Callon Petroleum Company

Welcome to Challen Petroleum Company's third quarter 2020 financial and operating results conference call. All participants will be in listen-only mode. As a reminder, this call is being webcast, and a replay of the call will be archived on the company's website for approximately one year. Please note, this event is being recorded. I would now like to turn the call over to Mark Brewer, Director of Investor Relations, for opening remarks. Please go ahead, sir.

Thank you, Gary. Good morning, everyone, and thank you for taking the time to join our conference call. With me this morning are Joe Gatto, President and Chief Executive Officer, Dr. Jeff Ballmer, our Chief Operating Officer, and Jim Alm, our Chief Financial Officer. During our prepared remarks, we'll be referencing the earnings results presentation that we posted yesterday afternoon to our website, so I encourage everyone to download the presentation if you haven't already. You can find the slides on our events and presentations page located within the investor relations section of our website at www.calend.com. Before we begin, I'd like to remind everyone to review our cautionary statements, disclaimers, and important disclosures included on slide two and three of today's presentation. We will make some forward-looking statements during today's call that refer to estimates and plans. Actual results could differ materially due to the factors noted on these slides and in our periodic SEC filings. We'll also refer to some non-GAAP financial measures today, which we believe help to facilitate comparisons across periods and with our peers. For any non-GAAP measures we reference, we provide a reconciliation to the nearest corresponding GAAP measure. You may find these reconciliations in the appendix to the presentation slides and in our press release, both of which are available on the website. Following our prepared remarks, we will be opening the call for Q&A. With that, I'd like to turn the call over to Joe Gatto.

Thank you, Mark. And thanks everyone for taking time out today on this important election day. I'll start with page four in the deck for those of you following along. We've put another strong quarter in the books and continue to deliver on our stated goals and plans that were developed in the midst of a changing landscape with outcomes exceeding expectations. Despite persistent challenges facing the industry, our team has persevered and set the bar higher with improvements across the board. Development and operating costs continue to reap the benefit of our scale development model focused on larger projects. G&A remains at the front of the pack amongst our peer group, and we continue to build free cash flow with approximately $100 million generated over the past two quarters, well ahead of expectations. Our recent monetizations and financing efforts have increased liquidity substantially, and we remain focused on absolute debt reduction and efficient execution of our moderated capital development program as we enter 2021. We posted strong numbers across the board yesterday, exceeding street estimates in nearly every key category. Production came in at 102,000 BOE per day, 63% oil, and drove quarterly EBITDA to approximately $171 million. Strong operational efficiency resulted in operational capital of just $38.4 million in lease operating expense of $45.9 million. Our adjusted cash G&A was $0.87 per BOE with full cash G&A, which includes the cash portion of our capitalized G&A, at just $1.59 per BOE. The result of this strong performance was $80 million of free cash flow for the quarter. On the back of a consistent development philosophy to swell performance, Calum is poised to hit the upper half of our previous full year production guidance, even after the impact of the non-operated asset sale and overriding royalty interest transaction. Equally as important, we have also lowered the upper end of our full year 2020 capital guidance by $15 million, the second such reduction this year since announcing our adjusted capital program in May. Although 2020 has been quite different than what most of us expected at the outset, it has not deterred our team from achieving numerous milestones that are detailed on page five. We've managed to integrate two organizations while implementing a large-scale development program across all three of our asset areas and also exceeding our synergy targets for capital costs and G&A well ahead of schedule. In addition, we have delivered improvements in our field operating cost structure as a result of the combined knowledge base from our two organizations and the applications of best practices from each. At the center of many of these accomplishments, our IT organization has facilitated the level of coordination required to execute at a high level over the last six months and supported the first completely remote accounting system conversion our vendors have ever completed. On the financial front, our recent asset monetizations and second lien note issuance significantly improved our liquidity and broadened the avenues to additional debt reduction. To that end, we announced a private debt exchange transaction this morning that builds upon our momentum for absolute debt reduction and increases optionality for the future. Looking into 2021, a moderated development program characterized by lower reinvestment rates and repeatable diversified activity across the portfolio provides the necessary foundation for achieving our financial goals. Lower decline rates, coupled with our life of field development philosophy, will enhance our ability to generate free cash flow while preserving our high-quality inventory. At the core of our business, we will continue to advance our broader emissions reduction initiatives, support our employees and our communities, and further align ourselves with the needs of our shareholders. In terms of our vision for a sustainable oil and gas company, I want to highlight some of the achievements featured in our inaugural sustainability report that greatly enhanced transparency for our investors and other stakeholders. We've included a small sample of these achievements on page six. Many of these accomplishments have not only resulted in improved environmental emissions, but are also driving bottom line results. Our focus on minimizing flaring, which is down 30%, reduces our carbon footprint and increases revenues through additional hydrocarbon capture. In addition, a well-established recycling program has resulted in lower capital costs for our Delaware development program, and substantially reduce our water disposal volumes and associated costs. We are an employer of choice in the industry, and our stringent safety standards have led to our best safety year on record, with a total recordable incident rate well ahead of the industry benchmark. Our governance practices and board diversity have continued to evolve, and our board members set a strong example earlier this year by electing to reduce their own compensation alongside management as part of our cost reduction efforts. I encourage you to download a copy of our report to gain a better understanding of our achievements and evolving goals to ensure the sustainability of the calendar organization. Moving to page seven, our operations organization has been quick to implement best practices, incorporate subsurface learnings, and drive efficiencies in our capital program. The summation of these efforts has been a significant uplift in our capital efficiency with rapid deployment of our model across all of our operating areas. Specifically, well costs are down anywhere from 14% to nearly 40%, and our most recent wells continue to show improvement in leading-edge costs. Across the industry, we are witnessing a wave of consolidation, with many pointing to lower G&A costs as a clear benefit. This category was just one of the primary synergies we highlighted for the market last year as a part of our consolidation efforts, and I'm proud to say that we have significantly exceeded our targets. As you can see on page eight, we are on track to reduce our total cash G&A expense, which includes both our capitalized cash G&A and cash G&A expense to roughly $60 million from over $135 million. Our current cash G&A expense puts us amongst the lowest across a broad group of peers of various sizes and has been a significant contributing factor to free cash flow generation in this volatile environment. At this point, I'm going to turn the call over to Jeff to discuss operations.