Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and West Texas. Callon Petroleum our core footprint to approximately 200,000 net acres in the Permian Basin and Eagle Ford Shale. Callon Petroleum ranks #20 in wells drilled in 2022 with 104 wells drilled in the Mid Continent of the US. The Mid Continent region includes Texas, Oklahoma, New Mexico and Louisiana.
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Operational Results
Callon second quarter production averaged 107 MBoe/d (59% oil and 80% liquids), in line with guidance. During the quarter, 32 gross wells were turned in-line.
Average realized commodity prices during the quarter were $73.52 per Bbl for oil (100% of NYMEX WTI), $19.87 per Bbl for natural gas liquids, and $1.23 per MMBtu for natural gas (53% of NYMEX HH). Total average realized price for the period was $49.00 per Boe on an unhedged basis.
Lease operating expense, which includes workover expense, for the quarter was $76.8 million or $7.89 per Boe compared to $75.1 million or $8.36 per Boe in the first quarter of 2023. The sequential per unit decrease was primarily related to increases in total production volumes.
Third and Fourth Quarter Outlook and Guidance
Callon entered the third quarter running seven drilling rigs, five in the Delaware Basin, one in the Midland Basin, and one in the Eagle Ford. Upon closing the Eagle Ford divestiture on July 3rd, the acquiring party assumed the Eagle Ford rig.
Callon has finalized plans for integrating the newly acquired Delaware Basin assets into its scaled co-development model and drilling and completion schedules. The Company intends to release a drilling rig in the Permian Basin in August and maintain a 5-rig drilling program through the end of the year. Development activity on the acquired assets is scheduled to resume in the second half after the previous operator dropped its one drilling rig in the second quarter. Five drilled but uncompleted wells acquired with the asset package are expected to be turned to sales in the fourth quarter.
During the second quarter, the now divested Eagle Ford assets produced 17 MBoe/d and the newly acquired Delaware assets produced 14 MBoe/d. Transitioning to the third quarter, the Company expects to produce 100 – 103 MBoe/d, which includes oil volumes of 60 – 62 MBbls/d. These estimates include the impact of a force majeure event at a large Midland Basin natural gas processing facility in July that lasted for 14 days. Given the elevated occurrences of weather-related power and midstream disruptions experienced during June and July, the Company has also assumed incremental downtime above previous seasonal levels used for forecasting. Combined, these two factors reduced third quarter production estimates by approximately 1,500 Boe/d. Wells turned in-line are expected to be 30 – 35 gross operated wells (27 – 32 net). Operational capital expenditures are expected to be $250 – $275 million on an accrual basis.
For the fourth quarter, Callon expects to produce 104 – 108 MBoe/d which includes oil volumes of 63 – 65 MBbls/d.
Capital spending for the second half now includes approximately $15 million in non-operated capital projects previously budgeted for 2024 due to a change in the operator’s schedule. Despite the incremental activity, Callon’s 2023 full-year capital expenditure guidance is unchanged due to identified savings related to the base activity plan that offset the project spend. The production contribution from these non-operated capital projects is expected in 2024.
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