EX-99.1 2 ex99_1.htm EXHIBIT 99.1 ex99_1.htm
EXHIBIT 99.1

For further information contact
Rodger W. Smith   1-800-451-1294
FOR IMMEDIATE RELEASE

Callon Petroleum Company Reports Increased Earnings
For Second Quarter, First Six Months of 2008

Natchez, MS (August 6, 2008)—Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and the six-month periods ended June 30, 2008.

Second Quarter and Six Months 2008 Net Income.  For the quarter ended June 30, 2008, the company reported net income of $5.2 million which was a 100% increase over the $2.6 million reported for the same period in 2007.  Net income for the second quarter of 2008 included a one-time charge of $11.9 million, or $0.35 per share net of tax, related to the early extinguishment of debt associated with the retirement of the company’s $200 million Senior Revolving Credit Facility.   Net income per share was $0.23 and $0.12 for the quarters ended June 30, 2008 and 2007, respectively.  For the six months ended June 30, 2008, Callon reported net income of $12.8 million, or $0.58 per share. This compares with net income of $8.4 million, or $0.39 per share during the same period of 2007.  All per share amounts are on a diluted basis.

 Second Quarter and Six Months 2008 Operating Results.  Operating results for the three months ended June 30, 2008 include oil and gas sales of $48.0 million from average production of 37.2 million cubic feet of natural gas equivalent per day (MMcfe/d).  This corresponds to sales of $43.5 million from average production of 54.1 MMcfe/d during the comparable 2007 period. The average price received, after the impact of hedging, per thousand cubic feet of natural gas (Mcf) for the quarter ended June 30, 2008 increased to $11.67, compared to $8.17 for the quarter ended June 30, 2007. The average price received, after the impact of hedging, per barrel of oil (Bbl) in the second quarter of 2008 increased to $99.99, compared to $61.47 during the second quarter of 2007. Oil and gas sales for the first six months of 2008 totaled $93.0 million from average production of 39.6 MMcfe/d.  This corresponds to sales of $89.0 million from average production of 57.2 MMcfe/d during the same period in 2007.  The average price, after the impact of hedging, received per Mcf in the six-month period of 2008 increased to $10.46, compared to $8.07 during the first six months of 2007, while the average price received, after the impact of hedging, per Bbl in the first half of 2008 increased to $93.27, compared to $58.36 during the same period in 2007.

 Second Quarter and Six Months 2008 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended June 30, 2008 totaled $30.2 million compared to $24.9 million during the comparable prior year period.  Net cash flow provided by operating activities, as defined by GAAP, totaled $28.8 million and $37.3 million during the quarters ended June 30, 2008 and 2007, respectively. Discretionary cash flow for the first six months of 2008 totaled $59.3 million compared to $58.4 million during the same period in 2007.  Net cash flow provided by operating activities, as defined by GAAP, totaled $63.9 million and $70.2 million during the six-month periods ended June 30, 2008 and 2007, respectively. (See “Non-GAAP Financial Measure” that follows and the accompanying reconciliation of discretionary cash flow, a non-GAAP measure, to net cash flow provided by operating activities.)

 
 
 

Non-GAAP Financial Measure - This news release refers to a non-GAAP financial measure as “discretionary cash flow.” Callon believes that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company’s ability to internally fund exploration and development activities and to service or incur additional debt.  The company also 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 may not relate to the period in which the operating activities occurred. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.
 
Reconciliation of Non-GAAP Financial Measure:
  
Three Months Ended
    
Six Months Ended
  
(In thousands)
  
June 30,
    
June 30,
  
   
2008
    
2007
    
2008
    
2007
  
Discretionary cash flow
   $ 30,245     $ 24,886     $ 59,288     $ 58,392  
Net working capital changes and other changes
     (1,467 )      12,401        4,621       11,764  
Net cash flow provided by operating activities
   $ 28,778     $ 37,287     $ 63,909     $ 70,156      

Production and Price Information:
  
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
June 30,
  
   
2008
    
2007
    
2008
    
2007
  
Production:
                        
Oil (MBbls)
     286       263       575       551  
Gas (MMcf)
     1,668       3,341       3,759       7,043  
Gas equivalent (MMcfe)
     3,382       4,920       7,211       10,348  
Average daily (MMcfe)
     37.2       54.1       39.6       57.2  
                                 
Average prices:
                                
Oil ($/Bbl) (a)
   $ 99.99     $ 61.47     $ 93.27     $ 58.36  
Gas ($/Mcf)
   $ 11.67     $ 8.17     $ 10.46     $ 8.07  
Gas equivalent ($/Mcfe)
   $ 14.20     $ 8.84     $ 12.90     $ 8.60  
                                 
Additional per Mcfe data:
                                
Sales price
   $ 14.20     $ 8.84     $ 12.90     $ 8.60  
Lease operating expenses
      1.44       1.75     $ 1.39       1.47  
Operating margin
   $ 12.76     $ 7.09     $ 11.51     $ 7.13  
                                 
Depletion
   $ 4.50     $ 3.83     $ 4.19     $ 3.93  
General and administrative (net of management fees)
   $ 0.87     $ 0.46     $ 0.78     $ 0.43  
                                 
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil:
                                
                                 
Average NYMEX oil price
   $ 123.98     $ 65.00     $ 110.94     $ 61.63  
Basis differentials and quality adjustments
     ( 4.06 )     ( 2.85 )     ( 3.95 )     ( 4.18 )
Transportation
     ( 1.34 )     ( 1.14 )     ( 1.30 )     ( 1.14 )
Hedging
     ( 18.59 )     0.46       ( 12.42 )     2.05  
Averaged realized oil price
   $ 99.99     $ 61.47     $ 93.27     $ 58.36  
 
 
 
 

Callon Petroleum Company
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)

 
   
June 30,
2008
    
December 31,
2007
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 42,056     $ 53,250  
Accounts receivable
     41,956       22,073  
Deferred tax asset
     22,707       --  
Restricted investments
     --       100  
Other current assets
     3,366       6,592  
Total current assets
     110,085       82,015  
                 
Oil and gas properties, full-cost accounting method:
                
Evaluated properties
     1,272,005       1,349,904  
Less accumulated depreciation, depletion and amortization
     (768,621 )     (738,374 )
      503,384       611,530  
                 
Unevaluated properties excluded from amortization
     54,514       70,176  
Total oil and gas properties
     557,898       681,706  
                 
Other property and equipment, net
     2,130       1,986  
Restricted investments
     4,704       4,525  
Investment in Medusa Spar LLC
     12,869       12,673  
Other assets, net
     3,378       9,577  
Total assets
   $ 691,064     $ 792,482  
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 57,363     $ 37,698  
Asset retirement obligations
     6,738       9,810  
Fair market value of derivatives
     21,358       5,205  
Total current liabilities
     85,459       52,713  
                 
Long-term debt
     228,617       392,012  
Asset retirement obligations
     28,355       27,027  
Deferred tax liability
     54,568       32,190  
Other long-term liabilities
     2,272       1,465  
Total liabilities
     399,271       505,407  
Stockholders' equity:
                
Preferred Stock, $.01 par value, 2,500,000 shares authorized;
     --       --  
Common Stock, $.01 par value, 30,000,000 shares authorized; 21,152,090 and 20,891,145 shares outstanding at June 30, 2008 and December 31, 2007, respectively
     211       209  
Capital in excess of par value
     226,061       223,336  
Other comprehensive income
     (14,177 )     (3,383 )
Retained earnings
     79,698       66,913  
Total stockholders' equity
     291,793       287,075  
Total liabilities and stockholders' equity
   $ 691,064     $ 792,482  
 
 
 
 

Callon Petroleum Company
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2008
    
2007
    
2008
    
2007
  
Operating revenues:
                        
Oil sales
   $ 28,554     $ 16,178     $ 53,650     $ 32,146  
Gas sales
     19,475       27,296       39,339       56,812  
Total operating revenues
     48,029       43,474       92,989       88,958  
                                 
Operating expenses:
                                
Lease operating expenses
     4,870       8,613       10,048       15,212  
Depreciation, depletion and amortization
     15,218       18,819       30,247       40,666  
General and administrative
     2,943       2,271       5,595       4,492  
Accretion expense
     952       943       1,984       2,055  
Total operating expenses
     23,983       30,646       47,874       62,425  
                                 
Income from operations
     24,046       12,828       45,115       26,533  
                                 
Other (income) expenses:
                                
Interest expense
     4,755       9,172       14,695       13,757  
Other income
     (379 )     (102 )     (851 )     (427 )
Loss on early extinguishment of debt
     11,871       --       11,871       --  
Total other (income) expenses
     16,247       9,070       25,715       13,330  
                                 
Income before income taxes
     7,799       3,758       19,400       13,203  
Income tax expense
     2,730       1,315       6,812       5,118  
                                 
Income before Medusa Spar LLC
     5,069       2,443       12,588       8,085  
Income from Medusa Spar LLC, net of tax
     84       138       197       299  
                                 
Net income
   $ 5,153     $ 2,581     $ 12,785     $ 8,384  
                                 
Net income per common share:
                                
Basic
   $ 0.25     $ 0.12     $ 0.61     $ 0.40  
Diluted
   $ 0.23     $ 0.12     $ 0.58     $ 0.39  
                                 
Shares used in computing net income per common share:
                                
Basic
     20,966       20,726       20,919       20,724  
Diluted
     22,074       21,302       21,859       21,248  
 
 
 
 

Callon Petroleum Company
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 

   
Six Months Ended
  
   
June 30,
2008
    
June 30,
2007
  
Cash flows from operating activities:
            
Net income
   $ 12,785     $ 8,384  
Adjustments to reconcile net income to cash provided by operating activities:
                
Depreciation, depletion and amortization
     30,615       41,095  
Accretion expense
     1,984       2,055  
Amortization of deferred financing costs
     1,580       1,314  
Non-cash loss on early extinguishment of debt
     5,598       --  
Equity in earnings of Medusa Spar LLC
     (197 )     (299 )
Deferred income tax expense
     6,812       5,118  
Non-cash charge related to compensation plans
     1,546       725  
Excess tax benefits from share-based payment arrangements
     (1,435 )     --  
Changes in current assets and liabilities:
                
Accounts receivable
     (2,470 )     6,340  
Other current assets
     3,226       (929 )
Current liabilities
     3,482       6,980  
Change in gas balancing receivable
     732       (10 )
Change in gas balancing payable
     359       437  
Change in other long-term liabilities
     (6 )     (5 )
Change in other assets, net
     (702 )     (1,049 )
Cash provided by operating activities
     63,909       70,156  
                 
Cash flows from investing activities:
                
Capital expenditures
     (78,441 )     (50,911 )
Entrada acquisition
     --       (150,000 )
Proceeds from sale of mineral interests
     167,493       --  
Distribution from Medusa Spar LLC
     108       430  
Cash provided by (used in) investing activities
     89,160       (200,481 )
                 
Cash flows from financing activities:
                
Increases in debt
     51,435       211,000  
Payments on debt
     (216,000 )     (46,000 )
Deferred financing costs
     --       (6,429 )
Equity issued related to employee stock plans
     (1,133 )     --  
Excess tax benefits from share-based payment arrangements
     1,435       --  
Capital leases
     --       (872 )
Cash (used in) provided by financing activities
     (164,263 )     157,699  
                 
Net (decrease) increase in cash and cash equivalents
     (11,194 )     27,374  
Cash and cash equivalents:
                
Balance, beginning of period
     53,250       1,896  
Balance, end of period
   $ 42,056     $ 29,270  
 
 
 
 

Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region. The majority of Callon’s properties and operations are concentrated in the offshore waters of the Gulf of Mexico.

This news release is posted on the company’s website at www.callon.com and will be archived there for subsequent review.  It can be accessed from the “News Releases” link on the left side of the homepage.

It should be noted that this news release contains projections and other 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.  These projections and statements reflect the company’s current views with respect to future events and financial performance.  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.  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 are discussed in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, available on our website or the SEC’s website at www.sec.gov.


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