Latest News and Analysis
Deals and Transactions
Track Drilling (Rigs by operator) | Completions (Frac Spreads)

Drilling & Completions | Quarterly / Earnings Reports | Third Quarter (3Q) Update | Financial Results | Capital Markets | Capital Expenditure | Drilling Activity

Callon Petroleum Third Quarter 2021 Results

emailEmail    |    printPrint    |    bookmarkBookmark
   |    Monday,November 15,2021

Callon Petroleum Co. reported its Q3 2021 results.

Third Quarter 2021 and Recent Highlights:

  • Delivered production of approximately 99.7 MBoe/d (64% oil) in the third quarter of 2021
  • Generated net cash provided by operating activities of $294.6 million and adjusted free cash flow1 of $119.5 million
  • Net income of $171.9 million, or $3.65 per diluted share, adjusted EBITDA1 of $292.2 million, and adjusted income1 of $137.9 million, or $2.93 per diluted share
  • Achieved an operating margin of $45.16 per Boe, a 20% increase from the previous quarter
  • Finalized the acquisition of Delaware Basin assets from Primexx, significantly increasing operating cash flow and accelerating the projected timeline for corporate deleveraging
  • Entered into agreements to divest non-core assets for cash consideration of approximately $170 million, bringing estimated gross asset sales proceeds to approximately $210 million for the year
  • Completed the fall redetermination for Callon's credit facility with the borrowing base and elected commitment maintained at $1.6 billion
  • Obtained shareholder approval for the conversion of $197 million of second lien debt into common shares, lowering net debt outstanding and reducing Callon's future interest burden by nearly $20 million annually

Joe Gatto, President and Chief Executive Officer commented, "Our third quarter performance demonstrates Callon's continued commitment to operational excellence, balance sheet strength and delivering on our promises to shareholders. Our development program and financial results reflect both strong well performance and resilient capital efficiency. The team has been able to mitigate the majority of the inflationary pressures we have seen throughout the year which has bolstered our top-tier operating margins. The recent rise in commodity prices has been a welcome surprise and has enhanced our free cash flow generation, increasing our estimates for 2021 to over $250 million. This increase to bottom line cash flow will be dedicated to our deleveraging efforts and provides a clear path for Callon to reach our target debt metrics and absolute debt levels much sooner than originally anticipated, opening the door for meaningful discussions regarding shareholder return strategies in the future."

He continued, "Our acquisition of the Primexx assets, coupled with multiple non-core divestitures, has not only improved our balance sheet, but will also allow us to expand our scaled model of life-of-field development in our core areas that will preserve long-term inventory quality. With an acreage position of over 186,000 net acres, our future development plans will be primarily focused on our Permian asset base, building upon the efficiency of current operations and delivering synergies from deployment of operational best practices. We have made significant progress integrating the acquired assets into our near-term activity and look forward to sharing more details about our 2022 plans for the broader Company in the coming months."

Credit Facility and Liquidity

On November 1, 2021, Callon completed the fall redetermination for its senior secured credit facility. The borrowing base and elected commitment were both reaffirmed at $1.6 billion. As of September 30, 2021, the drawn balance on the facility was $723.0 million and cash balances were $3.7 million. The Company expects to continue applying organic free cash flow and divestiture proceeds towards repayment of the credit facility balance.

Close of Primexx Acquisition & Related Matters

On October 1, 2021, Callon completed the acquisition of leasehold interests and related infrastructure from Primexx Energy Partners and its affiliates. At closing, Callon paid an adjusted purchase price of $453.7 million in cash and 8.84 million shares of common stock, subject to post-closing adjustments.

On November 3, 2021, shareholders voted to authorize the issuance of approximately 5.5 million shares of common stock to Chambers Investments, LLC, a private investment vehicle managed by Kimmeridge Energy, as part of the conversion of just under $200 million of our second lien notes. This conversion eliminates nearly $20 million of future annual interest payments and is expected to close on November 5, 2021.

The Company recently entered into an agreement to sell certain non-core Midland Basin assets for approximately $38 million. The assets include approximately 1,150 net acres located in central Howard County and a single section in Midland County. Current average daily production for these assets is approximately 900 Boe per day (48% oil).

Additionally, Callon entered into an agreement to divest certain non-core water infrastructure assets for $30 million in upfront cash proceeds and potential earnout payments of up to $18 million. Callon's broader water infrastructure footprint of 14 saltwater disposal wells with approximately 325,000 barrels per day of capacity, associated gathering lines and 140,000 barrels per day of recycling capacity are not impacted by the transaction.

The previously announced divestiture of Eagle Ford properties in northern La Salle and Frio counties for $100 million is expected to close in mid-November.

Scotiabank served as financial advisor to the Company for the water transaction, Wells Fargo Securities LLC for the Eagle Ford sale and TenOaks Energy Advisors, LLC for the Midland divestiture.

Callon Operations Update

At September 30, 2021, Callon had 1,562 gross (1,382.8 net) wells producing from established flow units in the Permian and Eagle Ford. Net daily production for the three months ended September 30, 2021 was 99.7 MBoe/d (64% oil).

For the three months ended September 30, 2021, Callon drilled 15 gross (13.5 net) wells and placed a combined 26 gross (23.6 net) wells on production. Wells placed on production during the quarter were completed in the Eagle Ford in South Texas, the Delaware Basin and the Midland Basin.

Third quarter completion activity was focused primarily in the Permian Basin, with approximately 75% of the new wells placed on production coming from larger projects in both the Delaware Basin and Midland Basin. Within the Midland Basin, multi-well projects in Howard County targeted multi-zone development of the Wolfcamp A and Lower Spraberry. In the Delaware Basin, a four-well project targeting Third Bone Spring and Lower Wolfcamp A zones was brought online in September and has exceeded production expectations. As part of the optimization of 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 turned one two-well pad and a separate four-well project to production in July and August, respectively. All six wells are producing as expected. 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.

Primexx Asset Updates

During the third quarter, Primexx placed 12 gross wells on production with eight wells achieving first production in July and the remaining four wells coming online during late August. These wells have demonstrated a high level of productivity, averaging peak oil rates of more than 1,200 barrels per day. Callon recently placed on production a three-well pad that was drilled and completed by Primexx. Through the first 20 days of production, all three wells are performing ahead of the Callon type curve for the area with peak production yet to be reached. There are no additional wells on the acquired acreage that are expected to be placed on production in the fourth quarter of 2021 as Callon builds an operational well inventory that will facilitate a transition to a larger scale development model going forward.

Fourth Quarter Activity Outlook

Callon is currently running six rigs across the combined acreage position with approximately 1.5 completion crews scheduled for the fourth quarter. Completion activity during the quarter will be spread across the Midland and legacy Delaware positions, moving to the acquired Delaware acreage towards year end. Drilling activity is currently ongoing with four rigs in the Delaware Basin, one rig in the Eagle Ford and one rig in the Midland Basin.

Capital Expenditures

For the three months ended September 30, 2021, Callon incurred $115.0 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 September 30, 2021








Total Capital


Capital (a)








(In thousands)

Cash basis (b)










Timing adjustments (c)










Non-cash items










Accrual basis











Includes drilling, completions, facilities, and equipment, but excludes land and seismic.


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.


Includes timing adjustments related to cash disbursements in the current period for capital expenditures incurred in the prior period.

Related Categories :

Third Quarter (3Q) Update   

More    Third Quarter (3Q) Update News

Permian News >>>