Callon Petroleum (CPE) Q2 Results
Posted: Mon Aug 06, 2018 8:28 pm
Q2 results were good, but big ramp in production into year-end is much better.
Financial and operational highlights for the second quarter of 2018 and other recent data points include:
•Increased production to 29.0 MBOE/D (76% oil), an increase of 30% year-over-year < compares to my forecast of 30,000 Boepd.
•Reduced lease operating expense by 10% year-over-year to $4.99 per BOE < compares to $5.70/boe used in my forecast.
•Generated an operating margin of $44.17 per BOE, an increase of 37% year-over-year
•Recent Wolfcamp A wells in the Fairway area of WildHorse outperforming oil type curves by approximately 30%
•Successful Wolfcamp A wells at Spur, including the initiation of pad co-development of the Upper and Lower Wolfcamp A, significantly outperforming initial operated wells
•Continued outperformance from ten-well downspacing test at Fairway through more than 200 days of production
•First "mega-pad" placed on production in July and performing favorably against offset three-well pads
•Announced entry into a definitive agreement and completed related financings to acquire approximately 28,657 net surface acres in the Delaware Basin, providing near-term value contribution from current production as well as upside potential, with the transaction projected to close later in the third quarter
•Executed a multi-year firm transportation agreement covering 15,000 barrels of oil per day to Gulf Coast destination points and corresponding long-term sales agreements for equivalent volumes based on Gulf Coast and international pricing benchmarks < very good news.
Joe Gatto, President and Chief Executive Officer, commented, "Our second quarter results reflect our continued commitment to maximizing returns while thoughtfully growing our business with the support of leading internal cash margins. Halfway through the year, we have drilled and completed more wells than originally anticipated while still managing our capital spending within our original expectations. The team's continued efforts to reduce operating costs have allowed us to nearly match our operating margins from the first quarter, despite lower realized commodity prices." He continued, "We have been preparing for the integration of our recently announced acquisition into a combined Spur business plan and are looking forward to contributions from both the production base of acquired properties as well as incremental drilling and completion activity on the new footprint later this year, driving an expected combined production rate of over 40,000 BOE/d in the fourth quarter. Additionally, we have been preparing for growing production volumes with recent additions to our hedging program and a new firm transportation agreement that is a meaningful first step to increasing our exposure to pricing points outside of the Permian Basin."
I will update my forecast/valuation for CPE on Tuesday morning. - Dan
Financial and operational highlights for the second quarter of 2018 and other recent data points include:
•Increased production to 29.0 MBOE/D (76% oil), an increase of 30% year-over-year < compares to my forecast of 30,000 Boepd.
•Reduced lease operating expense by 10% year-over-year to $4.99 per BOE < compares to $5.70/boe used in my forecast.
•Generated an operating margin of $44.17 per BOE, an increase of 37% year-over-year
•Recent Wolfcamp A wells in the Fairway area of WildHorse outperforming oil type curves by approximately 30%
•Successful Wolfcamp A wells at Spur, including the initiation of pad co-development of the Upper and Lower Wolfcamp A, significantly outperforming initial operated wells
•Continued outperformance from ten-well downspacing test at Fairway through more than 200 days of production
•First "mega-pad" placed on production in July and performing favorably against offset three-well pads
•Announced entry into a definitive agreement and completed related financings to acquire approximately 28,657 net surface acres in the Delaware Basin, providing near-term value contribution from current production as well as upside potential, with the transaction projected to close later in the third quarter
•Executed a multi-year firm transportation agreement covering 15,000 barrels of oil per day to Gulf Coast destination points and corresponding long-term sales agreements for equivalent volumes based on Gulf Coast and international pricing benchmarks < very good news.
Joe Gatto, President and Chief Executive Officer, commented, "Our second quarter results reflect our continued commitment to maximizing returns while thoughtfully growing our business with the support of leading internal cash margins. Halfway through the year, we have drilled and completed more wells than originally anticipated while still managing our capital spending within our original expectations. The team's continued efforts to reduce operating costs have allowed us to nearly match our operating margins from the first quarter, despite lower realized commodity prices." He continued, "We have been preparing for the integration of our recently announced acquisition into a combined Spur business plan and are looking forward to contributions from both the production base of acquired properties as well as incremental drilling and completion activity on the new footprint later this year, driving an expected combined production rate of over 40,000 BOE/d in the fourth quarter. Additionally, we have been preparing for growing production volumes with recent additions to our hedging program and a new firm transportation agreement that is a meaningful first step to increasing our exposure to pricing points outside of the Permian Basin."
I will update my forecast/valuation for CPE on Tuesday morning. - Dan