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Callon Petroleum Fourth Quarter, Full Year 2022 Results

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   |    Wednesday,February 22,2023

Callon Petroleum Co. reported fourth quarter and full year 2022 financial and operating results.

2022 Highlights:

• Set Company records for full-year net cash provided by operating activities of $1.5 billion and adjusted free cash flow of $622.7 million
• Set Company record for full-year net income of $19.54 per diluted share (all per share amounts are stated on a diluted basis)
• Improved full-year operating margin by 38% year-over-year to $58.04 per barrel of oil equivalent (Boe)
• Grew annual production by nearly 10% to 104.3 MBoe/d, in line with guidance
• Invested $841.5 million in operational capital expenditures, or less than 60% of net cash provided by operating activities
• Year-end total proved reserves of 479.5 MMBoe (57% oil) with a standardized measure of future discounted cash flows of total proved reserves of $9.0 billion; PV-10 of total proved reserves of $10.5 billion
• Increased proved developed reserves by 7% to 293.2 MMBoe (58% oil), representing 61% of total reserve volumes
• Paid down $461.9 million in debt and reduced leverage ratio, as defined by our credit facility, by over 40% over the last 12 months

Fourth Quarter 2022 Highlights:

• Generated $372.6 million of net cash provided by operating activities and adjusted free cash flow of $165.4 million
• Net income of $272.5 million, or $4.41 per diluted share, adjusted EBITDA of $412.2 million, and adjusted income of $207.7 million or $3.36 per diluted share
• Fourth quarter 2022 production averaged 106.3 MBoe/d (62% oil)
• Reduced lease operating expense (LOE) to $7.58 per Boe
• Reduced debt by an additional $133.0 million

CEO Joe Gatto said: "Callon's fourth quarter and full year performance drove new company records in profitability and cash flow. Our results demonstrate what our strong operational team plus a quality, oil-weighted asset base can do, profitably growing production while improving margins and investing less than 60% of our cash flow. We believe our business model is sustainable with a deep inventory of high-return oil projects that adhere to our "Life of Field" co-development model. Our cash flow will continue to be allocated to disciplined reinvestment, further debt reduction and eventual returns of capital as we pursue shareholder value creation from multiple sources."

Financial Results

Callon reported fourth quarter 2022 net income of $272.5 million, or $4.41 per diluted share, and adjusted EBITDA of $412.2 million. The Company's adjusted income was $207.7 million, or $3.36 per diluted share.

The Company generated $372.6 million of net cash provided by operating activities in the fourth quarter, a 2% year-over-year increase. Net cash provided by operating activities in 2022 was up 54% year-over-year to $1.5 billion.

Total operational capital expenditures for the fourth quarter and full-year 2022 were $191.7 million and $841.5 million, respectively. Callon is committed to not outspending cash flow and had a capital reinvestment rate of less than 60% of net cash provided by operating activities in 2022.

For full-year 2022, debt was reduced by $461.9 million. The year-end balance on the Company's senior secured revolving credit facility (the "Credit Facility") was $503.0 million and cash balances were $3.4 million. In mid-October, Callon and its lenders entered into an amendment to the Credit Facility which extended the maturity to October 19, 2027. The Credit Facility has a borrowing base of $2.0 billion with an elected commitment of $1.5 billion.

Operational Results

Fourth quarter production averaged 106.3 MBoe/d (62% oil and 82% liquids), in line with guidance. Results reflect the negative impact of adverse winter weather, which is estimated at approximately 0.6 MBoe/d.

Average realized commodity prices during the quarter were $84.33 per Bbl for oil (102% of NYMEX WTI), $25.79 per Bbl for natural gas liquids, and $4.06 per MMBtu for natural gas (66% of NYMEX HH). Total average realized price for the period was $62.00 per Boe on an unhedged basis.

LOE, which includes workover expense, for the quarter was $74.1 million or $7.58 per Boe, compared to $7.71 per Boe in the prior quarter of 2022. The sequential decrease in LOE was primarily related to lower operating costs for fuel, power, chemicals and repairs and maintenance.

Year-End Proved Reserves

DeGolyer and MacNaughton prepared the estimates of Callon's proved reserves as of December 31, 2022. As of December 31, 2022, Callon's estimated net proved reserves were 479.5 MMBoe and included 275.6 MMBbls of oil, 592.8 Bcf of natural gas, and 105.1 MMBbls of NGLs with a standardized measure of discounted future net cash flows of $9.0 billion using average realized prices for sales of oil, natural gas, and NGLs on the first calendar day of each month during the year of $95.02/Bbl for oil, $5.75/Mcf for natural gas, and $36.40/Bbl for NGLs. PV-10 using the same realized pricing was $10.5 billion for total proved reserves and $7.1 billion for proved developed reserves.

Oil comprised approximately 57% of the estimated total proved reserves. The Company added 68.0 MMBoe of new reserves in extensions and discoveries through development efforts in 2022, with a total of 114 gross (103.0 net) wells drilled and 106 gross (94.5 net) wells completed.

Environmental, Social, and Governance ("ESG") Updates

The Company is committed to GHG emission reductions and has made significant progress in its 2022 environmental performance. Highlights include:

• On pace to achieve 2024 goal of reducing GHG intensity by 50%
• Exceeded our 2022 target for replacement of pneumatic devices
• Set a safety record, achieving the Company's lowest recorded incident rate