Callon Petroleum Company (NYSE: CPE) (“Callon” or the “Company”) today reported fourth quarter and full year 2023 financial and operating results. Due to the pending merger (the “Merger”) with APA Corporation (“APA”), Callon will not host a conference call or webcast to discuss its fourth quarter and full year 2023 results.
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Callon Wells Drilled 2023
Fourth Quarter 2023 Highlights
- Generated $298.3 million of net cash provided by operating activities
- Adjusted free cash flow of $120.2 million marking 15 consecutive quarters of adjusted free cash flow generation
- Total production was above the high end of guidance and averaged 103.4 MBoe/d (79% liquids); oil production averaged 58.7 MBbls/d
- Capital expenditures were in line with guidance at $170.5 million
- Repurchased $40.5 million in common stock during the quarter
Full-Year 2023 Highlights
- Completed transformative transactions to focus on the Permian Basin, reduce leverage and accelerate returns to shareholders following the acquisition of high-value, accretive assets in the Delaware Basin and the simultaneous divestiture of its legacy Eagle Ford assets
- Launched a $300 million share buyback program, repurchasing 1.7 million shares, or approximately 2.5% of total shares outstanding at December 31, 2023, at an average-weighted price of $33.59 per share
- Allocated free cash flow to reduce long-term debt by 14% year-over-year, exiting 2023 with $1.9 billion in long-term debt and a leverage ratio, calculated as net debt divided adjusted EBITDAX as defined in our credit facility, of less than 1.5x
- Generated $1.1 billion of net cash provided by operating activities
- Adjusted free cash flow of $188.1 million
- Total production averaged 103.0 MBoe/d and 60.0 MBbl/d (80% liquids and 58% oil)
- Capital expenditures were in line with guidance at $977 million
- Estimated proved reserves at year-end, as prepared by DeGolyer and MacNaughton, were 433.5 MMBoe, of which 64% was proved developed producing (PDP) and 55% was crude oil. Using SEC prices, the standardized measure of discounted future net cash flows was $5.4 billion with an associated PV-10 metric of $5.9 billion (73% PDP)
“The steps we took in 2023 to focus on the Permian and improve overall capital efficiency are paying dividends as demonstrated in the fourth quarter. We posted exceptional results, with a sequential production increase and capital spending on target with plan. Our recent operational initiatives, including fit-for-purpose completion designs and artificial lift optimization, generated tangible improvements in well performance and pave the way for sustained uplift in the future,” said Joe Gatto, President and Chief Executive Officer. “Callon is firing on all cylinders today with a solid capital efficiency trajectory driven by both well productivity and significant reductions in wells costs. Our pending combination with APA will further increase the value proposition for shareholders from an expanded Permian footprint and organization that can drive incremental gains in performance through the application of best practices and technical expertise from both companies.”
Fourth Quarter 2023 Financial and Operating Summary
Fourth quarter 2023 net income of $169.0 million, or $2.51 per share, (all share amounts are stated on a diluted basis), and adjusted EBITDAX of $325.8 million. Adjusted income was $109.0 million, or $1.62 per share.
Fourth quarter production was above the high end of guidance and averaged 103.4 MBoe/d (57% oil and 79% liquids). During the quarter, 14 gross wells were TIL. Notably, cumulative oil production from fourth quarter wells were 51% more productive on a per lateral foot basis in the first 90 days of production (6,848 Bbl / 1,000 lateral ft.) compared to third quarter 2023 wells.
Average realized commodity prices during the quarter were $79.05 per Bbl for oil (101% of NYMEX WTI), $20.94 per Bbl for natural gas liquids, and $1.60 per MMBtu for natural gas (55% of NYMEX HH). Total average realized price for the period was $51.54 per Boe on an unhedged basis.
Lease operating expense, which includes workover expense, for the quarter was $77.9 million or $8.19 per Boe compared to $73.5 million or $7.85 per Boe in the third quarter of 2023.
Capital expenditures for the fourth quarter were $170.5 which was within guidance. Over the course of the second half of 2023, relative to prior activity plans, Callon drilled an incremental nine wells (all to be completed in 2024) and completed roughly 40,000 incremental lateral feet at higher than planned intensities while staying within the original budget guidance. The incremental completions activity was related to an eleven-well project placed on production in Q1 of 2024. Entering 2024, these types of realized efficiency gains have positioned the Company to deliver significantly lower average well costs, including facilities, of approximately $980 per lateral foot in the Delaware Basin (a 19% decrease to 2023 actuals) and $682 per lateral foot in the Midland Basin (a 26% decrease to 2023 actuals). This well cost structure also includes an average 20% increase in completion intensity, or proppant lb/ft, compared to 2023 actuals. These capital cost estimates, which underpin our AFEs currently in process for 2024, are consistent with previously disclosed estimates of per well cost reductions of at least 15% for 2024 versus 2023.
Shareholder Returns
During the fourth quarter, Callon repurchased 1.3 million shares of common stock at a weighted average purchase price of $32.02 per common share for a total cost of $40.5 million. As of December 31, 2023, the remaining authorized repurchase amount under the share repurchase program was $244.5 million; however, Callon is restricted under its merger agreement with APA from share repurchases.
Environmental, Social, and Governance (“ESG”) Updates
The Company is committed to GHG emission reductions and has made significant progress in its 2023 environmental performance, including reaching its 2024 goals for GHG emissions a year earlier than expected. Highlights of the 2023 program include:
- Attained corporate 2024 goal of reducing GHG intensity by more than 50% over 2019 levels
- Reduced methane emissions by more than 80% as compared to 2021 levels to exceed our 2024 goal of methane emissions <0.2% of total gas produced
- Accelerated achievement of 2024 goal to reduce Callon-controlled flaring to less than 1%
2024 Guidance
Due to the pending merger with APA, Callon has discontinued providing guidance.
About Callon Petroleum
Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and sustainable development of high-quality assets in the Permian Basin in West Texas.
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