Inside Callon Petroleum’s Cost Efficiencies



Callon’s costs

As we’ve already discussed in this series, one of Callon Petroleum’s (CPE) key initiatives in 2016 was to reduce costs. The image below shows the progress it has made on this front since 3Q15.

CPE’s total cash operating costs in 3Q16 averaged ~$11 per boe (barrels of oil equivalent), as compared to ~$15 per boe in 3Q15. The majority of this reduction came from the reduction in CPE’s LOE (lease operating expenses). CPE’s LOE in 3Q16 was $6.52 per boe, as compared to $8.03 per boe in 3Q15—a reduction of 19%.

The company also saw a reduction in its G&A (general and administrative) expenses, which fell to $2.96 per boe in 3Q16 from $4.63 per boe in 3Q15. Its cash G&A expenses fell 38% from 3Q15 levels.

Article continues below advertisement

Three-year plan

In its 3Q16 earnings conference, the company’s management pointed out that it has “continued to trend downward on cost, even with enhanced completions,” and that “activity levels are ramping in the Permian,” which should bring about “more inflationary pressures on costs…assuming some cost inflation starting in 2017 as part of our three-year planning cases.”

Other companies that have been focusing on cost reductions include Continental Resources (CLR), Sanchez Energy (SN), and Anadarko Petroleum (APC). These companies combined make up ~7% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

You can read more about Anadarko’s operational efficiencies at What Are APC’s Key Operational Efficiencies and Strategies? Continue to the next part for a closer look at CPE’s earnings trend.


More From Market Realist