Callon Petroleum (CPE) Q4 results - Feb 28

[dan_s]

Key Stat: Operating Cash Flow beat my forecast.
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HOUSTON, Feb. 23, 2022 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company") today reported results of operations for the three months and full-year ended December 31, 2021.

Presentation slides accompanying this earnings release are available on the Company's website at www.callon.com located on the "Presentations" page within the Investors section of the site.

2021 Highlights

Full-year 2021 production of 95.6 MBoe/d (64% oil)

Year-end proved reserves of 484.6 MMBoe (60% oil) with a standardized measure of future discounted cash flows of total proved reserves of $6.3 billion

PV-10 of total proved reserves of $7.1 billion; Proved developed reserves represent 57% of total reserve volumes with an associated PV-10 of $4.5 billion

Generated net cash provided by operating activities of $974.1 million and adjusted free cash flow of $274.2 million < CFPS over $21!

Net income of $365.2 million, or $7.26 per diluted share, adjusted EBITDA of $998.8 million, and adjusted income of $437.4 million or $8.69 per diluted share

Achieved a full year operating margin of $42.05 per Boe, a 141% increase over last year

Announced approximately $210 million in non-core asset sales

Asset monetization proceeds, debt exchanges, and free cash flow contributed to a reduction in total debt of approximately $760 million, excluding cash consideration paid for acquisitions

Exited the year with a net debt / last twelve months EBITDA ratio of 2.3x pro forma for the Primexx acquisition and a net debt / fourth quarter annualized EBITDA of 2.0x

Fourth Quarter 2021 Highlights

Fourth quarter 2021 production of 112.4 MBoe/d (64% oil) with 16.8 net wells placed on production

Generated $366.3 million of net cash provided by operating activities and adjusted free cash flow of $123.6 million < Beat forecast

Net income of $285.4 million, or $4.78 per diluted share, adjusted EBITDA of $339.2 million, and adjusted income of $159.2 million or $2.66 per diluted share

Achieved an operating margin of $48.71 per Boe, a 130% increase over last year

Closed the acquisition of 35,000 net acres and approximately 18,000 net barrels of oil equivalent per day in the Delaware Basin

Realized $153 million in proceeds through the divestiture of non-core Eagle Ford and Midland producing assets and water infrastructure assets

2022 Capital Plan Highlights

Operational capital budget of $725 million, with approximately 85% allocated to the Permian Basin

Annual production guidance of 101 - 105 MBoe/d (64% oil)

Transition to more efficient, larger scale development on recently acquired southern Delaware properties with an expanded drilled and uncompleted well inventory and execute on identified opportunities to reduce lifting costs by 30%

Maintenance capital spending program driving stable production profile relative to 2021 after adjusting for acquisitions and divestitures

Expected adjusted free cash flow generation of greater than $500 million and an estimated reinvestment rate of less than 60% at $75/Bbl oil (WTI benchmark) < If WTI stays over $90/bbl CPE should generate over $800 million of free cash flow.

Joe Gatto, President and Chief Executive Officer commented, "During the fourth quarter and throughout the year, our team has outperformed expectations and set new records, all the while dealing with pandemic-related workplace challenges and a dynamic industry environment. Our operations team once again delivered solid results with production for the fourth quarter and the full year coming in at the high end of guidance while delivering our program under budget for the year.

"In 2021, Callon successfully completed a large acquisition that was both accretive and deleveraging. We followed through on our monetization targets for the year, announcing approximately $210 million in gross proceeds from non-core asset sales. Financially, we set several new records, generating record net income of $365.2 million and annual adjusted EBITDA of $999 million which represents an increase of over 40% relative to last year. Our capital discipline and high margins enabled us to deliver $274 million in adjusted free cash flow, a new company record. These outstanding achievements allowed us to dramatically improve the balance sheet and reduce Callon's leverage ratio by over 2x during the year. We look forward to raising the bar even further in 2022.

"Our 2022 capital budget reflects both our continued commitment to capital discipline and a greater focus on Callon's high rate of return Permian Basin assets. Inclusive of capitalized expenses, our capital budget implies a reinvestment rate1 of approximately 60% of adjusted discretionary cash flow at $75 per barrel WTI price and an adjusted free cash flow breakeven price of approximately $40 per barrel. We are in the process of implementing our operating model on the recently acquired Delaware assets and are actively taking measures to improve both production efficiency and operating cost structure. After completing our work to transition the acquired assets to larger project developments in the first quarter, we expect to generate oil production growth in excess of 10% over the course of the year.

"The industry continues to face inflationary cost pressures in items like steel tubulars and fuel, as well as overall labor and service costs. These inflationary pressures have increased estimated spot market well costs by over 15% based on recent data points. Given our scaled program of steady development activity and longer-term agreements with service providers, we expect to benefit from a wide range of efficiencies and limit the anticipated inflationary impact on our well costs to approximately 10%.

"Based on our planned operational activity and leading operating margins, we expect to generate over $500 million in adjusted free cash flow in 2022, based on $75 per barrel. This level of free cash flow puts us on a path to further reduce our absolute debt levels and achieve a leverage ratio of less than 1.5x by year end 2022," concluded Mr. Gatto.

[dan_s]

My valuation of CPE will be going over $95.