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Callon Petroleum Company Reports Operating Results (10-Q)

November 09, 2009 | About:
10qk

10qk

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Callon Petroleum Company (CPE) filed Quarterly Report for the period ended 2009-09-30.

Callon Petroleum Company has been engaged in the exploration, development, acquisition and production of oil and gas properties since 1950. Callon Petroleum Company has a market cap of $36.2 million; its shares were traded at around $1.67 with and P/S ratio of 0.3. Callon Petroleum Company had an annual average earning growth of 12.6% over the past 5 years.

Highlight of Business Operations:

Our senior secured revolving credit facility was committed in the amount of $43.7 million as of June 30, 2009. Subsequent to June 30, 2009, our borrowing base redetermination was completed and reduced to $35 million due to lower commodity prices and reserves. In addition, (i) a monthly commitment reduction (MCR) was implemented commencing September 1, 2009 in the amount of $4.7 million per month, and (ii) a further limitation was implemented which only permits borrowings in excess of $10 million to be used to fund acquisitions approved by the lenders. The credit facility matures on September 25, 2012, unless the 2010 Senior Notes have not been extended or refinanced to a maturity date occurring after September 25, 2012 in which case the credit facility will mature on June 15, 2010. Should current credit market tightening be prolonged for several years, future extensions of our credit facility may contain terms that are less favorable than those of our current credit facility. The amounts which may be outstanding under our credit facility are limited to an amount which is established by our lenders and based on the value of our proved reserves using prices, costs and other assumptions determined by our

On September 25, 2008, we completed a $250 million second amended and restated senior secured credit agreement with Union Bank as issuing lender, which matures September 25, 2012. As of August 1, 2009, our borrowing base and MCR are $35.0 million and $4.7 million, respectively. Borrowings under the credit agreement are secured by mortgages covering our major fields excluding Entrada. As of September 30, 2009, there were no borrowings outstanding under the agreement with $30.3 million, subject to MCR, available for future borrowings. See Note 4 to the Consolidated Financial Statements.

On April 1, 2009, Diamond Offshore Drilling, Inc. (Diamond) called on the outstanding letter of credit for CIECO Energy (US) Limiteds (CIECO) share of the settlement for the termination of the Ocean Victory drilling contract in the amount of $7.3 million. We paid our share, in the amount of $7.3 million, in March 2009. The remaining balance of the letter of credit was released by Diamond on April 2, 2009. We continue to discuss with CIECO its failure to fund the settlement for the termination of the drilling contract. The $7.3 million due from CIECO for their share of the settlement for the termination of the drilling contract is recorded as a receivable as of September 30, 2009.

Capital expenditures on an accrual basis were $19 million for the nine-months ended September 30, 2009. Included in this amount was capitalized interest of approximately $2 million and capitalized general and administrative costs allocable directly to exploration and development projects of approximately $7 million. The remainder of the capital expended primarily includes the cost of seismic data, leases and plugging and abandonment costs.

Gas production during the third quarter of 2009 totaled 1.3 billion cubic feet (Bcf) and generated $4.9 million in revenues compared to 1.2 Bcf and $12.4 million in revenues during the same period in 2008. The average gas price after hedging impact for the third quarter of 2009 was $3.64 per thousand cubic feet of natural gas (Mcf) compared to $10.77 per Mcf for the same period in 2008. Approximately 13% of the 16% increase in 2009 production was due to the production from our East Cameron #2 well which came online in the fourth quarter of 2008.

Oil production during the third quarter of 2009 totaled 197,000 barrels and generated $16.5 million in revenues compared to 205,000 barrels and $20.4 million in revenues for the same period in 2008. The average oil price received after hedging impact in the third quarter of 2009 was $83.38 per barrel compared to $99.40 per barrel in the third quarter of 2008. The 4% decrease in 2009 production was attributable to normal and expected declines in production.

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