Callon reports results of operations for third quarter

By Special to The Democrat | The Natchez Democrat

Published Sunday, November 8, 2009

NATCHEZ — Callon Petroleum Company (NYSE: CPE) reported this week results of operations for both the three and the nine-month periods ending September 30.

Third quarter net income

For the quarter ended Sept. 30, 2009, the company reported a net loss of $1.0 million, or $0.04 per share. Net income for the comparable period of 2008 was $5.9 million, or $0.27 per share. For the nine months ended Sep. 30, 2009, Callon reported net income of $0.5 million, or $0.02 per share. This compares with net income of $18.6 million, or $0.85 per share during the same period of 2008. All per share amounts are on a diluted basis.

Third quarter operating results

Operating results for the three months ended Sept. 30, 2009, include oil and gas sales of $21.3 million from average production of 27.4 million cubic feet of natural gas equivalent per day (MMcfe/d), which was within the company’s published guidance range of 25 MMcfe/d to 28 MMcfe/d. This corresponds to sales of $32.8 million from average production of 25.9 MMcfe/d during the comparable 2008 period. The average price received, after the impact of hedging, per thousand cubic feet of natural gas (Mcf) for the quarter ended September 30, 2009 decreased to $3.64, compared to $10.77 for the quarter ended Sept. 30, 2008. The average price received, after the impact of hedging, per barrel of oil (Bbl) in the third quarter of 2009 decreased to $83.38, compared to $99.40 during the third quarter of 2008. Oil and gas sales for the first nine months of 2009 totaled $71.2 million from average production of 31.3 MMcfe/d. This corresponds to sales of $125.8 million from average production of 35.0 MMcfe/d during the same period in 2008. The average price, after the impact of hedging, received per Mcf in the nine-month period of 2009 decreased to $4.69, compared to $10.53 during the first nine months of 2008, while the average price received, after the impact of hedging, per Bbl in the first nine months of 2009 decreased to $71.03, compared to $94.89 during the same period in 2008.

Third quarter discretionary cash flow

Discretionary cash flow for the three-month period ended Sept. 30, 2009, totaled $9.8 million compared to $21.9 million during the comparable prior year period. As defined by U.S. generally accepted accounting principles (GAAP), net cash flow used in operating activities totaled $14.9 million during the quarter ended Sept. 30, 2009 and net cash flow provided by operating activities totaled $60.9 million during the quarter ended Sept. 30, 2008. Discretionary cash flow for the first nine months of 2009 totaled $35.4 million compared to $81.2 million during the same period in 2008. Net cash flow provided by operating activities, as defined by GAAP, totaled $17.0 million and $124.8 million during the nine-month periods ended September 30, 2009, and 2008 respectively.

(See “Non-GAAP Financial Measure” that follows and the accompanying reconciliation of discretionary cash flow, a non-GAAP measure, to net cash flow provided by operating activities.)

Non-GAAP Financial Measure - This news release refers to a non-GAAP financial measure as “discretionary cash flow.” Callon believes that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company’s ability to internally fund exploration and development activities and to service or incur additional debt. The company also has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.