Callon Petroleum Company First Quarter 2023 Results

Financial Results

For the first quarter of 2023, Callon converted its accounting method from full cost to successful efforts which resulted in certain changes to the financial statements. On the income statement, the impacts were primarily the elimination of capitalized interest and G&A and the addition of exploration expense. On the balance sheet, the most significant changes were an increase to oil and gas properties and stockholders' equity driven by lower historical impairments under successful efforts as compared to full cost. As a result, DD&A has increased under successful efforts due to a higher depletable base.

Callon reported first quarter 2023 net income of $220.6 million, or $3.57 per share, and adjusted EBITDAX of $326.3 million. Adjusted income was $119.9 million, or $1.94 per diluted share.

The Company generated $247.9 million of net cash provided from operating activities in the first quarter. Total operational capital expenditures for the quarter were $270.1 million. Callon expects its adjusted free cash flow to increase through the remainder of 2023 which will continue to be allocated solely to debt reduction until the key $2.0 billion milestone is reached.

On May 1, 2023 Callon completed the spring redetermination for its senior secured revolving credit facility ("Credit Facility"). The borrowing base was reaffirmed at $2 billion with an elected commitment of $1.5 billion. During the quarter, debt under the Credit Facility was reduced by $37.7 million for a quarter-end balance of $465.3 million.

Operational Results

First quarter production averaged 100 MBoe/d (60% oil and 80% liquids), in line with guidance. During the quarter, 29 wells were turned in-line. Of note was a 13-well project producing at various stages of flowback over quarter end after being turned in-line ahead of expectations due to improved completion times.

Average realized commodity prices during the quarter were $75.65 per Bbl for oil (99% of NYMEX WTI), $24.18 per Bbl for natural gas liquids, and $2.22 per MMBtu for natural gas (80% of NYMEX HH). This quarter's oil price realization was negatively impacted by tightening Gulf Coast and international oil price basis differentials to WTI pricing. Total average realized price for the period was $53.07 per Boe on an unhedged basis.

Lease operating expense, which includes workover expense, for the quarter was $75.1 million or $8.36 per Boe compared to $74.1 million or $7.58 per Boe in the fourth quarter of 2022. The sequential per unit increase was primarily related to increases in certain operating expenses such as fuel, power, and equipment rental, as well as the distribution of fixed costs spread over lower production volumes.

Capital Investments

Callon incurred $270.1 million in operational capital expenditures on an accrual basis. Capital spending was 8% below the midpoint of the Company's first quarter guidance primarily due to lower facility spending and fewer workovers.

Second Quarter Activity Outlook and Guidance

Callon entered the second quarter running seven drilling rigs, four in the Delaware Basin, two in the Midland Basin, and one in the Eagle Ford. The Company intends to maintain this drilling pace through mid-year. Callon is currently utilizing two completion crews.

For the second quarter, the Company expects to produce 105 - 108 MBoe/d which includes oil volumes of 63 - 65 MBbls/d. Gross wells turned to sales are expected to be 33 - 38 gross wells (31 - 36 net). Operational capital expenditures are expected to be $285 - $300 million on an accrual basis. Second quarter guidance are available in the accompanying presentation.