Callon Petroleum (CPE) Misses Q1 EPS by 1c

Callon Petroleum (NYSE: CPE) reported Q1 EPS of $0.12, $0.01 worse than the analyst estimate of $0.13.

• Instituted updated safety procedures for all field employees and enhanced communication with our current vendors to ensure safe social distancing.
• Material reductions in general and administrative costs including: 35% compensation reduction for board members, 35% reduction in CEO target cash compensation, and at least 25% reduction in target cash compensation by all other officers. This is in addition to previously planned staff reductions and a suspension of hiring activity, contributing to an incremental 15% reduction from post-merger integration targets.
• The Company also announced today that it has further reduced activity, including the suspension of all completion activity in April and moving to one active drilling rig by mid-May. Callon currently forecasts total operational capital expenditures of approximately $250 - $325 million over the remaining three quarters of 2020, assuming resumption of completion activities in the second half of the year. The ultimate timing and level of activity will continue to be based on maximizing free cash flow in 2020 and 2021.

Recent Highlights

• Delivered production of approximately 101 Mboe/d (64% oil), above the high end of guidance, for the first quarter of 2020
• Realized fully diluted earnings per share of $0.55, adjusted income per share of $0.12, net income of $216.6 million, and adjusted EBITDA of $217.5 million(1) for the first quarter of 2020
• Achieved lease operating expense ("LOE") per Boe of $5.70 for the first quarter of 2020, an improvement of nearly 14% over the comparable three month period ended March 31, 2019
• Enhanced corporate liquidity position through incremental hedging and conversion of previous instruments to NYMEX oil swaps, basis hedges, and incremental gas hedges resulting in a mark-to market value of $245 million as of May 1, 2020
• Achieved new peak efficiency gains with recent Eagle Ford and Midland Basin projects delivering average daily completion rates of more than 2,000 lateral feet per day with completion costs of approximately $250 per lateral foot
• On May 7, completed the spring borrowing base redetermination for Callon's senior secured credit facility resulting in a facility commitment and elected borrowing base of $1.7 billion along with a new secured leverage ratio covenant to temporarily replace the previous total leverage ratio covenant until March 31, 2022

Joe Gatto, President and Chief Executive Officer commented, "Beginning in early March, our team began taking decisive action to align our activity levels with the current economic environment. We also quickly moved to enhance our cash flow protection through strategic hedging initiatives which provide support as we transition the business to lower levels of activity. Additionally, the leadership team, along with our Board, has made the decision to pare costs through voluntary G&A reductions."

He continued, "Our operational and financial performance since the beginning of the year clearly demonstrates the collective effort of our organization to execute on our post-merger integration plan and drive the synergies that will position us to manage through a challenging time for our industry. We have developed numerous scenarios that support returning to a modest level of completion activity in the next few months, and our decisions will be based on our outlook for sustainable, unhedged returns on capital that generate incremental value. These scenarios will also be governed by the optimization of free cash flow(2) for debt reduction over the balance of the year while preparing ourselves for a solid foundation into 2021."

For earnings history and earnings-related data on Callon Petroleum (CPE) click here.

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