Callon Petroleum — Q4 2019 Earnings Presentation
31 slides from Callon Petroleum's earnings presentation, Feb 27, 2020
Slide 1: 4th Quarter 2019 Earnings
Exhibit 99.2 4th QUARTER 2019 EARNINGS February 27th, 2020
Slide 2: Important Disclosures: Forward Looking Statements
IMPORTANT DISCLOSURES FORWARD LOOKING STATEMENTS This presentation 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
Slide 3: Returns-Focused, Multi-Basin Portfolio with Scale
RETURNS-FOCUSED, MULTI-BASIN PORTFOLIO WITH SCALE KEY STATISTICS COMPLIMENTARY ASSET PORTFOLIO 4Q19 Total Production (MBoe/d) 46.6 / 105.8 4Q19 PF (1) Midland Basin: (1) 4Q19 Crude Oil Production (MBbls/d) 35.1 / 71.9 4Q19 PF Mid-cycle co-development of 4Q19 FCF ($MM) $9.1 / $58.2 4Q19 PF (1)(2) hig
Slide 4: Delivering Shareholder Value
DELIVERING SHAREHOLDER VALUE (1) Improving Corporate Returns on Capital ▪ Targeting CROCI (2) of 18%, up from 13% in 2019 on stand-alone basis ▪ Focus on capital discipline, budget down over $100 million versus pro forma 2019 ▪ Scaled 2020 development program and balanced capital allocation reduces
Slide 5: History of Strategic Evolution and Expansion
HISTORY OF STRATEGIC EVOLUTION AND EXPANSION Three-year average: 73% (1) 100% 75% 50% 25% 0% CPE EBITDA Margin EBITDA CPE 120 CPE continues CPE acquires 140k expansion of CRZO Southern Delaware 120k 100 Basin CPE expands footprint with 100k 80 acquisitions in Permian NetAcreage Midland Basin and CPE
Slide 6: Self-Funded, High-Margin Oil Growth Company
SELF-FUNDED, HIGH-MARGIN OIL GROWTH COMPANY ATTRACTIVE COMBINED ASSET BASE WITH FREE CASH FLOW TO DEVELOP DEEP PERMIAN INVENTORY Accelerated value realization from deep Permian inventory Reflective of recent upspacing 2,800 Eagle Ford Permian ▪ Scale improves operational flexibility 2,400 ▪ Long-ter
Slide 7: 2020 Game Plan
2020 GAME PLAN KEY ELEMENTS ▪ Accelerate combination of individual activity plans into an integrated capital efficient development model with consistency and economies of scale ahead of plan ▪ Maximize free cash flow generation with reduced reinvestment rate relative to previous years ▪ Incorporate
Slide 8: 2020 Outlook
2020 OUTLOOK CAPITAL EFFICIENCY RATE OF CHANGE (1) 2020 GUIDANCE (2) Total production (MBoepd) 115 – 120 2020 Pro Forma Boepd Oil production 66% Add Per $1MM NGL production 17% Gas production 17% Income statement expenses 2019 Pro Forma Boepd Add Per $1MM LOE, including workovers (mm) $195 - $235 Ga
Slide 9: 2020 Capital Program Achieves Efficiencies of Scale
2020 CAPITAL PROGRAM ACHIEVES EFFICIENCIES OF SCALE 2020 OPERATIONAL CAPEX BREAKDOWN (1) 8 - 9 Operated Rigs 3 Avg. Operated Completion Crews 165 / 160 Gross Wells Drilled / Completed (WI: 80 – 95%) 2020 TRAJECTORY COMMENTARY (2) Capital ▪ 2020 capital/production cadence similar to 2019 but better B
Slide 10: Development Optimization
DEVELOPMENT OPTIMIZATION MAXIMIZING RETURNS WHILE PRESERVING ECONOMIC INVENTORY DRIVES SUSTAINABLE FCF GENERATION OPTIMIZED PROGRAM DEVELOPMENT SIGNIFICANT ADVANTAGES ACHIEVED Communicate effectively Lower well costs ▪ Plan development to optimize ▪ Maximizing crew efficiency, leveraging production
Slide 11: Delaware Synergy Value Capture Exceeds Target
DELAWARE SYNERGY VALUE CAPTURE EXCEEDS TARGET (1)(2) IDENTIFIED STRUCTURAL SAVINGS AVERAGE WELL SYNERGY BREAKDOWN (DC&E/1,000’ LATERAL) Scaled development model $1,300 > $45 MM (3) 2020 D&C Synergy Update ▪ Consistent crews and equipment ~ $25 - $30 MM Original 2020 D&C Synergy Guidance ▪ Shared ser
Slide 12: Continued Capital Efficiency Execution
CONTINUED CAPITAL EFFICIENCY EXECUTION (1)(2) DELAWARE DC&E ($000) / 1,000’ Scaled development drives lower costs $1,450 ▪ Simultaneous operations improves completion cycle $1,100 $995 time efficiency and performance consistency ▪ Reduced mobilization/demobilization time ▪ Executing multi-pad develo
Slide 13: Durable Free Cash Flow Through Cycles
DURABLE FREE CASH FLOW THROUGH CYCLES (1)(2)(3) 2020 FREE CASH FLOW SENSITIVITIES PF 4Q19 FREE CASH $58 MM (3) $250 20% FLOW 2020 WTI < $50 BREAKEVEN $200 15% 2020 REVENUE < 10% EXPOSURE TO GAS $150 (4) FCF FCF Yield 2020 NET CONTINGENT PAYMENTS 10% No potential outflows after 2020 $MM (potential in
Slide 14: Differentiated Assets and Opportunity
DIFFERENTIATED ASSETS AND OPPORTUNITY QUALITY BUSINESS MODEL (1) Operating Margin CPE Pro Forma ▪ Industry-leading operating margin and return on capital differentiate asset quality and outperform premium Top 5 Equity Performers Average multiple peers Bottom 5 Equity Performers Average ▪ Efficient c
Slide 15: Protecting Cash Flow and Improving Diversification
PROTECTING CASH FLOW AND IMPROVING DIVERSIFICATION ▪ Focused on total realized price including both benchmark and Robust hedges minimize the impact to oil revenue which is basis; aligning hedges to complement pricing points > than 90% of projected total revenue ▪ Over 70% of 1Q20 oil hedged above $5
Slide 16: Financial Strength
FINANCIAL STRENGTH ENHANCED CREDIT AND SIMPLIFIED CAP STRUCTURE 4Q19 CAPITALIZATION TABLE ▪ No near-term maturities and elected availability of ~ $700 4Q19 million Cash $13 ▪ PDP reserves PV-10 in excess of total debt Credit Facility $1,285 ▪ Upgraded by Moody’s in June 2019 and S&P in January 2020
Slide 17: Environmental, Social, and Governance
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (1) LONG TERM INCENTIVE PLAN (“LTIP”) COMPENSATION ALIGNED WITH STAKEHOLDERS ▪ 70% of executive compensation weighted to LTIP ▪ Performance shares = 60% of LTIP weighting ▪ Added an ABSOLUTE TSR modifier to 2020 performance share awards to further align executiv
Slide 18: Scale to Compete in the Current Environment
SCALE TO COMPETE IN THE CURRENT ENVIRONMENT (1) 2016 2019 PF 2020E OUR FOCUS: (2) • Consistent Execution Total Net Acres ~ 40,000 ~ 200,000 • Efficient Development Proved Reserves 54 540 (mmboe) (mmboe) • Improving Returns (3) • FCF Generation Oil Production 4 73 78 7% (mbopd) (mbopd) (mbopd) • Debt
Slide 19: Appendix
APPENDIX chp
Slide 20: Long-Term Focus on Capital Allocation Strategy
LONG-TERM FOCUS ON CAPITAL ALLOCATION STRATEGY DELAWARE (1) MIDLAND (1) EAGLE FORD (1) 2019 (2) 2020 2019 2020 2019 2020 DC&E / 1,000’ $1,100 $995 DC&E / 1,000’ $800 $700 DC&E / 1,000’ $550 $505 % Drilling 45% 45% % Drilling 45% 45% % Drilling 35% 40% % Completions 50% 50% % Completions 50% 45% % Co
Slide 21: Achieving G&A Synergies Early
ACHIEVING G&A SYNERGIES EARLY TIME COMPLETE SUBSTANTIALLY COMPLETE IN PROGRESS Executive Leadership Reductions in Non-Payroll Related Reductions Duplicative Groups Corporate Overlap • Office consolidation • Software licensing • Public company costs • Outside advisors • Systems redundancy • Duplicate
Slide 22: 4Q19 Contribution Detail
4Q19 CONTRIBUTION DETAIL CPE 4Q19 Stand-alone (1) CRZO 4Q19 11 Days (2) 4Q19 Reported CRZO 4Q19 Stand-alone (1) TOTAL PRODUCTION (Mboe) 3,582 707 4,289 6,151 OIL PERCENTAGE 78% 60% 75% 62% NGL PERCENTAGE N/A 20% 3% 18% GAS PERCENTAGE 22% 20% 22% 20% OIL PRICE (% WTI) 99% 104% 99% 98% NGL PRICE (% WT
Slide 23: Three-Stream Conversion
THREE-STREAM CONVERSION PRO FORMA CPE FY19 CRZO FY19 PF FY19 PF FY19 TWO STREAM THREE STREAM COMBINED THREE STREAM TOTAL PRODUCTION (Mboepd) 39.4 66.1 105.5 108.6 OIL PERCENTAGE 78% 65% 70% 68% NGL PERCENTAGE N/A 17% 10% 16% GAS PERCENTAGE 22% 18% 20% 16% OIL PRICE (% WTI) 95% 100% 98% NGL PRICE (%
Slide 24: Oil Hedge Portfolio
OIL HEDGE PORTFOLIO (1) 1Q20 2Q20 3Q20 4Q20 FY 2020 FY 2021 WTI NYMEX (Bbls, $/Bbl) Swaps Total Volumes 819,000 919,100 933,800 828,000 3,499,900 - Total Daily Volumes 9,000 10,100 10,150 9,000 9,563 - Avg. Sw ap $55.72 $55.82 $55.66 $55.72 $55.73 - Three-way Collars Total Volumes 3,276,000 3,276,00
Slide 25: Gas Hedge Portfolio
GAS HEDGE PORTFOLIO (1) 1Q20 2Q20 3Q20 4Q20 FY 2020 FY 2021 NYMEX HENRY HUB (MMBtu, $/MMBtu) Swaps Total Volumes 910,000 910,000 920,000 920,000 3,660,000 - Total Daily Volumes 10,000 10,000 10,000 10,000 10,000 - Avg. Sw ap Price $2.48 $2.48 $2.48 $2.48 $2.48 - Three-way Collars Total Volumes 910,0
Slide 26: Quarterly Cash Flow Statement
QUARTERLY CASH FLOW STATEMENT (1) ($000s) 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 (2) Cash flows from operating activities: Net income (loss) 156,194 (19,543) 55,180 55,834 (23,543) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortizatio
Slide 27: Non-GAAP Free Cash Flow Reconciliation
NON-GAAP FREE CASH FLOW RECONCILIATION (1) ($000s) 4Q19 (2) Net cash provided by operating activities 137,578 Less: Changes in working capital (58,587) Plus: Payments to settle asset retirement obligations 2,723 Plus: Merger and integration expense 68,420 Plus: Other operating expense and non-recurr
Slide 28: Non-GAAP Adjusted EBITDA Reconciliation
NON-GAAP ADJUSTED EBITDA RECONCILIATION (1) ($000s) FY 2019 (2) Net income 67,928 (Gain) loss on derivatives, net 62,109 Cash paid for commodity derivative settlements, net (3,789) Non-cash stock-based compensation expense 11,364 Merger-related expenses 74,363 Other operating expense 1,076 Income ta
Slide 29: Non-GAAP PV-10 Reconciliation
NON-GAAP PV-10 RECONCILIATION (1) As of December 31, 2019 2018 2017 (in millions) Standardized measure of discounted future net cash flows $4,951 $2,941 $1,557 Add: present value of future income taxes discounted at 10% per annum 419 208 20 PV-10 5,370 3,149 1,577 1. See “Important Disclosures” slid
Slide 30: Non-GAAP Net Debt Reconciliation
NON-GAAP NET DEBT RECONCILIATION (1) As of December 31, 2019 (in millions) Long-term debt $3,186 Gross debt 3,186 Less Cash and cash equivalents 13 Net Debt $3,173 1. See “Important Disclosures” slide for additional information related to Supplemental Non-GAAP Financial Measures 30
Slide 31: Non-GAAP Adjusted EBITDA Reconciliation
NON-GAAP ADJUSTED EBITDA RECONCILIATION (1) ($000s) FY 2016 Net Income ($91,813) (Gain) loss on derivative contracts, net of settlements 38,135 Non-cash stock-based compensation expense 9,721 Withdrawn proxy contest expenses 224 Acquisition expense 3,673 Income tax expense (14) Interest expense 11,8