SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number 0-25192
CALLON PETROLEUM COMPANY
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 64-0844345
------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification No.)
200 North Canal Street
Natchez, Mississippi 39120
--------------------------------------------------
(Address of principal executive offices)(Zip code)
(601) 442-1601
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
_____ _____
As of November 4, 1998, there were 8,041,525 shares of the Registrant's
Common Stock, par value $0.01 per share, outstanding.
<PAGE>
CALLON PETROLEUM COMPANY
Index
Page No.
Part I. Financial Information
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the three and
nine-month periods ended September 30, 1998 and
September 30, 1997 4
Consolidated Statements of Cash Flows for the nine-month
periods ended September 30, 1998 and September 30, 1997 5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-13
Part II. Other Information 14-16
<PAGE>
<TABLE>
<CAPTION>
CALLON PETROLEUM COMPANY
CONSOLIDATED BALANCE SHEETS
($ In thousands)
September 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,661 $ 15,597
Accounts receivable 7,268 12,168
Other current assets 637 723
---------- ---------
Total current assets 19,566 28,488
---------- ---------
Oil & gas properties, full cost accounting method:
Evaluated properties 420,716 398,046
Less accumulated depreciation, depletion and
amortization ( 297,418) (282,891)
---------- ---------
123,298 115,155
Unevaluated properties excluded from amortization 49,092 35,339
---------- ---------
Total oil and gas properties 172,390 150,494
---------- ---------
Pipeline and other facilities, net 6,263 6,504
Other property and equipment, net 1,841 1,938
Deferred tax asset -- 1,248
Long-term gas balancing receivable 233 242
Other assets, net 1,118 1,507
---------- ---------
Total assets $ 201,411 $ 190,421
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 14,103 $ 12,389
Undistributed oil and gas revenues 1,764 2,259
Other current liabilities 1,278 1,121
---------- ---------
Total current liabilities 17,145 15,769
---------- ---------
Long-term debt 67,250 60,250
Deferred tax liability 240 --
Other long-term liabilities 542 297
Long-term gas balancing payable 343 404
---------- ---------
Total liabilities 85,520 76,720
---------- ---------
Stockholders' equity:
Preferred stock 13 13
Common stock 80 79
Unearned compensation - restricted stock (3,847) (2,232)
Other stockholder's equity 119,645 115,841
---------- ---------
Total stockholders' equity 115,891 113,701
---------- ---------
Total liabilities and stockholders' equity $ 201,411 $ 190,421
========== =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
CALLON PETROLEUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 8,627 $ 8,734 $ 28,949 $ 29,578
Interest and other 712 467 1,615 1,162
------- ------- -------- --------
Total revenues 9,339 9,201 30,564 30,740
------- ------- -------- --------
Costs and expenses:
Lease operating expenses 1,935 2,071 6,024 6,235
Depreciation, depletion and amortization 4,303 3,707 14,769 11,288
General and administrative 1,402 881 4,134 3,263
Interest 279 735 1,262 945
------- ------- -------- --------
Total costs and expenses 7,919 7,394 26,189 21,731
------- ------- -------- --------
Income from operations 1,420 1,807 4,375 9,009
Income tax expense 487 615 1,488 2,926
------- ------- -------- --------
Net income 933 1,192 2,887 6,083
Preferred stock dividend 699 699 2,097 2,097
------- ------- -------- --------
Net income available to common shares $ 234 $ 493 $ 790 $ 3,986
======= ======= ======== ========
Net income per common share:
Basic $ 0.03 $ 0.08 $ 0.10 $ 0.66
Diluted $ 0.03 $ 0.08 $ 0.10 $ 0.63
Shares used in computing net income
per common share:
Basic 8,042 6,025 8,026 6,017
Diluted 8,104 6,379 8,200 6,332
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
CALLON PETROLEUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In thousands)
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,887 $ 6,083
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 15,147 11,607
Amortization of deferred costs 471 321
Deferred income tax expense 1,488 2,926
Noncash compensation related to stock plans 1,435 973
Changes in current assets & liabilities:
Accounts receivable, trade 4,900 3,040
Other current assets 86 (222)
Current liabilities (1,743) (3,924)
Change in gas balancing receivable 9 414
Change in gas balancing payable (61) (77)
Change in other long-term liabilities -- 185
Change in other assets, net (82) (1,018)
--------- ---------
Cash provided by operating activities 24,537 20,308
--------- ---------
Cash flows from investing activities:
Capital expenditures (47,176) (61,034)
Cash proceeds from sale of mineral interests 10,471 4,405
Cash proceeds from sale of interest burdened
by a net profits interest 1,825 --
--------- ---------
Cash used in investing activities (34,880) (56,629)
--------- ---------
Cash flows from financing activities:
Change in accrued liabilities for capital expenditures 1,294 628
Increase in debt 7,000 54,500
Payment on debt -- (18,500)
Equity issued by conversion of stock options -- 60
Purchase of treasury shares (43) --
Stock canceled (145) --
Sale of common stock 398 --
Dividends on preferred stock (2,097) (2,097)
--------- ---------
Cash provided by (used in) financing activities 6,407 34,591
--------- ---------
Net increase (decrease) in cash and cash equivalents (3,936) (1,730)
Cash and short-term investments:
Balance, beginning of period 15,597 7,669
--------- ---------
Balance, end of period $ 11,661 $ 5,939
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
CALLON PETROLEUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
1. Basis of Presentation
The financial information presented as of any date other than December 31,
has been prepared from the books and records without audit. Financial
information as of December 31, has been derived from the audited financial
statements of the Company, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary
for the fair presentation of the financial information for the period
indicated, have been included. For further information regarding the
Company's accounting policies, refer to the Consolidated Financial
Statements and related notes for the year ended December 31, 1997 included
in the Company's Annual Report on Form 10-K dated March 17, 1998.
2. Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("FAS 133"), Accounting for
Derivative Instruments and Hedging Activities. The Statement establishes
accounting and reporting standards requiring that every derivative
instrument, including certain derivative instruments embedded in other
contracts be recorded in the balance sheet as either an asset or liability
measured at its fair value.
FAS 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998
and thereafter). FAS 133 cannot be applied retroactively.
The Company has not yet quantified the impacts of adopting FAS 133 on the
financial statements and has not determined the timing of or method of the
adoption of FAS 133. However, the Statement could increase volatility in
other comprehensive income.
3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("FAS 128"), "Earnings Per Share", which generally simplifies the
manner in which earnings per share are determined. The Company adopted FAS
128 effective December 15, 1997. In accordance with FAS 128, the Company's
previously reported earnings per share for 1997 was restated.
Basic earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
quarter. Diluted earnings per common share for the three and nine month
periods ended September 30, 1998 and 1997 were determined on a weighted
average basis using common shares issued and outstanding adjusted for the
effect of stock options considered common stock equivalents computed using
the treasury stock method and the effect of the convertible preferred stock
(if dilutive).
<PAGE>
A reconciliation of the basic and diluted earnings per share computation is
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
(a) Net income available for common stock $ 234 $ 493 $ 790 $ 3,986
Preferred dividends assuming conversion
of preferred stock ( if dilutive) $ -- $ -- $ -- $ --
(b) Income available for common stock
assuming conversion of preferred
stock (if dilutive) $ 234 $ 493 $ 790 $ 3,986
(c) Weighted average shares outstanding 8,042 6,025 8,026 6,017
(d) Dilutive impact of stock options 62 354 174 315
(e) Convertible preferred stock (if dilutive) -- -- -- --
(d) Total diluted shares 8,104 6,379 8,200 6,332
Basic earnings per share (a/c) $ 0.03 $ 0.08 $ 0.10 $ 0.66
Diluted earnings per share (b/d) $ 0.03 $ 0.08 $ 0.10 $ 0.63
</TABLE>
The conversion of the preferred stock (convertible into 2,990,132 shares of
common stock) was not included in the diluted calculation for the three
months ended September 30, 1998 and 1997 and for the nine month period
ended September 30, 1998 and 1997, due to its antidilutive effect on diluted
earnings per share.
4. Net Profits Interest
During May 1998, the Company completed the sale of an oil and gas property
burdened by a net profits interest. The owner of the net profits interest
was due approximately $19.9 million as a result of this sale. A partial
distribution of the sales proceeds was made to the owner of the net
profits interest during the third quarter, with approximately $2.0 million
remaining in current liabilities as of September 30, 1998 pending a final
accounting settlement.
5. Hedging Contracts
The Company periodically uses derivative financial instruments to manage
oil and gas price risks. Settlements of gains and losses on commodity
price swap contracts are generally based upon the difference between the
contract price or prices specified in the derivative instrument and a
NYMEX price and are reported as a component of oil and gas revenues. Gains
or losses attributable to the termination of a swap contract are deferred
and recognized in revenue when the oil and gas is sold.
At September 30, 1998, the Company had open collar contracts with third
parties whereby minimum floor prices and maximum ceiling prices are
contracted and applied to related contract volumes. These agreements in
effect for 1998 are for average gas volumes of 333,000 Mcf per month
through March of 1999 (on average) a ceiling price of $2.93 and floor
of $2.33. In addition, the Company had oil open collar contracts for
12,500 barrels per month from October 1998 through June of 1999 at a
ceiling price of $18.00 and a floor of $14.50 and 12,500 barrels per
month from July 1999 through December 1999 at a ceiling price of $18.54
and a floor of $15.00.
<PAGE>
Also at September 30, 1998 the Company had open forward sales position
natural gas contracts of 500,000 Mcf for the month of October 1998 at a
fixed contract average price of $2.19 and 200,000 Mcf per month from
April of 1999 through September of 1999 at a fixed contract price of $2.35.
For the nine months ending September 30, 1998, $1.6 million of net revenue
was recognized as a result of the Company's hedging activities.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
YEAR 2000 COMPLIANCE
Three years ago, Callon began its efforts to address the Year 2000 threat by
beginning a process of standardization, reducing the various vendors of
hardware and software to a more manageable number. Callon's core financial
accounting software, running on an IBM AS/400 midrange computer, is maintained
by one major vendor of oil and gas industry software and is Year 2000 compliant
at this date. Microcomputers are equipped with a standard Microsoft appliation
suite and engineering software from major industry vendors who have Year 2000
solutions ready for implementation. Telecommunication equipment has been
upgraded to Year 2000 compliance.
As Callon has completed its inventory phase and remedial action is being taken
as necessary, we now turn our attention to our business partners, vendors and
customers. The third phase of our plan calls for the development of contingency
plans to address, among other things, the failure of our business associates to
adequately address their Year 2000 problems.
Overseeing the Year 2000 project is the Callon Year 2000 Project Committee which
meets on a periodic basis to review project status, provide necessary management
input, and resolve project issues on a timely basis. A formal review is
presented to the Callon Board of Directors during their regularly scheduled
quarterly meetings. At this date, the Company does not anticipate that Year
2000 compliance will have a material effect on the company's financial
condition or results of operations.
Total budget for the Year 2000 project is less than $200,000.
GENERAL
This report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934. All statements other than
statements of historical fact included in this report regarding the Company's
financial position, estimated quantities, reserves, business strategy, plans
and objectives for future operations and covenant compliance, are forward-
looking statements. Although the Company believes that the assumptions upon
which such forward-looking statements are based are reasonable, it can give no
assurances that such assumptions will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations include the results of and dependence on exploratory drilling
activities, operating risks, regulatory and environmental matters, capital
requirements and availability, dependence on key personnel, oil and gas price
levels, availability of drilling rigs, weather, land issues and other risks
described in the Company's filings with the Security and Exchange Commission
("Cautionary Statements"). The Cautionary Statements expressly qualify all
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf.
The Company's revenues, profitability and future growth and the carrying
value of its oil and gas properties are substantially dependent on prevailing
prices of oil and gas. The Company's ability to maintain or increase its
borrowing capacity and to obtain additional capital on attractive terms is
also substantially dependent upon oil and gas prices. Prices for oil and gas
are subject to large fluctuation in response to relatively minor changes in
the supply of and demand for oil and gas, market uncertainty and a variety of
additional factors beyond the control of the Company. Any substantial and
extended decline in the price of oil or gas would have an adverse effect on
the Company's carrying value of its proved reserves, borrowing capacity,
revenues, profitability and cash flows from operations.
Volatile oil and gas prices make it difficult to estimate the value of
producing properties for acquisition and often cause disruption in the market
<PAGE>
for oil and gas producing properties, as buyers and sellers have difficulty
agreeing on such value. Price volatility also makes it difficult to budget
for and project the return on acquisitions, exploration and development
projects.
The following discussion is intended to assist in an understanding of the
Company's historical financial position and results of operations for the
three and nine-month periods ended September 30, 1998 and 1997. The Company's
historical financial statements and notes thereto included elsewhere in this
quarterly report contain detailed information that should be referred to in
conjunction with the following discussion.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital are its cash flow from operations,
borrowings from financial institutions and the sale of debt and equity
securities. Net cash flow provided by operations for the nine months ending
September 30, 1998 totaled $21.4 million. Capital expenditures during the
first nine months totaled $47.2 million, offset by $10.5 million from the sale
of mineral interests. The excess of net expenditures over cash flow was funded
by $7.0 million drawn under the Company's Credit Facility and a decrease in
working capital, including a $3.9 million decrease in the cash balance.
At September 30, 1998, the Company had working capital of $2.4 million and a
current ratio of 1.4 to 1.
The Company has budget $85 million in capital expenditures for 1998. During
the first nine months of 1998, the Company has expended approximately $37.6
million on drilling and development activities, $8.9 million in acquisitions
of undeveloped mineral interests and seismic information attributable to
future drilling sites and $0.7 million for other associated costs. For the
balance of the year, the Company will continue evaluating producing property
acquisitions and drilling opportunities. The major portion of the remaining
capital expenditure budget will be used for exploratory and development
activities. The capital budget will be financed with the sale of debt
securities, projected cash flow from operations and unused borrowings under
the Company's Credit Facility.
RESULTS OF OPERATIONS
The following table sets forth certain operating information with respect
to the oil and gas operations of the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Production:
Oil (MBbls) 59 114 252 351
Gas (MMcf) 3,496 2,946 11,172 9,394
Total production (MMcfe) 3,848 3,629 12,683 11,497
Average sales price:
Oil (per Bbl) $ 11.60 $ 17.70 $ 12.72 $ 18.82
Gas (per Mcf) 2.27 2.28 2.30 2.45
Total production (per Mcfe) 2.24 2.41 2.28 2.57
Average costs (per Mcfe):
Lease operating (excluding severance taxes) $ 0.47 $ 0.49 $ 0.42 $ 0.45
Severance taxes 0.03 0.08 0.06 0.09
Depreciation, depletion and amortization 1.12 1.02 1.16 0.98
General and administrative (net of management fees) 0.36 0.24 0.33 0.28
</TABLE>
<PAGE>
Comparison of Results of Operations for the Three Months Ended September 30,
1998 and the Three Months Ended September 30, 1997.
Oil and Gas Production and Revenues
Total oil and gas revenues were $8.6 million in 1998 and $8.7 million in 1997.
While oil production and prices were lower, gas revenues increased 18% and gas
production increased 19% when compared to the same period last year. Oil
production during the third quarter of 1998 totaled 59,000 barrels and
generated $0.7 million in revenues compared to 114,000 barrels and $2.0 million
in revenues for the same period in 1997. Third quarter average daily production
decreased to 638 barrels per day in 1998 from 1,237 barrels per day in 1997.
Average oil prices received in the third quarter of 1998 were $11.60 compared
to $17.70 in 1997. Decreased production in the third quarter of 1998 is
largely attributable to the sale of Black Bay in May 1998 and the loss of
normal production from wells being shut-in due to three severe storms in the
Gulf of Mexico during August and September.
Gas production during the third quarter of 1998 totaled 3.50 billion cubic feet
and generated $7.9 million in revenues compared to 2.95 billion cubic feet and
$6.7 million in revenues during the same period in 1997. The average sales
price for the third quarter of 1998 averaged $2.27 per thousand cubic feet
compared to $2.28 per thousand cubic feet at this time this year. When
compared to the same quarter last year, the Company had a net increase in gas
production of 19%, despite losing normal production from wells being shut-in
due to three severe storms in the Gulf of Mexico during August and September.
Production increases as a result of acquisitions, a new discovery and the
recompletion of an existing well were partially offset by expected production
declines in the other properties.
The following table summarizes oil and gas production from the Company's major
producing properties for the comparable periods.
Oil Production Gas Production
(Barrels) (Mcf)
Three Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
Mobile Block 864 Area -- -- 771,000 323,000
Chandeleur Block 40 -- -- 525,000 843,000
Main Pass 163 -- -- 363,000 854,000
Mobile Block 952/953 -- -- 466,000 --
Main Pass 31 5,000 -- 215,000 --
Main Pass 164/165 -- -- 254,000 299,000
North Dauphin Island Field -- -- 452,000 306,000
Black Bay -- 41,000 -- --
Escambia Mineral Properties 36,000 29,000 59,000 44,000
Other properties 18,000 44,000 391,000 277,000
------ ------- --------- ---------
Total 59,000 114,000 3,496,000 2,946,000
====== ======= ========= =========
Lease Operating Expenses
Lease operating expenses, including severance taxes, for the three-month period
ending September 30, 1998 were $1.9 million, compared to $2.1 million for the
same period in 1997. This decrease is associated with the producing properties,
which were acquired during the second half of 1998. Severance taxes for the
third quarter of 1998 and 1997 were $0.1 million and $0.3 million, respectively.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization for the three months ending September
30, 1998 and 1997 was $4.3 million and $3.7 million, respectively. The increase
reflects the increase in rates of $0.10 per Mcf equivalent and increased
production volumes.
<PAGE>
General and Administrative
General and administrative expense for the three months ended September 30,
1998 was $1.4 million compared to $0.9 million for the three months ended
September 30, 1997. This increase is primarily due to increased franchise
taxes and the loss of management fees.
Interest Expense
Interest expense decreased to $279,000 during the three months ended
September 30, 1998 from $735,000 during the three months ended
September 30, 1997 reflecting the decrease in the Company's average long-
term debt.
Comparison of Results of Operations for the Nine Months Ended September 30,
1998 and the Nine Months Ended September 30, 1997.
Oil and Gas Production and Revenues
For the nine months ended September 30, 1998, total oil and gas revenues
decreased by $0.07 million, or 2%, to $28.9 million when compared to $29.6
million for the same period in 1997.
For the nine months ending September 30, 1998, oil production and revenues
decreased to 252,000 barrels and $3.2 million, respectively. For the
comparable period in 1997, oil production was 351,000 barrels while revenues
totaled $6.6 million. Oil prices during the first nine months of 1998 averaged
$12.72, compared to $18.82 for the same period in 1997.
Natural gas production and revenue for the nine-month period ending September
30, 1998 were 11.17 billion cubic feet and $25.7 million, respectively,
increasing from 9.39 billion cubic feet and gas revenues of $23.0 million in
the first nine months of 1997. The average sales price for natural gas in the
first nine months in 1998 was $2.30 per Mcf, a $0.15 per Mcf decrease from the
same period in 1997. When compared to the nine-month period last year, the
Company had a net increase in gas production of 19%. Production increases as
a result of acquisitions, a new discovery and the recompletion of an existing
well were partially offset by expected production declines in the other
properties.
The following table summarizes oil and gas production from the Company's major
producing properties for the comparable periods.
Oil Production Gas Production
(Barrels) (Mcf)
Nine Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Mobile Block 864 Area -- -- 2,922,000 323,000
Chandeleur Block 40 -- -- 1,985,000 3,094,000
Main Pass 163 -- -- 1,553,000 3,331,000
Mobile Block 952/953 -- -- 1,219,000 --
Main Pass 31 33,000 -- 863,000 --
Main Pass 164/165 -- -- 870,000 569,000
North Dauphin Island Field -- -- 855,000 1,132,000
Black Bay 57,000 134,000 -- --
Escambia Mineral properties 116,000 85,000 194,000 143,000
Other properties 46,000 132,000 711,000 802,000
------- ------- ---------- ---------
Total 252,000 351,000 11,172,000 9,394,000
======= ======= ========== =========
<PAGE>
Lease Operating Expenses
Lease operating expenses, excluding severance taxes, for the first nine months
of 1998 increased by 2% to $5.3 million from $5.2 million for the 1997
comparable period. This increase is primarily the result of expenses associated
with the new producing properties. Severance taxes decreased by 31% to $0.7
million during the first nine months of 1998 from $1.1 million for the same
period in 1997 as a result of production declines in the Company's onshore
properties, property sales and lower oil and gas sale prices.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization for the first nine months of 1998
was $14.8 million, or $1.16 per Mcf equivalent. For the same period in 1997,
the total was $11.3 million and $0.98 per Mcf equivalent. This increase is the
result of an increased rate per Mcf equivalent and increased production.
General and Administrative
During the first nine months of 1998, general and administrative expenses
increased by 27% to $4.1 million compared to $3.3 million for the nine-month
period in 1997. Increased compensation expenses and the loss of management
fees, as a result of property sales, combined to produce this overall
increase.
Interest Expense
Interest expense during the first three quarters of 1998 was $1,262,000
compared to $945,000 for the first three quarters of 1997. This increase
is a result of the increase in the Company's average long-term debt.
<PAGE>
CALLON PETROLEUM COMPANY
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession*
3. Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation of the Company, as amended
(incorporated by reference from Exhibit 3.1 of the Company's
Registration Statement on Form S-4, Reg. No. 33-82408)
3.2 Certificate of Merger of Callon Consolidated Partners, L. P.
with and into the Company dated September 16, 1994
(incorporated by reference from Exhibit 3.2 of the Company's
Report on Form 10-K for the period ended December 31, 1994)
3.3 Bylaws of the Company (incorporated by reference from Exhibit
3.2 of the Company's Registration Statement on Form S-4, Reg.
No. 33-82408)
4. Instruments defining the rights of security holders, including
indentures
4.1 Specimen stock certificate (incorporated by reference from
Exhibit 4.1 of the Company's Registration Statement on Form
S-4, Reg. No. 33-82408)
4.2 Specimen Preferred Stock Certificate (incorporated by
reference from Exhibit 4.2 of the Company's Registration
Statement on Form S-1, Reg. No. 33-96700)
4.3 Designation for Convertible Exchangeable Preferred Stock,
Series A (incorporated by reference from Exhibit 4.3 of the
Company's Report on Form 10-K for the period ended December
31, 1995)
4.4 Indenture for Convertible Debentures (incorporated by
reference from Exhibit 4.4 of the Company's Report on Form
10-K for the period ended December 31, 1995)
4.5 Certificate of Correction on Designation of Series A
Preferred Stock (incorporated by reference from Exhibit 4.4
of the Company's Registration Statement on Form S-1/A filed
November 22, 1996, Reg. No. 333-15501)
4.6 Form of Note Indenture (incorporated by reference from
Exhibit 4.6 of the Company's Registration Statement on
Form S-1/A filed November 22, 1996, Reg. No. 333-15501)
9. Voting trust agreement*
<PAGE>
10. Material contracts
10.1 Contingent Share Agreement dated September 16, 1994 between
the Company and the Callon Stockholders (incorporated by
reference from Exhibit 10.1 of the Company's Registration
Statement on Form 8-B filed October 3, 1994)
10.2 Registration Rights Agreement dated September 16, 1994
between the Company and NOCO Enterprises, L.P. (incorporated
by reference from Exhibit 10.2 of the Company's Registration
Statement on Form 8-B filed October 3, 1994)
10.3 Registration Rights Agreement dated September 16, 1994
between the Company and Callon Stockholders (incorporated by
reference from Exhibit 10.3 of the Company's Registration
Statement on Form 8-B filed October 3, 1994)
10.4 Callon Petroleum Company 1994 Stock Incentive Plan
(incorporated by reference from Exhibit 10.5 of the Company's
Registration Statement on Form 8-B filed October 3, 1994)
10.5 Credit Agreement dated October 14, 1994 by and between the
Company, Callon Petroleum Operating Company and Inter-
nationale Nederlanden (U.S.) Capital Corporation (incorpor-
ated by reference from Exhibit 99.1 of the Company's Report
on Form 10-Q for the quarter ended September 30, 1994)
10.6 Third Amendment dated February 22, 1996, to Credit Agreement
by and among Callon Petroleum Operating Company, Callon
Petroleum Company and Internationale Nederlanden (U.S.)
Capital Corporation (incorporated by reference from Exhibit
10.9 of the Company's report on Form 10-K for the period
ended December 31, 1995)
10.7 Consulting Agreement between the Company and John S. Callon
dated June 19, 1996 (incorporated by reference from Exhibit
10.10 of the Company's Registration Statement on Form S-1,
filed November 5, 1996, Reg. No. 333-15501)
10.8 Callon Petroleum Company 1996 Stock Incentive Plan
(incorporated by reference from Exhibit 10.6 of the
Company's Registration Statement on Form S-1/A, filed
November 14, 1996, Reg. No. 333-15501)
10.9 Employment Agreement effective September 1, 1996, between the
Company and Fred L. Callon (incorporated by reference from
Exhibit 10.4 of the Company's Registration Statement on Form
S-1/A, filed November 14, 1996, Reg. No. 333-15501)
10.10 Employment Agreement effective September 1, 1996, between
the Company and Dennis W. Christian (incorporated by
reference from Exhibit 10.7 of the Company's Registration
Statement on Form S-1/A, filed November 14, 1996, Reg. No.
333-15501)
10.11 Employment Agreement effective September 1, 1996, between
the Company and John S. Weatherly (incorporated by reference
from Exhibit 10.8 of the Company's Registration Statement on
Form S-1/A, filed November 14, 1996, Reg. No. 333-15501)
10.12 Callon Petroleum Company 1996 Stock Incentive Plan
(incorporated by reference from Exhibit 4.2 of the Company's
Registration Statement on Form S-8, Reg. No. 333-29537)
<PAGE>
10.13 Callon Petroleum Company 1997 Stock Incentive Plan
(incorporated by reference from Exhibit 4.2 of the Company's
Registration Statement on Form S-8, Reg. No. 333-29537)
11. Statement re computation of per share earnings
11.1 Computation of Per Share Earnings
15. Letter re unaudited interim financial information*
18. Letter re change in accounting principles*
19. Report furnished to security holders*
22. Published report regarding matters submitted to vote of
security holders*
23. Consents of experts and counsel*
24. Power of attorney*
27. Financial Data Schedule
99. Additional exhibits*
(b) Reports on Form 8-K and 8-K/A.
On September 2, 1998, the Company filed a report on Form 8-K
announcing the action of its Board of Directors in authorizing
the repurchase of up to $10 million in common stock. The
purchases may be made on the open market or in privately
negotiated transactions, depending upon market conditions
and other factors. Repurchased shares will be held in the
Company's treasury and used for general corporate purposes.
- ------------------
* Inapplicable to this filing
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALLON PETROLEUM COMPANY
Date November 9, 1998 By /s/ John S. Weatherly
-----------------------------------------
John S. Weatherly, Senior Vice President,
Chief Financial Officer and Treasurer
<PAGE>
Exhibit 11.1
Callon Petroleum Company
Computation of Per Share Earnings
(In thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
Net income $ 933 $ 1,192 $ 2,887 $ 6,083
Preferred stock dividends 699 699 2,097 2,097
Net income available
to common shareholders $ 234 $ 493 $ 790 $ 3,986
Net income per common share:
Basic $ 0.03 $ 0.08 $ 0.10 $ 0.66
Diluted $ 0.03 $ 0.08 $ 0.10 $ 0.63
Basic common shares outstanding 8,042 6,025 8,026 6,017
Stock options 62 354 174 315
Diluted common shares outstanding 8,104 6,379 8,200 6,332
Note: All computations are based on the weighted average shares outstanding
for the periods presented, adjusted for the effect of stock options, if any,
considered common stock equivalents computed using the treasury stock method.
The Convertible preferred stock is not a common stock equivalent and was not
considered in the diluted computation because, if included, the effect would
be antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF CALLON PETROLEUM COMPANY FOR THE
PERIOD ENDING SEPTEMBER 30, 1998 WHICH ARE PRESENTED IN ITS QUARTERLY REPORT ON
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,661
<SECURITIES> 0
<RECEIVABLES> 7,268
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,566
<PP&E> 469,808
<DEPRECIATION> 297,418
<TOTAL-ASSETS> 201,411
<CURRENT-LIABILITIES> 17,145
<BONDS> 0
0
13
<COMMON> 80
<OTHER-SE> 115,798
<TOTAL-LIABILITY-AND-EQUITY> 201,411
<SALES> 28,949
<TOTAL-REVENUES> 30,564
<CGS> 0
<TOTAL-COSTS> 24,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,262
<INCOME-PRETAX> 4,375
<INCOME-TAX> 1,488
<INCOME-CONTINUING> 2,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,887
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
