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Callon Petroleum Company Announces Third Quarter 2019 Results

HOUSTON, Nov. 4, 2019 /PRNewswire/ -- Callon Petroleum Company (CPE) ("Callon" or the "Company") today reported results of operations for the three and nine months ended September 30, 2019.

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 and Recent Highlights

  • Increased production by 8% year-over-year to 37.8 Mboe/d (78% oil)
  • Generated an operating margin of $35.58 per Boe
  • Realized fully diluted earnings per share of $0.21, adjusted earnings per share of $0.19, net income of $55.8 million, and adjusted EBITDA of $117.4 million(i)
  • Reduced operational capital spending by 13% during the third quarter to $116.4 million, maintaining full year operational capital targets within the previously lowered guidance range
  • Achieved lease operating expense ("LOE") per Boe of $5.65, an improvement of nearly 9% over the prior period
  • Completed and placed on production large multi-interval, multi-pad projects in both the Midland and Delaware Basins with strong initial performance from both projects

"The hard work by our team throughout this quarter has continued to produce exceptional results with production ahead of expectations, operating expenses moving lower, and discretionary cash flow in line with operational capital spending. Our successful mega-pad development projects are not only generating significant and durable cost savings but have exhibited solid productivity. In addition, the continued efforts to optimize previously acquired assets have resulted in incremental value to shareholders as our team has made noteworthy progress on well productivity and operational costs across our expanded asset base," commented Joe Gatto, Callon's President and Chief Executive Officer. He continued, "We remain focused on preparing to integrate the Callon and Carrizo teams and operations upon closing and will strive to exceed our own expectations for capital efficiency and targeted synergy capture. In the current commodity environment, we recognize the need to be a low cost producer and are prepared to execute a program that will drive free cash flow generation, optimize asset development, accelerate deleveraging efforts, and deliver improved returns on invested capital to our shareholders in the near term."

Operations Update

At September 30, 2019, we had 492 gross (335.3 net) horizontal wells producing in the Permian Basin. Net daily production for the three months ended September 30, 2019 grew 8% to 37.8 Mboe/d (78% oil), as compared to the same period of 2018, or 25% when accounting for divested volumes from the sale of our Southern Midland Basin assets.

For the three months ended September 30, 2019, we drilled 12 gross (11.0 net) horizontal wells and placed a combined 16 gross (15.6 net) horizontal wells on production. The majority of wells placed on production were associated with two large multi-well developments, one each in the Delaware and Midland basins as described below. The two additional wells were placed on production at the end of September.

The Rag Run mega-pad, Callon's initial large-scale development project in the Delaware Basin, was placed on production near the end of July and includes co-development of two Wolfcamp A flow units and the Wolfcamp B with simultaneous operations of two completion crews. Through the first 90 days of production, these wells have averaged approximately 1,000 Boe per day (~80% oil). This project was placed on production using a more conservative choke management strategy than previous wells, which the Company expects to employ on future developments of this nature to optimize long-term well performance. The significant drilling and completion cost savings realized on this initial Delaware mega-pad, which resulted in an average total well cost of less than $1,100 per lateral foot, are representative of the synergy capture the Company expects to attain in 2020 and beyond after closing the pending acquisition and shifting to larger pad development as part of normal operations in the Delaware Basin.

The seven well project that was placed on production in the Midland Basin at the beginning of September included a multi-interval development of three Lower Spraberry and four Wolfcamp A wells within the Fairway area of our Howard County assets. Through the first 50 days, the combined seven wells have achieved average daily production of approximately 850 Boe per day (~90% oil). These wells were drilled and completed offsetting historical producing wells and have performed in-line with the offset single well pads in these sections.

Capital Expenditures

For the three months ended September 30, 2019, we incurred $116.4 million in operational capital expenditures (including other items) on an accrual basis as compared to $133.5 million in the second quarter of 2019, representing a decrease of 13%. Total capital expenditures, inclusive of capitalized expenses, are detailed below on an accrual and cash basis (in thousands):


Three Months Ended September 30, 2019


Operational


Capitalized


Capitalized


Total Capital


Capital (a)


Interest


G&A


Expenditures

Cash basis (b)

$

121,457



$

15,165



$

7,373



$

143,995


Timing adjustments (c)

(5,044)



2,965





(2,079)


Non-cash items





866



866


   Accrual basis

$

116,413



$

18,130



$

8,239



$

142,782




(a)

Includes facilities, equipment, seismic, land and other items. Excludes capitalized expenses.

(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.

Operating and Financial Results

The following table presents summary information for the periods indicated: 


Three Months Ended


September 30, 2019


June 30, 2019


September 30, 2018

Net production






Oil (MBbls)

2,725



2,848



2,521


Natural gas (MMcf)

4,538



5,031



4,144


   Total (Mboe)

3,481



3,687



3,212


Average daily production (Boe/d)

37,837



40,516



34,913


   % oil (Boe basis)

78

%


77

%


78

%

Oil and natural gas revenues (in thousands)






   Oil revenue

$

148,210



$

160,728



$

142,601


   Natural gas revenue

7,168



6,324



18,613


      Total revenue

155,378



167,052



161,214


   Impact of settled derivatives

1,011



(1,157)



(9,239)


      Adjusted Total Revenue (i)

$

156,389



$

165,895



$

151,975


Average realized sales price






(excluding impact of settled derivatives)






   Oil (per Bbl)

$

54.39



$

56.44



$

56.57


   Natural gas (per Mcf)

1.58



1.26



4.49


   Total (per BOE)

44.64



45.31



50.19


Average realized sales price






(including impact of settled derivatives)






   Oil (per Bbl)

$

54.01



$

54.87



$

52.87


   Natural gas (per Mcf)

2.03



1.91



4.51


   Total (per BOE)

44.93



44.99



47.31


Additional per BOE data






   Sales price (a)

$

44.64



$

45.31



$

50.19


      Lease operating expense

5.65



6.18



5.77


      Production taxes

3.41



3.02



3.20


   Operating margin

$

35.58



$

36.11



$

41.22








   Depletion, depreciation and amortization

$

16.09



$

17.07



$

15.02


   Adjusted G&A (b)






      Cash component (c)

$

2.52



$

2.42



$

2.17


      Non-cash component

0.44



0.68



0.57




(a)

Excludes the impact of settled derivatives.

(b)

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

(c)

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

Total Revenue. For the quarter ended September 30, 2019, Callon reported total revenue of $155.4 million and total revenue including settled derivatives ("Adjusted Total Revenue," a non-GAAP financial measure(i)) of $156.4 million, including the impact of a $1.0 million gain from the settlement of derivative contracts. The table above reconciles Adjusted Total Revenue to the related GAAP measure of the Company's total operating revenue. Average daily production for the quarter was 37.8 Mboe/d, compared to average daily production of 40.5 Mboe/d in the second quarter of 2019, a period which included volumes associated with our southern Midland Basin divestiture that closed on June 12, 2019. Average realized prices, including and excluding the effects of hedging, are detailed above.

Hedging impacts. For the quarter ended September 30, 2019, the net gain (loss) on commodity derivative instruments includes the following:


Three Months Ended September 30, 2019


In Thousands


Per Unit

Oil derivatives




Net gain (loss) on settlements

$

(1,045)



$

(0.38)


Net gain (loss) on fair value adjustments

25,767




   Total gain (loss) on oil derivatives

24,722




Natural gas derivatives




Net gain (loss) on settlements

2,056



$

0.45


Net gain (loss) on fair value adjustments

(733)




   Total gain (loss) on natural gas derivatives

1,323




Total commodity derivatives




Net gain (loss) on settlements

1,011



$

0.29


Net gain (loss) on fair value adjustments

25,034




   Total gain (loss) on total commodity derivatives

$

26,045




Lease Operating Expenses, including workover ("LOE"). LOE per Boe for the three months ended September 30, 2019 was $5.65 per Boe, compared to LOE of $6.18 per Boe in the second quarter of 2019. The decrease on a per unit basis was attributable to a reduction in chemical usage, repairs and maintenance, and workovers compared to the previous period.

Production Taxes, including ad valorem taxes. Production taxes were $3.41 per Boe for the three months ended September 30, 2019, representing approximately 7.6% of total revenue before the impact of derivative settlements. The incremental increase as compared to the second quarter of 2019 and third quarter of 2018 is due to an increase in ad valorem taxes based upon a higher valuation of our oil and gas properties by the taxing jurisdictions.

Depreciation, Depletion and Amortization ("DD&A"). DD&A for the three months ended September 30, 2019 was $16.09 per Boe compared to $17.07 per Boe in the second quarter of 2019. The decrease was attributed to lower future development costs for PUD locations relative to our historical rate.

General and Administrative ("G&A"). G&A was $9.4 million, or $2.70 per Boe, and G&A, excluding certain non-cash incentive share-based compensation valuation adjustments, ("Adjusted G&A", a non-GAAP measure(i)) was $10.3 million, or $2.96 per Boe, for the three months ended September 30, 2019 compared to $10.6 million, or $2.87 per Boe, and $11.4 million, or $3.10 per Boe, respectively, for the second quarter of 2019. The cash component of Adjusted G&A was $8.8 million, or $2.52 per Boe, for the three months ended September 30, 2019 compared to $8.9 million, or $2.42 per Boe, for the second quarter of 2019.

For the three months ended September 30, 2019, G&A and Adjusted G&A, which excludes the amortization of equity-settled, share-based incentive awards and corporate depreciation and amortization, are calculated as follows (in thousands):


Three Months Ended
September 30, 2019

Total G&A expense

$

9,388


   Change in the fair value of liability share-based awards (non-cash)

926


Adjusted G&A – total

10,314


   Restricted stock share-based compensation (non-cash)

(1,525)


   Corporate depreciation & amortization (non-cash)

(3)


Adjusted G&A – cash component

$

8,786


Income Tax Expense. Callon provides for income taxes at the statutory rate of 21% adjusted for permanent differences expected to be realized. We recorded an income tax expense of $17.9 million for the three months ended September 30, 2019, compared to income tax expense of $16.7 million for the three months ended June 30, 2019. The change in income tax expense is based upon net income generated in the respective periods.

Updated 2019 Guidance (Stand-Alone Callon)

The Company is updating guidance for the full year 2019 to reflect positive operational performance throughout the first three quarters of the year. This updated guidance does not take into effect the Carrizo merger, which is expected to close in the fourth quarter, subject to shareholder approvals.


Third Quarter


Year to Date


Updated Full Year


2019 Actual


2019 Actual


2019 Guidance

Total production (Mboe/d) (a)

37.8


39.5


39.2 - 39.6

% oil

78%


78%


78%

Income statement expenses (per Boe)






LOE, including workovers

$5.65


$6.16


$5.75 - $6.25

Production taxes, including ad valorem (% unhedged revenue)

8%


7%


7%

   Adjusted G&A: cash component (b)

$2.52


$2.41


$2.00 - $2.50

   Adjusted G&A: non-cash component (c)

$0.44


$0.52


$0.50 - $1.00

   Cash interest expense (d)

$0.00


$0.00


$0.00

Effective income tax rate

24%


24%


22%

Capital expenditures ($MM, accrual basis)






Total operational (e)

$116


$405


$495 - $520

Capitalized interest and G&A expenses

$26


$84


$100 - $105

Net operated horizontal wells placed on production

16


43


48 - 50



(a)

Year to date 2019 actual production reflects volumes associated with southern Midland Basin properties divested on June 12, 2019.

(b)

Excludes the amortization of equity-settled, share-based incentive awards, corporate depreciation and amortization, and pending merger-related expenses. Adjusted G&A is a non-GAAP financial measure; see the reconciliation provided within this press release for a reconciliation of G&A expense on a GAAP basis to Adjusted G&A expense.

(c)

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

(d)

All cash interest expense anticipated to be capitalized.

(e)

Includes facilities, equipment, seismic, land and other items. Excludes capitalized expenses.

Hedge Portfolio Summary

The following table summarizes our open derivative positions as of September 30, 2019:


For the Remainder


For the Full Year


For the Full Year


Oil contracts (WTI)

of 2019


of 2020


of 2021


   Puts







      Total volume (Bbls)

230,000







      Weighted average price per Bbl

$

65.00



$



$



   Put spreads







   Total volume (Bbls)

230,000







   Weighted average price per Bbl







   Floor (long put)

$

65.00



$



$



   Floor (short put)

$

42.50



$



$



   Collar contracts with short puts (three-way collars)







   Total volume (Bbls)

1,196,000



5,124,000





   Weighted average price per Bbl







   Ceiling (short call)

$

67.46



$

65.46



$



   Floor (long put)

$

56.54



$

55.45



$



   Floor (short put)

$

43.65



$

44.66



$



   Collar contracts (two-way collars)







   Total volume (Bbls)

276,000







   Weighted average price per Bbl







   Ceiling (short call)

$

60.00



$



$



   Floor (long put)

$

55.00



$



$



   Short call







   Total volume (Bbls)





1,825,000


(a)

   Weighted average price per Bbl

$



$



$

63.00



   Swap contracts







   Total volume (Bbls)

276,000



1,098,000





   Weighted average price per Bbl

$

60.17



$

56.17



$










Oil contracts (Brent ICE)







   Collar contracts with short puts (three-way collars)







   Total volume (Bbls)



837,500





   Weighted average price per Bbl







   Ceiling (short call)

$



$

70.00



$



   Floor (long put)

$



$

58.24



$



   Floor (short put)

$



$

50.00



$










Oil contracts (Midland basis differential)







   Swap contracts







   Total volume (Bbls)

2,176,000



4,576,000



1,095,000



   Weighted average price per Bbl

$

(2.50)



$

(1.29)



$

1.00










Oil contracts (Argus Houston MEH basis differential)







   Swap contracts







   Total volume (Bbls)



1,439,205





   Weighted average price per Bbl

$



$

2.40



$










Natural gas contracts (Henry Hub)







   Collar contracts (two-way collars)







      Total volume (MMBtu)

598,000







      Weighted average price per MMBtu







         Ceiling (short call)

$

3.50



$



$



         Floor (long put)

$

3.13



$



$



   Swap contracts







      Total volume (MMBtu)

155,000







      Weighted average price per MMBtu

$

2.87



$



$










Natural gas contracts (Waha basis differential)







   Swap contracts







      Total volume (MMBtu)

2,116,000



4,758,000





      Weighted average price per MMBtu

$

(1.18)



$

(1.12)



$





(a)

Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps.

Income (Loss) Available to Common Stockholders. The Company reported net income available to common shareholders of $47.2 million, or $0.21 per fully diluted share, and Adjusted Income available to common shareholders of $42.9 million, or $0.19 per fully diluted share, for the three months ended September 30, 2019. Adjusted Income, a non-GAAP financial measure(i), adjusts our income available to common stockholders to reflect our theoretical tax provision for prior period quarters as if the valuation allowance did not exist. The following tables reconcile to the related GAAP measure, the Company's income available to common stockholders to Adjusted Income and the Company's net income to Adjusted EBITDA(i), a non-GAAP financial measure, (in thousands):


Three Months Ended


September 30, 2019


June 30, 2019


September 30, 2018

Income (loss) available to common stockholders

$

47,180



$

53,357



$

36,108


   (Gain) loss on derivatives, net of settlements

(20,798)



(15,193)



25,100


   Change in the fair value of share-based awards

(925)



(850)



879


   Merger and integration expense

5,943






   Other operating expense

(175)



770




Tax effect on adjustments above

3,351



3,207



(5,456)


   Change in valuation allowance





(8,323)


   Loss on redemption of preferred stock

8,304






Adjusted Income (i)

$

42,880



$

41,291



$

48,308


Adjusted Income per fully diluted common share (i)

$

0.19



$

0.18



$

0.21





Three Months Ended


September 30, 2019


June 30, 2019


September 30, 2018

Net income (loss)

$

55,834



$

55,180



$

37,931


   (Gain) loss on derivatives, net of settlements

(20,798)



(15,193)



25,100


   Non-cash stock-based compensation expense

644



904



2,587


   Merger and integration expense

5,943






   Other operating expense

(161)



935



1,435


   Income tax (benefit) expense

17,902



16,691



1,487


   Interest expense

739



741



711


   Depreciation, depletion and amortization

57,107



64,374



48,977


   Accretion expense

128



216



202


Adjusted EBITDA (i)

$

117,338



$

123,848



$

118,430


Discretionary Cash Flow. Operating cash flow was $113.7 million and discretionary cash flow, a non-GAAP measure(i), was $111.5 million for the three months ended September 30, 2019. Discretionary cash flow is reconciled to operating cash flow in the following table (in thousands):


Three Months Ended


September 30, 2019


June 30, 2019


September 30, 2018

Cash flows from operating activities:






Net income (loss)

$

55,834



$

55,180



$

37,931


Adjustments to reconcile net income to cash provided by operating activities:






   Depreciation, depletion and amortization

57,107



64,374



48,977


   Accretion expense

128



216



202


   Amortization of non-cash debt related items

739



741



708


   Deferred income tax (benefit) expense

17,902



16,691



1,487


   (Gain) loss on derivatives, net of settlements

(20,798)



(15,193)



25,100


   (Gain) loss on sale of other property and equipment

(13)



21



(102)


   Non-cash expense related to equity share-based awards

1,569



1,754



1,708


   Change in the fair value of liability share-based awards

(925)



(850)



879


Discretionary cash flow (i)

$

111,543



$

122,934



$

116,890


   Changes in working capital

2,803



27,789



(347)


   Payments to settle asset retirement obligations

(654)



(107)



(507)


   Payments to settle vested liability share-based awards



(129)




Net cash provided by operating activities

$

113,692



$

150,487



$

116,036


 

Callon Petroleum Company

Consolidated Balance Sheets

(in thousands, except par and per share data)



September 30, 2019


December 31, 2018

ASSETS

Unaudited



Current assets:




   Cash and cash equivalents

$

11,309



$

16,051


   Accounts receivable

114,120



131,720


   Fair value of derivatives

25,032



65,114


   Other current assets

14,912



9,740


      Total current assets

165,373



222,625


Oil and natural gas properties, full cost accounting method:




   Evaluated properties

4,830,499



4,585,020


   Less accumulated depreciation, depletion, amortization and impairment

(2,458,026)



(2,270,675)


   Evaluated oil and natural gas properties, net

2,372,473



2,314,345


   Unevaluated properties

1,405,993



1,404,513


      Total oil and natural gas properties, net

3,778,466



3,718,858


Operating lease right-of-use assets

24,447




Other property and equipment, net

24,770



21,901


Restricted investments

3,490



3,424


Deferred financing costs

5,081



6,087


Fair value of derivatives

11,209




Other assets, net

4,087



6,278


   Total assets

$

4,016,923



$

3,979,173


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




   Accounts payable and accrued liabilities

$

243,481



$

261,184


   Operating lease liabilities

19,196




   Accrued interest

25,660



24,665


   Cash-settleable restricted stock unit awards

535



1,390


   Asset retirement obligations

1,250



3,887


   Fair value of derivatives

8,941



10,480


   Other current liabilities

1,948



13,310


      Total current liabilities

301,011



314,916


Senior secured revolving credit facility

200,000



200,000


6.125% senior unsecured notes due 2024

596,337



595,788


6.375% senior unsecured notes due 2026

394,317



393,685


Operating lease liabilities

4,995




Asset retirement obligations

8,294



10,405


Cash-settleable restricted stock unit awards

1,737



2,067


Deferred tax liability

39,007



9,564


Fair value of derivatives

2,573



7,440


Other long-term liabilities



100


   Total liabilities

1,548,271



1,533,965


Commitments and contingencies




Stockholders' equity:




   Preferred stock, series A cumulative, $0.01 par value and $50.00 liquidation preference, 2,500,000 shares authorized; 0 and 1,458,948 shares outstanding, respectively



15


   Common stock, $0.01 par value, 300,000,000 shares authorized; 228,372,081 and 227,582,575 shares outstanding, respectively

2,284



2,276


   Capital in excess of par value

2,421,559



2,477,278


   Retained earnings (accumulated deficit)

44,809



(34,361)


      Total stockholders' equity

2,468,652



2,445,208


Total liabilities and stockholders' equity

$

4,016,923



$

3,979,173


 

Callon Petroleum Company

Consolidated Statements of Operations

(Unaudited; in thousands, except per share data)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018

Operating revenues:








Oil sales

$

148,210



$

142,601



$

450,036



$

380,500


Natural gas sales

7,168



18,613



25,441



45,229


Total operating revenues

155,378



161,214



475,477



425,729


Operating expenses:








Lease operating expenses

19,668



18,525



66,511



44,705


Production taxes

11,866



10,263



33,810



26,265


Depreciation, depletion and amortization

56,002



48,257



178,690



122,407


General and administrative

9,388



9,721



31,705



26,779


Merger and integration expense

5,943





5,943




Settled share-based awards





3,024




Accretion expense

128



202



585



626


Other operating expense

(161)



1,435



931



3,750


Total operating expenses

102,834



88,403



321,199



224,532


Income from operations

52,544



72,811



154,278



201,197


Other (income) expenses:








Interest expense, net of capitalized amounts

739



711



2,218



1,765


(Gain) loss on derivative contracts

(21,809)



34,339



31,415



55,374


Other income

(122)



(1,657)



(270)



(2,571)


Total other (income) expense

(21,192)



33,393



33,363



54,568


Income before income taxes

73,736



39,418



120,915



146,629


Income tax expense

17,902



1,487



29,444



2,463


Net income

55,834



37,931



91,471



144,166


Preferred stock dividends

(350)



(1,823)



(3,997)



(5,471)


Loss on redemption of preferred stock

(8,304)





(8,304)




Income available to common stockholders

$

47,180



$

36,108



$

79,170



$

138,695


Income per common share:








Basic

$

0.21



$

0.16



$

0.35



$

0.65


Diluted

$

0.21



$

0.16



$

0.35



$

0.65


Weighted average common shares outstanding:








Basic

228,322



227,564



228,054



213,409


Diluted

228,469



228,140



228,557



214,079


 

Callon Petroleum Company

Consolidated Statements of Cash Flows

(Unaudited; in thousands)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018

Cash flows from operating activities:








Net income

$

55,834



$

37,931



$

91,471



$

144,166


Adjustments to reconcile net income to cash provided by operating activities:








   Depreciation, depletion and amortization

57,107



48,977



182,153



124,430


   Accretion expense

128



202



585



626


   Amortization of non-cash debt related items

739



708



2,218



1,749


   Deferred income tax expense

17,902



1,487



29,444



2,463


   Loss on derivatives, net of settlements

(20,798)



25,100



30,979



29,696


   (Gain) loss on sale of other property and equipment

(13)



(102)



36



(80)


   Non-cash expense related to equity share-based awards

1,569



1,708



7,868



4,466


   Change in the fair value of liability share-based awards

(925)



879



106



1,428


   Payments to settle asset retirement obligations

(654)



(507)



(1,425)



(1,080)


   Payments for cash-settled restricted stock unit awards





(1,425)



(4,990)


Changes in current assets and liabilities:








   Accounts receivable

(21,081)



(56,764)



17,600



(54,384)


   Other current assets

929



3,885



(5,172)



(1,665)


   Current liabilities

23,216



47,741



(13,038)



64,801


   Other

(261)



4,791



(2,662)



4,389


Net cash provided by operating activities

113,692



116,036



338,738



316,015


Cash flows from investing activities:








Capital expenditures

(143,995)



(156,982)



(503,425)



(455,352)


Acquisitions

(1,418)



(550,592)



(40,788)



(595,984)


Acquisition deposit



27,600






Proceeds from sale of assets

5,656



5,249



279,952



8,326


Net cash provided by (used in) investing activities

(139,757)



(674,725)



(264,261)



(1,043,010)


Cash flows from financing activities:








Borrowings on senior secured revolving credit facility

221,000



105,000



581,000



270,000


Payments on senior secured revolving credit facility

(126,000)



(40,000)



(581,000)



(230,000)


Issuance of 6.375% senior unsecured notes due 2026







400,000


Issuance of common stock



7





288,364


Payment of preferred stock dividends

(350)



(1,823)



(3,997)



(5,471)


Payment of deferred financing costs



(1,296)



(31)



(9,960)


Tax withholdings related to restricted stock units

(316)



(216)



(2,174)



(1,804)


Redemption of preferred stock

(73,012)





(73,017)




Net cash provided by (used in) financing activities

21,322



61,672



(79,219)



711,129


Net change in cash and cash equivalents

(4,743)



(497,017)



(4,742)



(15,866)


Balance, beginning of period

16,052



509,146



16,051



27,995


Balance, end of period

$

11,309



$

12,129



$

11,309



$

12,129


Non-GAAP Financial Measures and Reconciliations

This news release refers to non-GAAP financial measures such as "Discretionary Cash Flow," "Adjusted G&A," "Adjusted Income," "Adjusted EBITDA" and "Adjusted Total Revenue." 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 SEC filings and posted on our website.

  • Callon believes that the non-GAAP measure of discretionary cash flow 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. Discretionary cash flow is defined by Callon as net cash provided by operating activities before changes in working capital and payments to settle asset retirement obligations and vested liability share-based awards. 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. 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 (as defined under GAAP), or as a measure of liquidity, or as an alternative to net income.
  • Adjusted general and administrative expense ("Adjusted G&A") is a supplemental non-GAAP financial measure that excludes certain non-recurring expenses and non-cash valuation adjustments related to incentive compensation plans, as well as non-cash corporate depreciation and amortization expense. Callon believes that the non-GAAP measure of Adjusted G&A is useful to investors because it provides readers with a meaningful measure of our recurring G&A expense and provides for greater comparability period-over-period. The table contained within this release details all adjustments to G&A on a GAAP basis to arrive at Adjusted G&A.
  • Callon believes that the non-GAAP measure of Adjusted Income available to common shareholders ("Adjusted Income") and Adjusted Income per fully diluted common share 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 certain non-recurring items and non-cash valuation adjustments, which are detailed in the reconciliation provided.
  • Callon calculates adjusted earnings before interest, income taxes, depreciation, depletion and amortization ("Adjusted EBITDA") as net income (loss) before interest expense, income taxes, depreciation, depletion and amortization, asset retirement obligation accretion expense, (gains) losses on derivative instruments excluding net settled derivative instruments, impairment of oil and natural gas properties, non-cash equity based compensation, 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 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 may not be comparable to similarly titled measures of other companies.
  • Callon believes that the non-GAAP measure of Adjusted Total Revenue 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.

Earnings Call Information

The Company will host a conference call on Tuesday, November 5, 2019, to discuss its third quarter 2019 financial and operating results.

Please join Callon Petroleum Company via the Internet for a webcast of the conference call:

Date/Time:

Tuesday, November 5, 2019, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time)

Webcast:

Select "IR Calendar" under the "Investors" section of the website: www.callon.com.

Presentation Slides:

Select "Presentations" under the "Investors" section of the website: www.callon.com.

Alternatively, you may join by telephone using the following numbers:

Toll Free:

1-888-317-6003

Canada Toll Free:

1-866-284-3684

International:

1-412-317-6061

Access code:

1044236

An archive of the conference call webcast will be available at www.callon.com under the "Investors" section of the website.

About Callon Petroleum Company

Callon is an independent energy company focused on the acquisition and development of unconventional onshore oil and natural gas reserves in the Permian Basin in West Texas.

This news release is posted on the Company's website at www.callon.com and will be archived there for subsequent review under the "News" link on the top of the homepage.

No Offer or Solicitation

Communications herein do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed transaction or otherwise, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Communication herein do not constitute a notice of redemption with respect to or an offer to purchase or sell (or the solicitation of an offer to purchase or sell) any preferred stock of Carrizo Oil & Gas, Inc. ("Carrizo").

Additional Information and Where to Find It

In connection with the proposed transaction, Callon has filed, and the SEC has declared effective, a registration statement on Form S-4 (the "Registration Statement"), which contains a joint proxy statement of Callon and Carrizo that also constitutes a prospectus of Callon. This communication is not a substitute for the joint proxy statement/prospectus or the Registration Statement or for any other document that Callon or Carrizo may file with the SEC and/or send to Callon's shareholders and/or Carrizo's shareholders in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF CALLON AND CARRIZO ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED BY CALLON AND CARRIZO WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CALLON, CARRIZO AND THE PROPOSED TRANSACTION.

Investors will be able to obtain free copies of the Registration Statement and joint proxy statement/prospectus, as each may be amended from time to time, and other relevant documents filed by Callon and Carrizo with the SEC (when they become available) through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by Callon will be available free of charge from Callon's website at www.callon.com under the "Investors" tab or by contacting Callon's Investor Relations Department at (281) 589-5200 or IR@callon.com. Copies of documents filed with the SEC by Carrizo will be available free of charge from Carrizo's website at www.carrizo.com under the "Investor Relations" tab or by contacting Carrizo's Investor Relations Department at (713) 328-1055 or IR@carrizo.com.

Participants in the Proxy Solicitation

Callon, Carrizo and their respective directors and certain of their executive officers and other members of management and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from Callon's shareholders and Carrizo's shareholders in connection with the proposed transaction. Information regarding the executive officers and directors of Callon is included in its definitive proxy statement for its 2019 annual meeting filed with the SEC on March 27, 2019. Information regarding the executive officers and directors of Carrizo is included in its definitive proxy statement for its 2019 annual meeting filed with the SEC on April 2, 2019. Additional information regarding the persons who may be deemed participants and their direct and indirect interests, by security holdings or otherwise, will be set forth in the Registration Statement and joint proxy statement/prospectus and other materials when they are filed with the SEC in connection with the proposed transaction. Free copies of these documents may be obtained as described in the paragraphs above.

Cautionary Statement Regarding Forward-Looking Information

Certain statements in this communication concerning the proposed transaction, including any statements regarding the expected timetable for completing the proposed Carrizo transaction, the results, effects, benefits and synergies of the proposed transaction, future opportunities for the combined company, future financial performance and condition, guidance and any other statements regarding Callon's or Carrizo's future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are "forward-looking" statements based on assumptions currently believed to be valid. Forward-looking statements are all statements other than statements of historical facts. The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "probable," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "would," "potential," "may," "might," "anticipate," "likely" "plan," "positioned," "strategy," and similar expressions or other words of similar meaning, and the negatives thereof, are intended to identify forward-looking statements. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, failure to obtain the required votes of Callon's shareholders or Carrizo's shareholders to approve the transaction and related matters; whether any redemption of Carrizo's preferred stock will be necessary or will occur prior to the closing of the transaction; the risk that a condition to closing of the proposed transaction may not be satisfied, that either party may terminate the merger agreement or that the closing of the proposed transaction might be delayed or not occur at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Callon and Carrizo; the effects of the business combination of Callon and Carrizo, including the combined company's future financial condition, results of operations, strategy and plans; the ability of the combined company to realize anticipated synergies in the timeframe expected or at all; changes in capital markets and the ability of the combined company to finance operations in the manner expected; regulatory approval of the transaction; the effects of commodity prices; and the risks of oil and gas activities. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for our operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.

Additional factors that could cause results to differ materially from those described above can be found in Callon's Annual Report on Form 10-K for the year ended December 31, 2018 and in its subsequent Quarterly Reports on Form 10-Q for the quarter ended March 31, 2019, and the quarter ended June 30, 2019, each of which is on file with the SEC and available from Callon's website at www.callon.com under the "Investors" tab, and in other documents Callon files with the SEC, and in Carrizo's Annual Report on Form 10-K for the year ended December 31, 2018 and in its subsequent Quarterly Reports on Form 10-Q for the quarter ended March 31, 2019, and the quarter ended June 30, 2019, each of which is on file with the SEC and available from Carrizo's website at www.carrizo.com under the "Investor Relations" tab, and in other documents Carrizo files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Callon nor Carrizo assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

Contact Information

Mark Brewer
Director of Investor Relations
or
Kate Schilling
Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200

i)

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

 

Cision

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