Change in Accounting Principle

12 Months Ended

Dec. 31, 2023

Accounting Changes and Error Corrections [Abstract]

Change in Accounting Principle

Change in Accounting Principle

In the first quarter of 2023, the Company voluntarily changed its method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods has been recast to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration costs such as exploratory dry holes, exploratory geophysical and geological costs, delay rentals, unproved leasehold impairments and exploration overhead are expensed as incurred as opposed to being capitalized under the full cost method of accounting. The successful efforts method also provides for the assessment of potential proved oil and gas property impairments by comparing the net book value of proved oil and gas properties to associated estimated undiscounted future net cash flows. If the net book value exceeds the estimated undiscounted future net cash flows, an impairment is recorded to reduce the net book value to fair value. Under the full cost method of accounting, an impairment would be required if the net book value of oil and natural gas properties exceeds a full cost ceiling using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are recognized more frequently on the divestitures of oil and gas properties under the successful efforts method, as opposed to an adjustment to the net book value of the oil and gas properties under the full cost method.

The “Impairment of oil and gas properties” and “Gain on sale of oil and gas properties” line items presented in the tables below are in connection with the sale of all of the Company’s interests of Callon (Eagle Ford) LLC to Ridgemar Energy Operating, LLC. See “Note 5 — Acquisitions and Divestitures” for additional details.

The following tables present the effects of the change to the successful efforts method in the consolidated balance sheets:

	As of December 31, 2023
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Oil and natural gas properties:
Proved properties	$11,661,279	($2,004,174)	$9,657,105
Accumulated depreciation, depletion, amortization and impairments	(6,881,323)	2,311,191	(4,570,132)
Unproved properties	1,559,952	(496,919)	1,063,033
Total oil and gas properties, net	6,339,908	(189,902)	6,150,006
Deferred income taxes	136,144	44,819	180,963
Total assets	$6,856,559	($145,083)	$6,711,476
Stockholders’ equity:
Accumulated deficit	(50,745)	(145,083)	(195,828)
Total stockholders' equity	4,136,444	(145,083)	3,991,361
Total liabilities and stockholders' equity	$6,856,559	($145,083)	$6,711,476

	As of December 31, 2022
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Oil and natural gas properties:
Proved properties	$10,367,478	($1,099,343)	$9,268,135
Accumulated depreciation, depletion, amortization and impairments	(6,343,875)	1,927,269	(4,416,606)
Unproved properties	1,711,306	(485,538)	1,225,768
Total oil and gas properties, net	5,734,909	342,388	6,077,297
Total assets	$6,146,081	$342,388	$6,488,469
Deferred income taxes (1)	4,279	2,029	6,308
Stockholders’ equity:
Accumulated deficit	(937,388)	340,359	(597,029)
Total stockholders' equity	3,085,422	340,359	3,425,781
Total liabilities and stockholders' equity	$6,146,081	$342,388	$6,488,469

(1)    Included in “Other long-term liabilities” in the consolidated balance sheets.

The following tables present the effects of the change to the successful efforts method in the consolidated statements of operations:

	Year Ended December 31, 2023
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands, except per share amounts)
Operating Expenses:
Exploration	$—	$9,143	$9,143
Depreciation, depletion and amortization	545,144	(9,483)	535,661
Impairment of oil and gas properties	—	406,898	406,898
Gain on sale of oil and gas properties	—	(23,476)	(23,476)
General and administrative	77,464	37,880	115,344
Income From Operations	784,840	(420,962)	363,878
Other Expenses:
Interest expense	67,977	111,328	179,305
Income Before Income Taxes	743,683	(532,290)	211,393
Income tax benefit	142,960	46,848	189,808
Net Income	$886,643	($485,442)	$401,201
Net Income Per Common Share:
Basic	$13.71		$6.20
Diluted	$13.67		$6.19

	Year Ended December 31, 2022
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands, except per share amounts)
Operating Expenses:
Exploration	$—	$9,703	$9,703
Depreciation, depletion and amortization	466,517	27,712	494,229
Impairment of oil and gas properties	—	2,201	2,201
General and administrative	57,393	40,603	97,996
Income From Operations	1,680,532	(80,219)	1,600,313
Other Expenses:
Interest expense	79,667	108,125	187,792
Income Before Income Taxes	1,221,609	(188,344)	1,033,265
Income tax expense	(11,793)	(2,029)	(13,822)
Net Income	$1,209,816	($190,373)	$1,019,443
Net Income Per Common Share:
Basic	$19.63		$16.54
Diluted	$19.54		$16.47

	Year Ended December 31, 2021
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands, except per share amounts)
Operating Expenses:
Exploration	$—	$6,470	$6,470
Depreciation, depletion and amortization	356,556	32,056	388,612
Impairment of oil and gas properties	—	52,295	52,295
General and administrative	50,483	41,122	91,605
Income From Operations	1,038,343	(131,943)	906,400
Other Expenses:
Interest expense	102,012	99,647	201,659
Income Before Income Taxes	365,331	(231,590)	133,741
Income tax expense	(180)	—	(180)
Net Income	$365,151	($231,590)	$133,561
Net Income Per Common Share:
Basic	$7.51		$2.75
Diluted	$7.26		$2.65

The following tables present the effects of the change to the successful efforts method in the consolidated statements of cash flows:

	Year Ended December 31, 2023
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Cash flows from operating activities:
Net income	$886,643	($485,442)	$401,201
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	545,144	(9,483)	535,661
Impairment of oil and gas properties	—	406,898	406,898
Amortization of non-cash debt related items, net	4,064	6,726	10,790
Deferred income tax benefit	(140,422)	(46,848)	(187,270)
Gain on sale of oil and gas properties	—	(23,476)	(23,476)
Non-cash expense related to share-based awards	4,019	7,394	11,413
Net cash provided by operating activities	1,236,760	(144,231)	1,092,529
Cash flows from investing activities:
Capital expenditures	(1,104,070)	135,088	(968,982)
Acquisition of oil and gas properties	(297,082)	9,143	(287,939)
Net cash used in investing activities	(851,542)	144,231	(707,311)
Net change in cash and cash equivalents	(70)	—	(70)
Balance, beginning of period	3,395	—	3,395
Balance, end of period	$3,325	$—	$3,325

	Year Ended December 31, 2022
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Cash flows from operating activities:
Net income	$1,209,816	($190,373)	$1,019,443
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	466,517	27,712	494,229
Impairment of oil and gas properties	—	2,201	2,201
Amortization of non-cash debt related items, net	5,280	7,052	12,332
Deferred income tax expense	4,279	2,029	6,308
Non-cash expense related to share-based awards	2,507	5,535	8,042
Net cash provided by operating activities	1,501,517	(145,844)	1,355,673
Cash flows from investing activities:
Capital expenditures	(992,985)	144,297	(848,688)
Acquisition of oil and gas properties	(28,253)	1,547	(26,706)
Net cash used in investing activities	(999,027)	145,844	(853,183)
Net change in cash and cash equivalents	(6,487)	—	(6,487)
Balance, beginning of period	9,882	—	9,882
Balance, end of period	$3,395	$—	$3,395

	Year Ended December 31, 2021
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Cash flows from operating activities:
Net income	$365,151	($231,590)	$133,561
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	356,556	32,056	388,612
Impairment of oil and gas properties	—	52,295	52,295
Amortization of non-cash debt related items, net	10,124	9,909	20,033
Deferred income tax expense	—	—	—
Non-cash expense related to share-based awards	12,923	12,934	25,857
Net cash provided by operating activities	974,143	(124,396)	849,747
Cash flows from investing activities:
Capital expenditures	(578,487)	124,126	(454,361)
Acquisition of oil and gas properties	(493,732)	270	(493,462)
Net cash used in investing activities	(876,400)	124,396	(752,004)
Net change in cash and cash equivalents	(10,354)	—	(10,354)
Balance, beginning of period	20,236	—	20,236
Balance, end of period	$9,882	$—	$9,882

The following tables present the effects of the change to the successful efforts method in the consolidated statements of stockholders’ equity:

	As of December 31, 2023
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Accumulated deficit	($50,745)	($145,083)	($195,828)
Total stockholders’ equity	$4,136,444	($145,083)	$3,991,361

	As of December 31, 2022
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Accumulated deficit	($937,388)	$340,359	($597,029)
Total stockholders’ equity	$3,085,422	$340,359	$3,425,781

	As of December 31, 2021
	Under Full Cost	Changes	Under Successful Efforts
	(In thousands)
Accumulated deficit	($2,147,204)	$530,732	($1,616,472)
Total stockholders’ equity	$1,865,768	$530,732	$2,396,500