ||||||
Gathering, transportation and processing | ||||||
Permian | ||||||
Eagle Ford | 1.80 | 1.93 | 1.49 | |||
Total gathering, transportation and processing | ||||||
Operating margin | ||||||
Permian | ||||||
Eagle Ford | 65.28 | 74.34 | 49.74 | |||
Total operating margin | ||||||
Depreciation, depletion 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. |
Revenue. For the quarter ended September 30, 2022, Callon reported revenue of
Commodity Derivatives. For the quarter ended September 30, 2022, the net gain on commodity derivative contracts includes the following (in thousands):
Three Months Ended September 30, 2022 | |
Gain on oil derivatives | ( |
Loss on natural gas derivatives | 22,881 |
Gain on commodity derivative contracts | ( |
For the quarter ended September 30, 2022, the cash paid for commodity derivative settlements includes the following (in thousands):
Three Months Ended September 30, 2022 | |
Cash paid on oil derivatives, net | ( |
Cash paid on natural gas derivatives, net | (28,572) |
Cash paid for commodity derivative settlements, net | ( |
Lease Operating Expenses, including workover ("LOE"). LOE for the three months ended September 30, 2022 was
Production and Ad Valorem Taxes. Production and ad valorem taxes for the three months ended September 30, 2022 were approximately
Gathering, Transportation and Processing. Gathering, transportation and processing expense for the three months ended September 30, 2022 was
Depreciation, Depletion and Amortization ("DD&A"). DD&A for the three months ended September 30, 2022 was
General and Administrative Expense ("G&A"). G&A for the three months ended September 30, 2022 and June 30, 2022 was
The following table reconciles G&A to Adjusted G&A - cash component and full cash G&A (in thousands):
Three Months Ended | |||||
September 30, 2022 | June 30, 2022 | September 30, 2021 | |||
G&A | |||||
Change in the fair value of liability share-based awards (non-cash) | 1,618 | 5,071 | 2,492 | ||
Adjusted G&A – total | 15,640 | 15,980 | 11,995 | ||
Equity-settled, share-based compensation (non-cash) | (1,717) | (1,861) | (1,589) | ||
Adjusted G&A – cash component | |||||
Capitalized cash G&A | 11,053 | 11,432 | 9,034 | ||
Full cash G&A |
Income Tax. Callon provides for income taxes at the statutory rate of
Adjusted Income, Adjusted EBITDA and Unhedged Adjusted EBITDA. The following tables reconcile the Company's net income to adjusted income, adjusted EBITDA and unhedged adjusted EBITDA:
Three Months Ended | Nine Months | ||||||
September 30, | June 30, | September 30, | September 30, | ||||
(In thousands, except per share data) | |||||||
Net income | |||||||
(Gain) loss on derivative contracts | (134,850) | 81,648 | 107,169 | 305,098 | |||
Loss on commodity derivative settlements, net | (105,006) | (184,558) | (110,960) | (423,040) | |||
Non-cash (benefit) expense related to share-based awards | 99 | (3,210) | (903) | 1,055 | |||
Merger, integration, transaction and other | 2,861 | 1,051 | 7,323 | 3,899 | |||
(Gain) loss on extinguishment of debt | — | 42,417 | (2,420) | 42,417 | |||
Tax effect on adjustments above (a) | 49,748 | 13,157 | (44) | 14,820 | |||
Change in valuation allowance | (112,640) | (70,704) | (34,190) | (191,307) | |||
Adjusted income | |||||||
Net income per diluted share | |||||||
Adjusted income per diluted share | |||||||
Basic weighted average common shares outstanding | 61,703 | 61,679 | 46,290 | 61,624 | |||
Diluted weighted average common shares outstanding (GAAP) | 61,870 | 61,909 | 47,096 | 61,927 |
(a) | Calculated using the federal statutory rate of |
Three Months Ended | Nine Months | ||||||
September 30, | June 30, | September 30, | September 30, | ||||
(In thousands) | |||||||
Net income | |||||||
(Gain) loss on derivative contracts | (134,850) | 81,648 | 107,169 | 305,098 | |||
Loss on commodity derivative settlements, net | (105,006) | (184,558) | (110,960) | (423,040) | |||
Non-cash (benefit) expense related to share-based awards | 99 | (3,210) | (903) | 1,055 | |||
Merger, integration, transaction and other | 2,861 | 1,051 | 7,323 | 3,899 | |||
Income tax (benefit) expense | 3,515 | 3,009 | 2,416 | 7,008 | |||
Interest expense, net | 19,468 | 20,691 | 27,736 | 61,717 | |||
Depreciation, depletion and amortization | 122,833 | 109,409 | 89,890 | 335,221 | |||
(Gain) loss on extinguishment of debt | — | 42,417 | (2,420) | 42,417 | |||
Adjusted EBITDA | |||||||
Add: Loss on commodity derivative settlements, net | 105,006 | 184,558 | 110,960 | 423,040 | |||
Unhedged adjusted EBITDA |
Adjusted Free Cash Flow. The following table reconciles the Company's net cash provided by operating activities to unhedged adjusted EBITDA, adjusted EBITDA and adjusted free cash flow:
Three Months Ended | Nine Months | ||||||
September 30, | June 30, | September 30, | September 30, | ||||
(In thousands) | |||||||
Net cash provided by operating activities | |||||||
Changes in working capital and other | (75,748) | 25,096 | (30,355) | 73,153 | |||
Changes in accrued hedge settlements | 40,590 | 1,839 | (153) | 10,478 | |||
Loss on commodity derivative settlements, net | 105,006 | 184,558 | 110,960 | 423,040 | |||
Cash interest expense, net | 18,406 | 19,206 | 25,078 | 57,454 | |||
Merger, integration and transaction | — | — | 3,018 | 769 | |||
Unhedged adjusted EBITDA | |||||||
Less: Loss on commodity derivative settlements, net | 105,006 | 184,558 | 110,960 | 423,040 | |||
Adjusted EBITDA | |||||||
Less: Operational capital expenditures (accrual) | 254,662 | 237,812 | 114,964 | 649,852 | |||
Less: Capitalized cash interest | 25,964 | 24,416 | 23,590 | 73,886 | |||
Less: Cash interest expense, net | 18,406 | 19,206 | 25,078 | 57,454 | |||
Less: Capitalized cash G&A | 11,053 | 11,432 | 9,034 | 32,188 | |||
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 | |||||
September 30, 2022 | June 30, 2022 | September 30, 2021 | |||
(In thousands) | |||||
Net cash provided by operating activities | |||||
Changes in working capital | (76,994) | 23,342 | (30,581) | ||
Merger, integration and transaction | — | — | 3,018 | ||
Adjusted discretionary cash flow |
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 | |||||
September 30, 2022 | June 30, 2022 | September 30, 2021 | |||
(In thousands) | |||||
Operating revenues | |||||
Oil | |||||
Natural gas | 81,018 | 64,913 | 36,519 | ||
NGLs | 67,548 | 75,530 | 58,097 | ||
Total operating revenues | |||||
Impact of settled derivatives | (105,006) | (184,558) | (110,960) | ||
Adjusted total revenue |
Net Debt. The following table reconciles the Company's total debt to net debt:
September 30, | June 30, | March 31, | December 31, | September 30, | |||||
(In thousands) | |||||||||
Total debt | |||||||||
Unamortized premiums, discount, and | 20,663 | 20,684 | 26,639 | 28,806 | 48,311 | ||||
Adjusted total debt | |||||||||
Less: Cash and cash equivalents | 4,350 | 6,100 | 4,150 | 9,882 | 3,699 | ||||
Net debt |
Callon Petroleum Company | ||||
Consolidated Balance Sheets | ||||
(In thousands, except par and share amounts) | ||||
(Unaudited) | ||||
September 30, 2022 | December 31, 2021 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | ||||
Accounts receivable, net | 285,591 | 232,436 | ||
Fair value of derivatives | 14,744 | 22,381 | ||
Other current assets | 46,243 | 30,745 | ||
Total current assets | 350,928 | 295,444 | ||
Oil and natural gas properties, full cost accounting method: | ||||
Evaluated properties, net | 3,789,530 | 3,352,821 | ||
Unevaluated properties | 1,847,912 | 1,812,827 | ||
Total oil and natural gas properties, net | 5,637,442 | 5,165,648 | ||
Other property and equipment, net | 26,071 | 28,128 | ||
Deferred financing costs | 13,504 | 18,125 | ||
Other assets, net | 71,994 | 40,158 | ||
Total assets | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable and accrued liabilities | ||||
Fair value of derivatives | 48,697 | 185,977 | ||
Other current liabilities | 151,021 | 116,523 | ||
Total current liabilities | 793,997 | 872,491 | ||
Long-term debt | 2,373,358 | 2,694,115 | ||
Asset retirement obligations | 59,583 | 54,458 | ||
Fair value of derivatives | 9,604 | 11,409 | ||
Other long-term liabilities | 54,395 | 49,262 | ||
Total liabilities | 3,290,937 | 3,681,735 | ||
Commitments and contingencies | ||||
Stockholders' equity: | ||||
Common stock, | 616 | 614 | ||
Capital in excess of par value | 4,018,241 | 4,012,358 | ||
Accumulated deficit | (1,209,855) | (2,147,204) | ||
Total stockholders' equity | 2,809,002 | 1,865,768 | ||
Total liabilities and stockholders' equity |
Callon Petroleum Company | |||||||
Consolidated Statements of Operations | |||||||
(In thousands, except per share data) | |||||||
(Unaudited) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Operating Revenues: | |||||||
Oil | |||||||
Natural gas | 81,018 | 36,519 | 189,907 | 84,819 | |||
Natural gas liquids | 67,548 | 58,097 | 210,696 | 124,079 | |||
Sales of purchased oil and gas | 111,459 | 48,653 | 377,199 | 134,164 | |||
Total operating revenues | 835,877 | 552,562 | 2,526,715 | 1,352,842 | |||
Operating Expenses: | |||||||
Lease operating | 76,121 | 42,706 | 216,389 | 129,619 | |||
Production and ad valorem taxes | 43,290 | 26,070 | 125,841 | 66,467 | |||
Gathering, transportation and processing | 27,575 | 20,875 | 71,617 | 58,887 | |||
Cost of purchased oil and gas | 111,439 | 49,392 | 378,107 | 139,558 | |||
Depreciation, depletion and amortization | 122,833 | 89,890 | 335,221 | 244,005 | |||
General and administrative | 14,022 | 9,503 | 42,052 | 37,367 | |||
Merger, integration and transaction | — | 3,018 | 769 | 3,018 | |||
Total operating expenses | 395,280 | 241,454 | 1,169,996 | 678,921 | |||
Income From Operations | 440,597 | 311,108 | 1,356,719 | 673,921 | |||
Other (Income) Expenses: | |||||||
Interest expense, net of capitalized amounts | 19,468 | 27,736 | 61,717 | 76,786 | |||
(Gain) loss on derivative contracts | (134,850) | 107,169 | 305,098 | 512,155 | |||
(Gain) loss on extinguishment of debt | — | (2,420) | 42,417 | (2,420) | |||
Other (income) expense | 2,861 | 4,305 | 3,130 | 6,583 | |||
Total other (income) expense | (112,521) | 136,790 | 412,362 | 593,104 | |||
Income Before Income Taxes | 553,118 | 174,318 | 944,357 | 80,817 | |||
Income tax expense | (3,515) | (2,416) | (7,008) | (1,017) | |||
Net Income | |||||||
Net Income Per Common Share: | |||||||
Basic | |||||||
Diluted | |||||||
Weighted Average Common Shares Outstanding: | |||||||
Basic | 61,703 | 46,290 | 61,624 | 45,063 | |||
Diluted | 61,870 | 47,096 | 61,927 | 47,119 |
Callon Petroleum Company | |||||||
Consolidated Statements of Cash Flows | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
Three Months Ended September 30, | Nine Months Ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Cash flows from operating activities: | |||||||
Net income | |||||||
Adjustments to reconcile net income to net cash provided by operating | |||||||
Depreciation, depletion and amortization | 122,833 | 89,890 | 335,221 | 244,005 | |||
Amortization of non-cash debt related items, net | 1,062 | 2,658 | 4,263 | 7,166 | |||
Deferred income tax expense | 1,626 | — | 1,626 | — | |||
(Gain) loss on derivative contracts | (134,850) | 107,169 | 305,098 | 512,155 | |||
Cash paid for commodity derivative settlements, net | (145,596) | (110,807) | (433,518) | (238,378) | |||
(Gain) loss on extinguishment of debt | — | (2,420) | 42,417 | (2,420) | |||
Non-cash (benefit) expense related to share-based awards | 99 | (903) | 1,055 | 11,984 | |||
Other, net | 3,504 | 6,495 | 8,704 | 11,006 | |||
Changes in current assets and liabilities: | |||||||
Accounts receivable | 71,479 | (15,870) | (58,915) | (83,227) | |||
Other current assets | (4,732) | (1,278) | (12,229) | (8,701) | |||
Accounts payable and accrued liabilities | 10,247 | 47,729 | (8,693) | 74,443 | |||
Cash received for settlements of contingent consideration arrangements, net | — | — | 6,492 | — | |||
Net cash provided by operating activities | 475,275 | 294,565 | 1,128,870 | 607,833 | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (340,286) | (176,549) | (754,225) | (427,552) | |||
Acquisition of oil and gas properties | (2,169) | (65,021) | (18,114) | (67,236) | |||
Proceeds from sales of assets | 4,723 | 3,804 | 9,313 | 35,415 | |||
Cash paid for settlement of contingent consideration arrangement | — | — | (19,171) | — | |||
Other, net | 4,788 | (14) | 13,497 | 4,206 | |||
Net cash used in investing activities | (332,944) | (237,780) | (768,700) | (455,167) | |||
Cash flows from financing activities: | |||||||
Borrowings on Prior Credit Facility | 811,000 | 500,000 | 2,535,000 | 1,236,500 | |||
Payments on Prior Credit Facility | (954,000) | (652,000) | (2,684,000) | (1,498,500) | |||
Issuance of | — | — | 600,000 | — | |||
Redemption of | — | — | (467,287) | — | |||
Redemption of | — | — | (339,507) | — | |||
Redemption of | — | (542,755) | — | (542,755) | |||
Issuance of | — | 650,000 | — | 650,000 | |||
Cash received for settlement of contingent consideration arrangement | — | — | 8,512 | — | |||
Payment of deferred financing costs | (1,081) | (12,131) | (11,623) | (12,168) | |||
Other, net | — | — | (6,797) | (2,280) | |||
Net cash used in financing activities | (144,081) | (56,886) | (365,702) | (169,203) | |||
Net change in cash and cash equivalents | (1,750) | (101) | (5,532) | (16,537) | |||
Balance, beginning of period | 6,100 | 3,800 | 9,882 | 20,236 | |||
Balance, end of period |
Non-GAAP Financial Measures
This news release refers to non-GAAP financial measures such as "adjusted free cash flow," "adjusted EBITDA," "unhedged adjusted EBITDA," "adjusted income," "adjusted income per diluted share," "adjusted discretionary cash flow," "adjusted total revenue," "adjusted G&A," "full cash G&A," and "net debt." 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 expenditures (accrual), capitalized cash interest, capitalized cash G&A (which excludes capitalized expense related to share-based awards), and cash interest expense, net. 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).
- 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 certain other 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 calculates unhedged adjusted EBITDA as adjusted EBITDA, as defined above, excluding the impact of net settled derivative instruments. Unhedged 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 unhedged adjusted EBITDA provides useful information to investors because it provides additional information with respect to our performance without the impact of our settled derivative instruments. Because unhedged adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the unhedged adjusted EBITDA presented above may not be comparable to similarly titled measures of other companies.
- 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 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).
- 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.
- Adjusted G&A is a supplemental non-GAAP financial measure that excludes non-cash incentive share-based compensation valuation adjustments and adjusted G&A - cash component further excludes equity-settled, share-based compensation expenses. Callon believes that the non-GAAP measure of adjusted G&A and adjusted G&A - cash component are useful to investors because they provide for greater comparability period-over-period. In addition, adjusted G&A - cash component provides a meaningful measure of our recurring G&A expense.
- 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.
- 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. This ratio is referred to by the Company as its leverage ratio.
Earnings Call Information
The Company will host a conference call on Thursday, November 3, 2022, to discuss third quarter 2022 financial and operating results, outlook and guidance for the remainder of 2022, and current corporate strategy and initiatives.
Please join Callon Petroleum Company via the Internet for a webcast of the conference call:
Date/Time: | Thursday, November 3, 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 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; general economic conditions or the COVID-19 pandemic and various governmental actions taken to mitigate its impact; 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; rising interest rates and inflation; 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
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SOURCE Callon Petroleum Company
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