Callon Petroleum Co. has adjusted operational plans for the year to account for ongoing turmoil in the oil market. The company is changing its capital plan for 2020 to $700- to $725 million from $975 million.
The company is also reducing its operated rig count of nine to five before the end of the second quarter of 2020 and taking its frac crew count from five to two after completing projects in process. It will employ three to four drilling rigs (two to three in the Permian Basin and one in the Eagle Ford) and one to two completion crews focused on a set of shorter cycle projects, according to the company.
Assuming $40 per barrel and $2.25/MMBtu average prices in 2021, the company is expecting over $100 million of free cash flow in 2021 under an operational capital program of $400 to $500 million.
“The diversification of our asset base means that we can and will stay true to our strategy of large scale, co-development of our Delaware position,” Joe Gatto, President and Chief Executive Officer, said in a statement.
“Although we will be reducing the amount of activity in the near-term, our opportunity set will be preserved for future development and not be compromised by near-term high grading at the expense of optimal multi-zone development over time. Moreover, Callon's enhanced, pro forma scale affords us the ability to preserve the cost and cycle time efficiencies that are driven by the key tenets of scaled development—namely, the deployment of simultaneous operations and the continuous utilization of drilling rigs and completion crews—despite the substantial reduction in our planned capital spend.”
“Lastly and most importantly, our rapid shift in capital allocation gives us the free cash flow profile to reduce absolute leverage and protect our financial position.”
Gatto added that management has instituted a company-wide work policy grounded in a remote workplace and social distancing to protect employees, reduce potential COVID-19 transmission risks and maintain business continuity for its operations.
To contact the author, email bertie.taylor@rigzone.com.
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