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 Results
For Fourth Quarter, Full Year 2009

Natchez, MS (March 8, 2010)—Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and 12-month periods ended December 31, 2009.

The company reported fourth quarter net income of $53.9 million, or $2.27 per share, compared to a net loss of $457.5 million or $21.19 per share for the 2008 fourth quarter. For the year ended December 31, 2009, Callon’s net income was $54.4 million or $2.45 per share.

Highlights for 2009 include:

 
·
Restructured Senior Notes due December 2010 and reduced the principal from $200.0 million to $154.0 million, extended debt maturities of $138.0 million until September 2016.

 
·
Filed for recoupment of deepwater royalty payments and associated interest relating to the deepwater Medusa Field.  Received $44.8 million in January 2010 representing the royalty recoupment.

 
·
Initiated a new business strategy to reinvest strong offshore cash flow into lower-risk, longer-life onshore plays.

 
·
Acquired conventional oil assets in the Permian Basin, providing a multi-year inventory of drilling locations in the promising onshore Wolfberry oil play.

 
·
Established an initial position in the Haynesville Shale gas play of northern Louisiana.

“We exited the year 2009 with a new strategy and two new onshore assets in the Permian Basin in Texas and the Haynesville Shale play of northern Louisiana,” Fred Callon, Chairman and CEO explains.  “Our focus in 2010 will be on growing through the drill bit and making selective acquisitions in our core areas to further expand our inventory of drilling opportunities and strengthening our visible, long-term growth potential. Our strategy is supported by the strong cash flow from our deepwater Gulf of Mexico fields into our onshore conventional oil and shale gas projects.”

Fourth Quarter and Full Year 2009 Net Income.  For the year ended December 31, 2009, the company reported net income of $54.4 million, or $2.45 per share.  Earnings include accruals for recoupment of royalties and interest from the U.S. Minerals Management Service (MMS) of $51.5 million, or $2.32 per share.  The 2009 results compare to a 2008 net loss of $438.9 million, or $20.68 per share, which resulted primarily from a non-cash charge of $485.5 million due to the impairment of the company’s oil and gas properties under full-cost accounting rules. In 2008, the book value of the company’s oil and gas properties exceeded the full-cost ceiling due primarily to lower oil and natural gas prices at year-end 2008 and the announced suspension of operations at the deepwater Entrada Field during the fourth quarter of 2008.  For the quarter ended December 31, 2009, the company reported net income of $53.9 million, or $2.27 per share, compared to a net loss of $457.5 million, or $21.19 per share for the fourth quarter of 2008.

 
 
 

Fourth Quarter and Full Year 2009 Operating Results.  Operating results for the three months ended December 31, 2009 include oil and gas sales of $30.1 million from average production of 35.4 million cubic feet of natural gas equivalent per day (MMcfe/d).  This compares with oil and gas sales of $15.5 million from average production of 20.7 MMcfe/d during the comparable 2008 period.

The average price received per thousand cubic feet of natural gas (Mcf) in the fourth quarter of 2009, after the impact of hedging, decreased to $5.01, compared to $7.12 during the fourth quarter of 2008.  The average price received per barrel of oil (Bbl) in the fourth quarter of 2009, after the impact of hedging, increased to $77.94, compared to $55.23 during the same period in 2008.  Oil and natural gas sales for full year 2009 totaled $101.3 million, excluding the MMS royalty recoupment of $40.9 million related to 2003 through 2008 production, from average production of 32.4 MMcfe/d.  This corresponds to oil and natural gas sales of $141.3 million from average production of 31.4 MMcfe/d during 2008.  The average price received per Mcf for full year 2009, after the impact of hedging, decreased to $4.78, compared to $9.99 during the full year of 2008. The average price received per Bbl during full year 2009, after the impact of hedging, decreased to $73.00, compared to $88.07 during the same period in 2008.

Fourth Quarter and Full Year 2009 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended December 31, 2009 totaled $64.3 million compared to $3.8 million during the comparable prior year period.  Net cash flow provided by operating activities, as defined by U.S. GAAP, was $9.4 million in the fourth quarter 2009, while net cash flow used in operating activities was $31.5 million in the fourth quarter of 2008. Discretionary cash flow for full year 2009 totaled $99.7 million, compared to $84.9 million in 2008.  Net cash flow provided by operating activities, as defined by U.S. GAAP, totaled $26.4 million and $93.2 million for the years ended December 31, 2009 and 2008, 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.)

Liquidity. At December 31, 2009 the company’s cash balance was $3.6 million.  The company received $44.8 million in January 2010 from the MMS for the recoupment of royalties relating the Medusa Field.  The company concluded a notes exchange offering on December 31, 2009 and exchanged 92% of the $200 million of senior secured notes due December 2010.  At year-end the company had $164 million of principal outstanding, excluding the Callon Entrada non-recourse credit agreement in the amount of $84.8 million.  In January 2010, the company announced a new $100 million credit facility with Regions Bank.  The initial borrowing base of the new facility is $20 million which will be reviewed semi-annually.  As of March 8, 2010, is nothing drawn on the facility.

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.

 
 
 


Reconciliation of Non-GAAP Financial Measure:
  
Three Months Ended
    
12 Months Ended
  
(In thousands)
  
December 31,
    
December 31,
  
   
2009
    
2008
    
2009
    
2008
  
Discretionary cash flow
   $ 64,316     $ 3,774     $ 99,732     $ 84,935  
Net working capital changes and other changes
     ( 54,958 )     ( 35,317 )     ( 73,377 )     8,297  
Net cash flow provided by (used in) operating activities
   $ 9,358     $ ( 31,543 )   $ 26,355     $ 93,232  

 
 
 


Production and Price Information:
  
Three Months
    
12 Months
  
   
Ended
    
Ended
  
   
December 31,
    
December 31,
  
   
2009
    
2008
    
2009
    
2008
  
Production:
                        
Oil (MBbls)
     288       162       1,012       942  
Gas (MMcf)
     1,524       926       5,740       5,839  
Gas equivalent (MMcfe)
     3,254       1,901       11,809       11,494  
Average daily (MMcfe)
     35.4       20.7       32.4       31.4  
                                 
Average prices:
                                
Oil ($/Bbl) (a)
   $ 77.94     $ 55.23     $ 73.00     $ 88.07  
Gas ($/Mcf)
   $ 5.01     $ 7.12     $ 4.78     $ 9.99  
Gas equivalent ($/Mcfe)
   $ 9.25     $ 8.17     $ 8.57     $ 12.29  
                                 
Additional per Mcfe data:
                                
Sales price
   $ 9.25     $ 8.17     $ 8.57     $ 12.29  
Lease operating expenses
     1.47       2.87       1.56       1.67  
Operating margin
   $ 7.78     $ 5.30     $ 7.01     $ 10.62  
                                 
                                 
Depletion
   $ 2.68     $ 11.73     $ 2.83     $ 5.57  
General and administrative (net of management fees)
   $ 0.97     $ 1.33     $ 1.13     $ 0.83  
                                 
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil:
                                
                                 
Average NYMEX oil price
   $ 76.19     $ 58.76     $ 61.80     $ 99.67  
Basis differentials and quality adjustments
     (7.54 )     (15.66 )     (4.64 )     ( 1.15 )
Transportation
     (1.27 )     ( 1.32 )     (1.32 )     ( 1.15 )
Hedging
     10.56       13.45       17.16       ( 9.30 )
Averaged realized oil price
   $ 77.94     $ 55.23     $ 73.00     $ 88.07  

 
 
 

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

   
December 31,
  
   
2009
    
2008
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 3,635     $ 17,126  
Accounts receivable
     20,798       44,290  
Accounts receivable-MMS royalty recoupment
     51,534       --  
Fair market value of derivatives
     145       21,780  
Other current assets
     1,572       1,103  
Total current assets
     77,684       84,299  
                 
Oil and gas properties, full-cost accounting method:
                
Evaluated properties
     1,593,884       1,581,698  
Less accumulated depreciation, depletion and amortization
     (1,488,718 )     (1,455,275 )
      105,166       126,423  
                 
Unevaluated properties excluded from amortization
     25,442       32,829  
Total oil and gas properties
     130,608       159,252  
                 
Other property and equipment, net
     2,508       2,536  
Restricted investments
     4,065       4,759  
Investment in Medusa Spar LLC
     11,537       12,577  
Other assets, net
     1,589       2,667  
Total assets
   $ 227,991     $ 266,090  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 12,887     $ 76,516  
Asset retirement obligations
     4,002       9,151  
9.75% Senior Notes
     15,820       --  
      32,709       85,667  
                 
Callon Entrada (non-recourse) credit facility
     84,847       --  
Total current liabilities
     117,556       85,667  
                 
Senior Notes
                
Principal outstanding
     137,961       200,000  
Deferred credit
     31,213       --  
Discount
     --       (5,580 )
Total Senior Notes
     169,174       194,420  
                 
Senior secured revolving credit facility
     10,000       --  
Callon Entrada (non-recourse) credit facility
     --       81,154  
Total long-term debt
     179,174       275,574  
                 
Asset retirement obligations
     10,648       33,043  
Other long-term liabilities
     1,467       1,610  
Total liabilities
     308,845       395,894  
                 
Stockholders' equity (deficit):
                
Preferred Stock, $.01 par value; 2,500,000 shares authorized;
     --       --  
Common Stock, $.01 par value; 60,000,000 shares authorized; 28,742,926 shares and 21,621,142 shares issued outstanding at December 31, 2009 and 2008, respectively
     287       216  
Capital in excess of par value
     243,898       227,803  
Other comprehensive income (loss)
     (7,478 )     14,157  
Retained (deficit) earnings
     (317,561 )     (371,980 )
Total stockholders' equity (deficit)
     (80,854 )     (129,804 )
Total liabilities and stockholders' equity (deficit)
   $ 227,991     $ 266,090  

 
 
 

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

   
Quarter Ended
December 31,
    
Year Ended
December 31,
  
   
2009
    
2008
    
2009
    
2008
  
Operating revenues:
                        
Oil sales
   $ 22,468     $ 8,947     $ 73,842     $ 82,963  
Gas sales
     7,631       6,593       27,417       58,349  
MMS royalty recoupment
     40,886       --       40,886       --  
Total operating revenues
     70,985       15,540       142,145       141,312  
 
                                
Operating expenses:
                                
Lease operating expenses
     4,790       5,459       18,447       19,208  
Depreciation, depletion and amortization
     8,717       22,294       33,443       64,054  
General and administrative
     3,145       2,519       13,355       9,565  
Accretion expense
     618       1,096       3,149       4,172  
Acquisition expenses
     298       --       298       --  
Derivative expense
     --       (888 )     --       498  
Impairment of oil and gas properties
     --       485,498       --       485,498  
Total operating expenses
     17,568       515,978       68,692       582,995  
 
                                
Income (loss) from operations
     53,417       (500,438 )     73,453       (441,683 )
                                 
Other (income) expenses:
                                
Interest expense
     4,534       5,460       19,089       23,986  
Callon Entrada (non-recourse) interest expense
     1,699       1,536       7,072       2,719  
Loss on early extinguishment of debt
     --       --       --       11,871  
9.75% Senior Notes restructuring expenses
     1,024       --       1,024       --  
Interest on MMS royalty recoupment
     (7,681 )     --       (7,681 )     --  
Other income
     114       ( 439 )     190       (1,379 )
Total other (income) expenses
     (310 )     6,557       19,694       37,197  
                                 
Income (loss) before income taxes
     53,727       (506,995 )     53,759       (478,880 )
Income tax (benefit) expense
     --       ( 49,456 )     --       (39,725 )
                                 
Income (loss) before equity in earnings of Medusa Spar LLC
     53,727       (457,539 )     53,759       (439,155 )
Equity in earnings of  Medusa Spar LLC, net of tax
     168       5       660       262  
                                 
Net income (loss)
   $ 53,895     $ (457,534 )   $ 54,419     $ (438,893 )
                                 
Net income (loss) per common share:
                                
Basic
   $ 2.31     $ (21.19 )   $ 2.47     $ (20.68 )
Diluted
   $ 2.27     $ (21.19 )   $ 2.45     $ (20.68 )
                                 
 Shares used in computing net income (loss) per share:
                                
Basic
     23,331       21,589       22,072       21,222  
Diluted
     23,740       21,589       22,200       21,222  

 
 
 

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


   
Years Ended December 31,
  
   
2009
    
2008
    
2007
  
Cash flows from operating activities:
                  
Net income (loss)
   $ 54,419     $ (438,893 )   $ 15,194  
Adjustments to reconcile net income (loss) to cash provided by operating activities:
                        
Depreciation, depletion and amortization
     34,274       64,862       73,677  
Impairment of oil and gas properties
     --       485,498       --  
Accretion expense
     3,149       4,172       3,985  
Amortization of deferred financing costs
     2,522       4,185       3,009  
Non-cash interest expense for Callon Entrada credit agreement
     3,693       --       --  
Non-cash loss on early extinguishment of debt
     --       5,598       --  
Equity in earnings of Medusa Spar, LLC
     (660 )     (262 )     (507 )
Deferred income tax (benefit) expense
     --       (39,725 )     8,506  
Non-cash charge related to compensation plans
     2,335       1,550       849  
Excess tax benefits from share-based payment arrangements
     --       (2,050 )     (163 )
Changes in current assets and liabilities:
                        
Accounts receivable
     (45,573 )     (22,215 )     6,658  
Other current assets
     (468 )     5,489       (619 )
Current liabilities
     (27,260 )     22,987       (2,057 )
Change in gas balancing receivable
     279       630       (938 )
Change in gas balancing payable
     (312 )     156       889  
Change in other long-term liabilities
     (12 )     2,708       (10 )
Change in other assets, net
     (31 )     (1,458 )     810  
Cash provided by operating activities
     26,355       93,232       109,283  
                         
Cash flows from investing activities:
                        
Capital expenditures
     (35,790 )     (176,536 )     (127,409 )
ExL acquisition
     (15,756 )     --       --  
Entrada acquisition
     --       --       (150,000 )
Proceeds from sale of mineral interests
     --       167,349       60,931  
Distribution from Medusa Spar, LLC
     1,700       498       687  
Cash used by investing activities
     (49,846 )     (8,689 )     (215,791 )
                         
Cash flows from financing activities:
                        
Increases in debt
     20,337       94,435       229,000  
Payments on debt
     (10,337 )     (216,000 )     (64,000 )
Deferred financing costs
     --       --       (6,429 )
Equity issued related to employee stock plans
     --       (1,152 )     --  
Excess tax benefits from share-based payment arrangements
     --       2,050       163  
Capital leases
     --       --       (872 )
Cash provided by (used in) financing activities
     10,000       (120,667 )     157,862  
                         
Net  (decrease) increase in cash and cash equivalents
     (13,491 )     (36,124 )     51,354  
                         
Cash and cash equivalents:
                        
Balance, beginning of period
     17,126       53,250       1,896  
                         
Balance, end of period
   $ 3,635     $ 17,126     $ 53,250  

 
 
 

Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties in Louisiana, Texas, and 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.