NATCHEZ, Miss., Feb. 1, 2016 /PRNewswire/ -- Callon
Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today
announced its outlook for 2016 activity and an operational update,
including revised fourth quarter 2015 guidance estimates and proved
reserve estimates for the year ended December 31, 2015.
- Expected fourth quarter 2015 net daily production of 10,500 –
10,700 barrels of oil equivalent per day ("BOE/d"), comprised of
79% - 81% oil volumes
- Expected fourth quarter 2015 lease operating expense of
$6.40 – $6.60 per barrel of oil equivalent ("BOE")
- Forecasted 2016 net daily production range of 11,500 – 12,000
BOE/d (78% - 80% oil) with an associated operational capital budget
of $75 - $80 million
- Estimated total (two-stream) proved reserves of 54.3 million
barrels of oil equivalent ("BOE") at December 31, 2015, an increase of 65% over the
prior year-end, of which 80% are comprised of oil volumes and 53%
are classified as proved developed
- Continued strong performance of the Lower Spraberry program,
supporting a type curve in excess of 1 million BOE for a normalized
7,500' drilled lateral well
- Completion of an incremental working interest acquisition in
the Casselman-Bohannon focus area
- Addition of oil and natural gas hedges, increasing total
portfolio to 63% and 37%, respectively, of expected 2016 volumes
based on midpoint estimates
Fred Callon, Chairman and CEO,
commented "We delivered exceptional operational results in 2015
while pivoting our focus to our highest return investment
opportunities in a difficult commodity environment. Achieved
reductions in operating cost structure and well costs, combined
with sustained performance from our Lower Spraberry program that
has exceeded expectations, have positioned us to deliver returns on
invested capital per well in excess of 30% at current strip
pricing. As a result, Callon continues to generate capital
efficient production growth while adding reserves at less than
$10 per BOE based on our achieved
cost to date. While these resilient returns support continued
capital allocation, we also remain committed to achieving our goal
of aligning corporate net cash flows with our capital spending in
2016. As a result, we plan to use the operational flexibility
embedded in the business by transitioning to a one-rig drilling
program, retaining the option to quickly redeploy the second rig to
either our existing acreage or new acreage related to an
acquisition opportunity. Based on current strip pricing and
operational assumptions, we believe that Callon is on target to
achieve our goal of being net cash flow neutral by mid-year 2016
while delivering economic growth above our fourth quarter 2015
production rate."
Central Midland Basin
Acquisition
Callon recently completed the acquisition of an additional 4.9%
working interest (3.7% net revenue interest) in its Casselman and
Bohannon ("CaBo") fields for total cash consideration of
$9.3 million, excluding customary
purchase price adjustments. Highlights of the acquisition
include:
- Estimated December 2015 net daily
production of 170 BOE/d (75% oil), including production from three
established horizontal zones in the Lower Spraberry, Middle
Spraberry and Wolfcamp B, in addition to legacy vertical
production
- 305 net acres located primarily in Midland County, Texas
The Company currently owns a 71.3% working interest (53.5% net
revenue interest) in the CaBo area following the completion of this
recent acquisition.
Operations Update
Recent Well Performance
Callon is currently producing
from 83 horizontal wells that have been developed in five
established zones: the Lower Spraberry, Upper and Lower Wolfcamp B,
the Wolfcamp A and, most recently, the Middle Spraberry. The
following table summarizes initial production ("IP") data from
wells that reached peak producing in the fourth quarter of
2015:
|
|
|
|
|
|
24-Hour Peak
Rate
(BOE/d;
Two-stream)
|
|
30-Day
Average
Peak
Rate
(BOE/d;
Two-stream)
|
Well
|
|
County
|
|
Completed
Lateral
(ft)
|
|
Peak
24-Hour
IP
|
|
Production
(%
oil)
|
|
Per 1,000'
Lateral
Feet
|
|
Peak
30-Day
IP
|
|
Production
(%
oil)
|
|
Per 1,000'
Lateral
Feet
|
Lower
Spraberry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casselman 8 PSA 1 14
LS
|
|
Midland
|
|
4,930
|
|
989
|
|
91%
|
|
201
|
|
736
|
|
89%
|
|
149
|
Casselman 8 PSA 2 15
SH
|
|
Midland
|
|
4,930
|
|
872
|
|
88%
|
|
177
|
|
720
|
|
87%
|
|
146
|
Kendra-Annie
16SH
|
|
Midland
|
|
8,395
|
|
1,051
|
|
91%
|
|
125
|
|
845
|
|
91%
|
|
101
|
Kendra-Annie
17SH
|
|
Midland
|
|
7,612
|
|
1,088
|
|
91%
|
|
143
|
|
825
|
|
91%
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle
Spraberry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casselman 8 PSA 1
22MS
|
|
Midland
|
|
4,930
|
|
1078
|
|
86%
|
|
219
|
|
587
|
|
88%
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lower Wolfcamp
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
University 27-34
04LH
|
|
Reagan
|
|
7,552
|
|
1,197
|
|
84%
|
|
197
|
|
807
|
|
83%
|
|
107
|
With the recent Lower Spraberry activity, Callon continues to
add to its portfolio of wells producing from this horizontal zone
and refine its projections of estimated ultimate recoveries (EURs).
Based on observations to date, the performance of Lower Spraberry
wells in the Central Midland Basin
has been tracking a type curve (normalized for 7,500' drilled
lateral length) that is in excess of one million barrels of oil
equivalent of gross production over the life of the well. As a
result of this well performance, combined with an almost exclusive
focus on the Lower Spraberry program for operated activity in the
near-term, Callon expects full-year 2016 production growth of 20% -
25% compared to 2015 while reducing operational capital spending by
over 50% relative to 2015.
2015 Proved Reserve Estimates
The Company recently completed the reserve audit for the year
ended December 31, 2015 with its
independent reserve auditor, DeGolyer and MacNaughton. As of
December 31, 2015, Callon's estimated
total proved reserves were 54.3 million BOE, a 65% increase over
the previous year-end. The proved reserves estimate is comprised of
80% oil and 53% proved developed volumes. Included in total proved
reserve estimates are 60 (gross) horizontal proved undeveloped
locations. Estimates of the Company's year-end 2015 proved reserves
used NYMEX prices of $50.28 per
barrel ("Bbl") for crude oil and $2.59 per million British Thermal Units ("MMBtu")
for natural gas, before adjustments for energy content, quality,
midstream fees, and basis differentials, in accordance with
Securities and Exchange Commission guidelines.
The present value of the Company's proved reserves, on a pre-tax
basis and discounted at ten percent ("PV10"), decreased
approximately 9% to $570.9 million as
of December 31, 2015, resulting from
45% and 57% decreases in assumed oil and gas prices, respectively,
offset in part by growth in total proved reserve volumes.
|
|
December
31,
|
|
|
2014
|
|
2015
|
Proved
developed
|
|
|
Oil (thousand
barrels, "MBbls")
|
|
14,006
|
|
22,257
|
Natural gas (million
cubic feet, "MMcf")
|
|
25,171
|
|
38,157
|
Thousand
BOE ("MBOE")
|
|
18,201
|
|
28,617
|
Proved
undeveloped
|
|
|
Oil
(MBbls)
|
|
11,727
|
|
21,091
|
Natural gas
(MMcf)
|
|
17,377
|
|
27,380
|
MBOE
|
|
14,623
|
|
25,654
|
Total
proved
|
|
|
Oil
(MBbls)
|
|
25,733
|
|
43,348
|
Natural gas
(MMcf)
|
|
42,548
|
|
65,537
|
MBOE
|
|
32,824
|
|
54,271
|
Financial
information
|
|
|
Estimated pre-tax
future net cash flows (a)
|
|
$
|
1,330,628
|
|
$
|
1,160,808
|
Pre-tax discounted
present value (PV-10) (a) (b)
|
|
$
|
629,680
|
|
$
|
570,906
|
Standardized measure
of discounted future net cash flows (a) (b)
|
|
$
|
579,542
|
|
|
|
|
|
(a)
|
Includes a reduction
for estimated plugging and abandonment costs that is reflected as a
liability on the Company's balance sheet, in accordance with
accounting for asset retirement obligations rules.
|
(b)
|
The Company uses the
financial measure "pre-tax discounted present value" which is a
non-GAAP financial measure. The Company believes that pre-tax
discounted present value, while not a financial measure in
accordance with GAAP, is an important financial measure used by
investors and independent oil and gas producers for evaluating the
relative value of oil and natural gas properties and acquisitions
because the tax characteristics of comparable companies can differ
materially. Callon's pre-tax discounted present value may be
reconciled to its standardized measure of discounted future net
cash flows by reducing Callon's pre-tax discounted present value by
the discounted future income taxes associated with such reserves.
This reconciliation is not currently available for year-end 2015
and will be included, along with additional reserve disclosure, in
the Company's 2015 Annual Report on Form 10-K. The total
standardized measure calculated in accordance with the guidance
issued by the FASB for disclosures about oil and gas producing
activities for our proved reserves are calculated using the
following input assumptions:
|
|
|
|
|
|
2014
|
|
2015
|
|
Estimated discounted
future income taxes relating to such future net revenues
(millions)
|
$
|
50.1
|
|
|
|
Oil prices (per Bbl;
adjusted to reflect all field-specific deductions and premiums
including transportation, location differentials and crude
quality)
|
$
|
86.30
|
$
|
47.25
|
|
Natural gas prices
(per Mcf; adjusted to reflect Btu content, transportation and
field-specific fees)
|
$
|
6.38
|
$
|
2.73
|
The table below illustrates the impact of crude oil and natural
gas price assumptions on our estimated total proved reserve volumes
for the year ended December 31, 2015.
The volumes resulting from the sensitivity analysis, which are for
illustrative purposes only, incorporate a number of assumptions and
have not been audited by the Company's third-party engineer.
|
|
|
|
|
|
|
|
|
|
|
|
12-Month Average
Prices
|
|
Estimated
Total
Proved Reserves
|
Pricing
Scenarios
|
|
Oil
($/Bbl)
|
|
Natural gas
($/Mcf)
|
|
(MBOE)
|
December 31, 2015
reserve report
|
|
$
|
$50.16
|
|
$
|
2.64
|
|
|
54,271
|
|
|
|
|
|
|
|
|
|
|
Combined price
sensitivity
|
|
|
|
|
|
|
|
|
|
Oil and natural gas
+10%
|
|
$
|
55.18
|
|
$
|
2.90
|
|
|
54,778
|
Oil and natural gas
-10%
|
|
$
|
45.14
|
|
$
|
2.38
|
|
|
53,623
|
Oil price
sensitivity
|
|
|
|
|
|
|
|
|
|
Oil +10%
|
|
$
|
55.18
|
|
$
|
2.64
|
|
|
54,718
|
Oil -10%
|
|
$
|
45.14
|
|
$
|
2.64
|
|
|
53,716
|
Natural gas
sensitivity
|
|
|
|
|
|
|
|
|
|
Natural gas
+10%
|
|
$
|
50.16
|
|
$
|
2.90
|
|
|
54,339
|
Natural gas
-10%
|
|
$
|
50.16
|
|
$
|
2.38
|
|
|
54,191
|
2016 Outlook
Importantly, Callon has continued to secure well cost reductions
over the last several months which, combined with current Lower
Spraberry type curve estimates, contribute to internal rates of
return in excess of 30% for 5,000' laterals and in excess of 35%
for 9,000' laterals at current strip prices. These are the two
horizontal lateral lengths that are planned for operated activity
in 2016. Callon's operational activity is scheduled to focus almost
exclusively on the Lower Spraberry in 2016 as the Company
transitions from a two-rig to a one-rig program in the first
quarter of 2016.
Key elements of the 2016 operational plan include:
- 19 gross (13.7 net) operated horizontal wells scheduled to be
placed on production, all in the Central
Midland Basin
- 17 gross (12.6 net) operated wells target the Lower Spraberry
shale and two gross (1.1 net) wells targeting the Wolfcamp B
shale
- All wells completed from pads ranging from two to three
wells
- 2 gross (0.4 net) non-operated horizontal wells scheduled to be
placed on production
- 10,000' lateral wells that leverage Callon's existing acreage
position
- Targeting the Lower Spraberry and Wolfcamp A in Midland County
- Operational capital budget of $75 - $80
million, including drilling and completion and related
facilities expenditures (excluding capitalized expenses)
- Based on attained well costs for laterals completed with
approximately 1,500 pounds of proppant per foot
- $4.2 million for a 5,000' drilled
lateral length well
- $5.8 million for a 9,000' drilled
lateral length well
- Approximately 60% of operational capital accrued in the first
half of 2016
Callon will retain the option to return the second drilling rig
to service, with the ability to increase activity in its core
properties within 30 - 45 days depending on capital allocation
decisions and achievement of cash flow goals as the year
progresses. Moreover, the retention of the second drilling rig
positions Callon to maintain its quality crews and leading edge
day-rate, and promptly direct activity to potential acquisition or
joint venture opportunities that may require drilling operations to
retain acreage in the near-term. Alternatively, the Company also
has the option to terminate the rig contract subject to a declining
payment schedule which would currently be calculated at
approximately $4.5 million.
Liquidity
As of December 31, 2015, Callon
had an outstanding balance of $40
million under its revolving credit facility which currently
has a borrowing base of $300 million
following an increase of $50 million
in October 2015.
Commodity Risk Management
Callon's hedging portfolio currently includes the following
contracts, representing approximately 63% of the midpoint of
forecasted 2016 oil volumes for NYMEX WTI price contracts, 43% of
the midpoint of forecasted 2016 oil volumes for Midland Basin basis differential price
contracts and 37% of the midpoint of forecasted natural gas volumes
for NYMEX Henry Hub price contracts.
|
|
2016 Average Daily
Volumes
|
|
|
1Q
|
|
2Q
|
|
3Q
|
|
4Q
|
Oil
|
|
|
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
|
|
|
Volume (Bbl per
day)
|
|
2,000
|
|
2,000
|
|
2,000
|
|
2,000
|
Average NYMEX swap
price
|
|
$58.23
|
|
$58.23
|
|
$58.23
|
|
$58.23
|
|
|
|
|
|
|
|
|
|
Collar contracts
with short puts ("three-way" collar)
|
|
|
|
|
|
|
|
|
Volume (Bbl per
day)
|
|
2,000
|
|
2,000
|
|
2,000
|
|
2,000
|
Average NYMEX
price
|
|
|
|
|
|
|
|
|
Ceiling
|
|
$65.00
|
|
$65.00
|
|
$65.00
|
|
$65.00
|
Floor
(long put)
|
|
$55.00
|
|
$55.00
|
|
$55.00
|
|
$55.00
|
Short
put
|
|
$40.33
|
|
$40.33
|
|
$40.33
|
|
$40.33
|
|
|
|
|
|
|
|
|
|
Collar contracts
("two-way" collar)(a)
|
|
|
|
|
|
|
|
|
Volume (Bbl per
day)
|
|
1,319
|
|
2,000
|
|
2,000
|
|
2,000
|
Average NYMEX
price
|
|
|
|
|
|
|
|
|
Ceiling
|
|
$46.50
|
|
$46.50
|
|
$46.50
|
|
$46.50
|
Floor
|
|
$37.50
|
|
$37.50
|
|
$37.50
|
|
$37.50
|
a) Contracts executed in conjunction with the sale of
call options with a strike price of $50 on 1,836 barrels of oil per
day in 2017.
|
|
|
|
|
|
|
|
Midland Basin Oil
Differential
|
|
|
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
|
|
|
Volume (Bbl per
day)
|
|
4,000
|
|
4,000
|
|
4,000
|
|
4,000
|
Swap price spread to
NYMEX
|
|
$0.17
|
|
$0.17
|
|
$0.17
|
|
$0.17
|
|
|
|
|
|
|
|
|
|
Natural
Gas
|
|
|
|
|
|
|
|
|
Swap
contracts
|
|
|
|
|
|
|
|
|
Volume (MMBtu per
day)
|
|
6,000
|
|
6,000
|
|
6,000
|
|
6,000
|
Average NYMEX swap
price
|
|
$2.52
|
|
$2.52
|
|
$2.52
|
|
$2.52
|
About Callon Petroleum
Callon 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 there for subsequent
review. It can be accessed from the "News" link on the top of the
homepage.
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, and associated returns on
capital, future increases in production, the Company's 2015 and
2016 guidance, capital budget amounts, reserve quantities and the
present value thereof, the implementation of the Company's business
plans and strategy, as well as statements including the words
"believe," "expect," "plans" and words of similar meaning. Without
limiting the foregoing, forward-looking statements contained in
this news release specifically include the expectation of total
reserve potential and EUR. These statements reflect the Company's
current views with respect to future events and financial
performance. 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. 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 gas prices, ability to drill and complete wells,
operational, regulatory and environment risks, 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, available on our website or the SEC's
website at www.sec.gov.
Other than 2015 year-end reserve estimates, the information in
this release is unaudited and subject to revision. Audited and
final results will be provided in the press release announcing
fourth quarter and full year results ahead of the Company's
earnings conference call scheduled for March
3, 2016. The Company's Annual Report on Form 10-K for the
year ended December 31, 2015 is
currently planned to be filed with the Securities and Exchange
Commission on or about March 2,
2016.
Cautionary Note to Investors -- The SEC prohibits oil and gas
companies, in their filings with the SEC, from disclosing estimates
of oil or gas resources other than "reserves," as that term is
defined by the SEC. In this news release, Callon includes estimates
of quantities of oil and gas using certain terms, such as
"estimated ultimate recovery," "type curves," "EUR," or other
descriptions of volumes of reserves, which terms include quantities
of oil and gas that may not meet the SEC's definitions of proved,
probable and possible reserves, and which the SEC's guidelines
strictly prohibit Callon from including in filings with the SEC.
These estimates are by their nature more speculative than estimates
of proved reserves and accordingly are subject to substantially
greater risk of being recovered by Callon.
For further information contact:
Joe Gatto
Chief Financial Officer, Senior Vice President and Treasurer
1-800-451-1294
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/callon-petroleum-company-announces-operational-update-and-2015-year-end-reserves-300212380.html
SOURCE Callon Petroleum Company