HOUSTON, May 4, 2022 /PRNewswire/ — Callon Petroleum Company (NYSE: CPE) (“Callon” or the “Company”) today reported results of operations for the three months ended March 31, 2022.
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.
First Quarter 2022 and Recent Highlights
- Delivered production of approximately 102.7 MBoe/d (63% oil) in the first quarter of 2022
- Placed two co-development projects on production in the Delaware South area with performance exceeding expectations
- Increased drilled, uncompleted well count to 42 wells at quarter end
- Generated net cash provided by operating activities of $281.3 million and adjusted free cash flow of $183.3 million
- Reported net income of $39.7 million, or $0.64 per diluted share, adjusted EBITDA of $393.7 million, and adjusted income of $212.7 million, or $3.43 per diluted share
- Reduced lease operating expense and gathering, processing & transportation expense on a sequential basis by $6.2 million and $1.3 million, respectively
- Achieved an operating margin of $58.35 per Boe, including oil price realizations of over 100% of WTI benchmark
- Reduced trailing twelve-month net debt-to-adjusted EBITDA to 1.97x, calculated pursuant to our credit facility, driven by strong operating margins and absolute debt reduction during the quarter
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“Callon delivered another outstanding quarter as our results reflected both strong Permian well performance and increased overall capital and operating efficiency,” said Joe Gatto, President and Chief Executive Officer. “We took several steps this quarter to help set the stage for future production growth and sustained free cash flow generation, including the build-out of a DUC inventory on our newly acquired Delaware South acreage to accommodate a more efficient scaled development model going forward. Our initial projects in this area implementing our scaled development model and completion designs are performing above expectations, and future activity in Delaware South will be an important contributor to our targeted 10% oil production growth by the fourth quarter of this year.
“We are pleased with the rapid transformation of our balance sheet that has been the product of disciplined capital allocation and leading cash margins. Our leverage ratio was below 2.0x at the end of the first quarter and we expect that metric to approach 1.0x by year-end 2022 providing improved optionality for capital allocation, including a program of capital returns that accompany further debt reduction and re-investment in a deep inventory of low-breakeven projects,” concluded Mr. Gatto.
Callon Operations Update
At March 31, 2022, Callon had 1,344 gross (1,204.3 net) wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended March 31, 2022 was 102.7 MBoe/d (63% oil).
For the three months ended March 31, 2022, Callon drilled 31 gross (26.4 net) wells and placed a combined 17 gross (16.5 net) wells on production. First quarter completion activity was solely focused on the Delaware Basin. Within the Delaware Basin, a six-well co-development project targeting Wolfcamp A and B zones was brought online in January and has exceeded production expectations with average 30-day production rates of 1,312 barrels of oil equivalent (Boe) per day and an oil cut of approximately 71%. Additionally, a five-well project, targeting the same two zones, was brought online in February and also has strong performance with an average 30-day production rates of 1,199 Boe/d and an oil cut of approximately 70%. As part of a broader optimization program for producing assets, Callon continues to convert gas lift systems to electric submersible pumps, positively impacting the production profile of the existing asset base across the Delaware position.
In the Eagle Ford, Callon drilled 9 gross (7.2 net) wells during the quarter but had no completion activity. During the quarter, the Company expanded its electrification efforts in the area, advancing sustainability initiatives and improving productivity. The project has resulted in the removal of another 25 generators, providing a cleaner and more reliable source of energy for field operations. Altogether, these efforts are expected to save approximately $1.5 million annually in lease operating expenses. Additional field electrification efforts are progressing and are expected to be completed by year-end.
Credit Facility Redetermination
On May 2, 2022, Callon completed the spring redetermination for its senior secured credit facility. The borrowing base and elected commitment were both reaffirmed at $1.6 billion. As of March 31, 2022, the drawn balance on the facility was $712.0 million and cash balances were $4.2 million. The Company intends to continue its application of organic free cash flow towards repayment of debt balances related to the credit facility and other debt instruments.
Second Quarter Activity Outlook and Guidance
Callon is currently running seven rigs, with four rigs in the Delaware Basin, two rigs in the Midland Basin and one rig in the Eagle Ford. One rig is expected to be released in June. The Company plans to utilize two completion crews for the second quarter, supporting new production across the Midland, Delaware and Eagle Ford positions.
For the second quarter, the Company expects to produce between 100 and 102 MBoe/d (64% oil) with between 32 and 35 gross wells (28 – 31 net) placed on production. In addition, Callon projects an operational capital spending level of between $225 and $240 million on an accrual basis.
Capital Expenditures
For the three months ended March 31, 2022, Callon incurred $157.4 million in operational capital expenditures on an accrual basis. Total capital expenditures, inclusive of capitalized expenses, are detailed below on an accrual and cash basis:
Three Months Ended March 31, 2022 Operational Capitalized Capitalized Total Capital Capital (a) Interest G&A Expenditures (In thousands) Cash basis (b) $174,563 $17,212 $9,703 $201,478 Timing adjustments (c) (8,883) 6,293 — (2,590) Non-cash items (8,302) 2,033 1,877 (4,392) Accrual basis $157,378 $25,538 $11,580 $194,496 (a) Includes drilling, completions, facilities and equipment, but excludes land, seismic and asset retirement costs. (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.
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