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Callon Petroleum Company Announces First Quarter 2016 Results

NATCHEZ, Miss., May 4, 2016 /PRNewswire/ -- Callon Petroleum Company CPE, -1.93% ("Callon" or the "Company") today reported results of operations for the three months ended March 31, 2016.

Presentation slides accompanying this earnings release are available on the Company's website at www.callon.com located on the "Events and Presentations" page within the Investors section of the site.

Financial and operational highlights for the first quarter of 2016 and other recent data points include:

  • Net daily production of 12,440 barrels of oil equivalent per day ("BOE/d"), an increase of 17% compared to the fourth quarter of 2015, comprised of 79% oil volume
  • Adjusted Total Revenues of $38.4 million, a non-GAAP financial measure [(i)]
  • Lease operating expense, including workovers, of $6.15 per barrel of oil equivalent ("BOE"), a decrease of 5% from the fourth quarter of 2015
  • Adjusted cash G&A, a non-GAAP financial measure [(i)] , of $3.55 per BOE, a decrease of 7% from the previous quarter
  • Adjusted EBITDA, a non-GAAP financial measure [(i)] , of $25.6 million, representing a margin of approximately 67% of Adjusted Total Revenues, a non-GAAP financial measure [(i)]
  • Adjusted Income per fully diluted common share, a non-GAAP financial measure [(i)] , of $0.00 and a GAAP loss per diluted common share of $0.51
  • Announced two Midland Basin transactions and the establishment of a new core operating area in Howard County
  • Raised over $300 million in common stock through public offerings to fund pending acquisitions

i.

See "Non-GAAP Financial Measures and Reconciliations" included within this release for related disclosures and calculations

"Callon's performance continues to benefit from the strength of our core asset position and persistent focus on capital efficiency and operating costs. Our focus on day-to-day execution and enhancing our completion designs has positioned us to achieve our goal of living within cash flow while delivering efficient asset growth," commented Fred Callon, Chairman and Chief Executive Officer. "As we look forward into 2016, we are preparing to overlay our operational model across an expanded footprint, including our pending Howard County transaction, with an increased level of drilling activity commencing as early as October 2016. In the interim, we intend to use the anticipated free cash flow generation from our base drilling program to solidify our financial position in anticipation of this acceleration in activity."

Operations Update

At March 31, 2016, Callon had 89 gross (78.3 net) horizontal wells producing in the Midland Basin from five established zones. Our net daily production for the three months ended March 31, 2016, grew approximately 45% to 12,440 BOE/d (approximately 79% oil) as compared to the same period of 2015. Sequentially, we grew production more than 17% compared to the fourth quarter of 2015.

The following table summarizes the Company's drilling activity for the period indicated:



For the Three Months Ended March 31, 2016



Drilled


Completed (a)


Placed on Production


Awaiting Completion



Gross


Net


Gross


Net


Gross


Net


Gross


Net

Central Midland Basin horizontal wells


5


4.3


9


7.1


8


6.1


2


1.8

During the first quarter, we placed on production 8 gross (6.1 net) Lower Spraberry wells, all in our CaBo area, with an average lateral length of approximately 5,000'. Since placing our first two Lower Spraberry wells on production in November 2014, we now have 22 wells producing from this zone with lateral lengths ranging from 5,000' to 10,000'. We are currently completing a three-well pad in our Pecan Acres field targeting the lower section of the Lower Spraberry zone ("LLS") and are drilling a new three-well pad in our Carpe Diem field with two of the wells targeting the upper section of the Lower Spraberry ("ULS") and the third well targeting the LLS. This pad will be drilled on a 12 wells per section spacing and represents our ongoing efforts to evaluate tighter well density in this zone. In addition to our own planned tests of tighter spacing in 2016, we will continue to monitor offsetting activity that is expected to test well spacing density of up to 20 wells per section in the future.

For the three months ended March 31, 2016, we accrued $35.0 million in operational capital expenditures, including facilities expenditures of $5.4 million, compared to $36.4 million in the fourth quarter of 2015. Total capital expenditures, inclusive of capitalized expenses, are detailed below on an accrual and cash basis (in thousands):



Three Months Ended March 31, 2016



Operational Capital Expenditures


Capitalized Interest


Capitalized G&A


Total Capital Expenditures

Cash basis


$

52,991


$

2,338


$

3,329


$

58,658

Timing adjustments (a)



(18,021)



37





(17,984)

Non-cash items







953



953

Accrual (GAAP) basis


$

34,970


$

2,375


$

4,282


$

41,627

Second Quarter 2016 Guidance

Second quarter guidance assumes that the pending transactions involving Big Star Oil & Gas, LLC and the western Reagan County area of mutual interest are completed in late May 2016.








First Quarter


Second Quarter



2016 Actual


2016 Guidance

Total Production (BOE/d)


12,440


13,500 - 14,500

% oil


79%


76% - 78%

% oil hedged (a)




56%

Expenses (per BOE)





LOE, including workovers


$6.15


$6.00 - $6.50

Production taxes, including ad valorem


$1.96


$2.25 - $2.50

Adjusted G&A (b)


$4.10


$3.75 - $4.25

Adjusted G&A - cash component (c)


$3.55


$3.00 - $3.50

Operational Capital Expenditures





Accrual basis ($MM)


$35


$15 - $25



(a)

Based on the midpoint of guidance. Includes swaps, three-way collars and two-way collars tied to the WTI NYMEX benchmark pricing.

(b)

Excludes certain non-recurring expenses and non-cash valuation adjustments. See the reconciliation provided within the Non-GAAP financial measures and reconciliations section of this press release for a reconciliation of G&A expense on a GAAP basis to Adjusted G&A expense.

(c)

Excludes stock-based compensation and corporate depreciation and amortization.

Operating and Financial Results

The following table presents summary information for the periods indicated:



Three Months Ended



March 31, 2016


December 31, 2015


March 31, 2015

Net production:










Oil (MBbls)



892



777



638

Natural gas (MMcf)



1,443



1,188



801

Total production (MBOE)



1,132



975



771

Average daily production (BOE/d)



12,440



10,598



8,567

% oil (BOE basis)



79%



80%



83%

Oil and natural gas revenues (in thousands):










Oil revenue


$

27,443


$

30,582


$

27,909

Natural gas revenue



3,255



2,981



2,482

Total revenue


$

30,698


$

33,563


$

30,391

Impact of cash-settled derivatives



7,716



9,918



10,343

Adjusted Total Revenue (i)


$

38,414


$

43,481


$

40,734



Three Months Ended



March 31, 2016


December 31, 2015


March 31, 2015

Additional per BOE data:










Sales price, excluding impact of cash-settled derivatives


$

27.12


$

34.42


$

39.42

Sales price, including impact of cash-settled derivatives



33.93



44.60



52.83











Lease operating expense


$

6.15


$

6.47


$

9.03

Production taxes



1.96



2.04



2.94

Depletion, depreciation and amortization



13.89



17.29



23.48

Adjusted G&A - total (a)



4.10



4.45



6.15

Adjusted G&A - cash component (b)



3.55



3.80



5.37



(a)

Excludes certain non-recurring expenses and non-cash valuation adjustments. See the reconciliation provided within this press release for a reconciliation of G&A expense on a GAAP basis to Adjusted G&A expense.

(b)

Excludes the amortization of equity-settled share-based incentive awards and corporate depreciation and amortization.

Total Revenue. For the quarter ended March 31, 2016, Callon reported total revenues including cash-settled derivatives ("Adjusted Total Revenue," a non-GAAP financial measure [(i)] ) of $38.4 million, comprised of oil revenues of $35.0 million, and natural gas revenues of $3.4 million including the $7.7 million impact of settled derivative contracts. The table above reconciles to the related GAAP measure of the Company's revenue to Adjusted Total Revenue. Average daily production for the quarter was 12,440 BOE/d compared to average daily production of 10,598 BOE/d in the fourth quarter of 2015. Average realized prices, including and excluding the effects of hedging, are detailed below.

Hedging impacts. For the quarter ended March 31, 2016, Callon recognized the following hedging-related items:










In Thousands


Per Unit

Oil derivatives contracts







Net gain on settlements


$

7,507


$

8.41

Net loss on fair value adjustments



(9,137)




Total net loss on oil derivatives contracts


$

(1,630)











Natural gas derivatives contracts







Net gain on settlements


$

209


$

0.14

Net gain on fair value adjustments



489




Total net gain on natural gas derivatives contracts


$

698











Total derivatives contracts







Net gain on settlements


$

7,716


$

6.81

Net loss on fair value adjustments



(8,648)




Total net loss on total derivatives contracts


$

(932)




Average realized prices, including and excluding the impact of cash settled derivatives during the first quarter, were as follows:







Three Months Ended



March 31, 2016

Average realized sales price:




Oil (per Bbl) (excluding impact of cash-settled derivatives)


$

30.77

Impact of cash-settled derivatives



8.41

Oil (per Bbl) (including impact of cash-settled derivatives)


$

39.18





Natural gas (per Mcf) (excluding impact of cash-settled derivatives)


$

2.26

Impact of cash-settled derivatives



0.14

Natural gas (per Mcf) (including impact of cash-settled derivatives)


$

2.40





Total (per BOE) (excluding impact of cash-settled derivatives)


$

27.12

Impact of cash-settled derivatives



6.81

Total...


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