HOUSTON, Feb. 12, 2019 /PRNewswire/ -- Callon
Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today
announced its 2019 capital expenditure budget, reflecting a
combination of financial discipline and capital efficiency
gains.
- 2019 forecasted annual production of 39.5 - 41.5 MBoe/d (77% -
78% oil), representing growth of over 20% compared to current
"street" consensus of 32.7 MBoe/d for 2018
- Planned sequential decrease in 2019 operational capital
expenditures to a range of $500 to
$525 million
- Running an average of five drilling rigs to support larger and
more efficient, multi-well pad development
- Plan to place 47 - 49 net wells on production with an increase
of approximately 15% in average net lateral length over the 2018
program
- Year-end 2018 proved reserves of 238.5 MMBoe (54% proved
developed and 76% oil), an annual increase in total proved reserves
of 74% and proved developed reserves of 85%
- Year-end 2018 PV-10 value1 of $3.1 billion
Joe Gatto, President and Chief
Executive Officer of Callon, stated, "Our 2019 capital program
highlights our commitment to generate free cash flow in the
near-term as we transition to scaled development of our high
quality asset base. Strong cash operating margins underpin our plan
and are complemented by capital efficiency improvements resulting
from multi-well pad development in the Delaware Basin, increasing lateral lengths
across our portfolio and a significant reduction in facilities
spending. Even under our flat $50/Bbl
WTI oil price assumption, we expect to be free cash flow positive
in the fourth quarter of 2019 with a full year outspend that is
almost half of our 2018 projection. In addition, although our
production growth rate will be lower than previous years, the
combination of a well-established Midland Basin operation and the
emerging impact of large pad development in the Delaware Basin positions us for a sustained
trajectory over the longer term with capital expenditures within or
below internal cash flows." He continued, "Our tremendous progress
maturing the business in recent years now allows us to benefit from
repeatable well investments that will drive improved
corporate-level returns due to scale efficiencies, reduced
facilities needs and shallower production decline rates on a
consolidated basis. Any improvement in commodity prices would
further enhance that return on capital profile, as we have no plans
to increase capital investment in 2019 with higher oil prices."
2019 Capital Expenditures Budget
Callon expects operational capital expenditures to range between
$500 and $525
million in 2019, with infrastructure and facilities capital
comprising approximately 15% of operational capital. The percentage
of operational expenditures allocated to the Delaware Basin is planned to increase to
approximately 60% of the total with a transition to larger pad
development in our Spur area as the year progresses to capture
additional capital efficiencies and optimize development of our
multi-zone resource base. Specifically, our average pad size in the
Spur area is expected to more than double relative to our 2018
activity. As a result, completion activity will be primarily
focused on the Midland Basin in the first half of the year and
shift to a high proportion of multi-well pads in the Delaware Basin in the second half of 2019,
accelerating production growth into year-end while maximizing
capital efficiency. The program is also designed to optimize
production and resource recovery from multiple zones through
various co-development concepts that are tailored to specific
operating areas. As a result, we will target seven discrete flow
units in 2019, but the largest amount of wells are scheduled for
the Wolfcamp A (upper and lower intervals).
Importantly, our plan also incorporates a 15% increase in
lateral length to approximately 8,400 feet as our highly contiguous
Delaware Basin position enters
program development, enabling us to place more net lateral feet on
production in 2019 despite a decrease in net wells placed on line
(47 to 49 wells) relative to 2018. Based upon this level of
activity and associated allocation of capital, we are guiding to an
average daily production rate range of 39.5 to 41.5 MBoe/d
with an associated oil cut of 77% to 78%.
We are currently operating six rigs and one dedicated completion
crew. We expect to reduce the number of active rigs from six to
four by mid-year after building a sufficient inventory of wells
awaiting completion to provide operational flexibility for an
increased proportion of larger pad concepts. We began 2019 with one
dedicated completion crew and intend to reactivate a second crew to
reduce cycle times on large development pads once the necessary
drilling activity has been completed.
In addition to operational capital expenditures, we forecast
2019 capitalized general & administrative expenses (cash
component) of approximately $25 to
$30 million and expect to capitalize
100% of cash interest expense that would otherwise be reflected on
the income statement. Based upon current market interest rates, we
estimate an applicable weighted average interest rate on our total
average debt balances to be approximately 6%. In total, we forecast
total capital expenditures (including estimated total capitalized
expenses) of $615 million at the
midpoint for 2019. This amount also includes land and seismic
expenditures associated with the execution of our operational
program. To the extent we identify accretive "bolt-on" land
acquisition opportunities, we expect that these non-organic capital
costs would be funded by divestitures of non-core properties or
monetization of infrastructure investments.
2018 Proved Reserves
The Company recently completed the reserve audit for the year
ended December 31, 2018 with its
independent reserve auditor, DeGolyer and MacNaughton. As of
December 31, 2018, Callon's estimated
total proved reserves were 238.5 MMBoe, a 74% increase over the
previous year-end. The proved reserves estimate is comprised of 76%
oil and 54% proved developed estimated volumes. The PV-10
value1 of proved reserves at year-end 2018 was
$3.1 billion, with a proved developed
producing reserves value of $2.2
billion.
Callon Petroleum Company is an independent energy company
focused on the acquisition, development, exploration and operation
of oil and gas properties in the Permian Basin in West Texas.
This news release is posted on the company's website at
www.callon.com, and will be archived for subsequent review under
the "News" link on the top of the homepage.
Non-GAAP Disclosure
PV-10
Year-end pre-tax PV-10 value is a non-GAAP financial
measure as defined by the SEC. Callon believes that the
presentation of pre-tax PV-10 value is relevant and
useful to its investors because it presents the discounted future
net cash flows attributable to reserves prior to taking into
account future corporate income taxes and the Company's current tax
structure. The Company further believes investors and creditors use
pre-tax PV-10 values as a basis for comparison of the
relative size and value of its reserves as compared with other
companies.
The GAAP financial measure most directly comparable to
pre-tax PV-10 is the standardized measure of discounted
future net cash flows ("Standardized Measure"). Pre-tax PV-10 is
calculated using the Standardized Measure before deducting future
income taxes, discounted at 10%. The Company expects to include a
full reconciliation of pre-tax PV-10 to the GAAP
financial measure of Standardized Measure in its Earnings Press
Release on Form 8-K for the fourth quarter 2018 financial and
operating results, which it intends to file with the SEC on
February 26, 2019.
Cautionary Statement Regarding Forward Looking
Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements include all statements regarding wells anticipated to be
drilled and placed on production; future levels of drilling
activity and associated production and cash flow expectations; the
Company's 2019 production guidance and capital expenditure
forecast; estimated reserve quantities and the present value
thereof; anticipated returns and financial position; and the
implementation of the Company's business plans and strategy, as
well as statements including the words "believe," "expect," "may,"
"will," "forecast," "plans" and words of similar meaning. These
statements reflect the Company's current views with respect to
future events and financial performance based on management's
experience and perception of historical trends, current conditions,
anticipated future developments and other factors believed to be
appropriate. No assurances can be given, however, that these events
will occur or that these projections will be achieved, and actual
results could differ materially from those projected as a result of
certain factors. Any forward-looking statement speaks only as of
the date of which such statement is made and the Company undertakes
no obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law. Some of the factors which
could affect our future results and could cause results to differ
materially from those expressed in our forward-looking statements
include the volatility of oil and natural gas prices, ability to
drill and complete wells, operational, regulatory and environment
risks, cost and availability of equipment and labor, our ability to
finance our activities and other risks more fully discussed in our
filings with the Securities and Exchange Commission, including our
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q,
available on our website or the SEC's website at www.sec.gov.
For further information contact
Mark Brewer
Director of Investor Relations
1-281-589-5200
1 A non-GAAP financial measure: The 12-month
average benchmark pricing used to estimate proved reserves in
accordance with the definitions and regulations of the U.S.
Securities and Exchange Commission ("SEC") and pre-tax PV-10 value
for crude oil and natural gas was $65.56 per Bbl of WTI crude oil and $3.10 per MMBtu of natural gas at Henry Hub
before differential adjustments. After differential adjustments,
the Company's SEC pricing realizations for year-end 2018 were
$58.40 per Bbl of oil and
$3.64 per Mcf of natural gas. Please
refer to the Non-GAAP Disclosure at the end of this release for
information regarding pre-tax PV-10.
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SOURCE Callon Petroleum Company