NATCHEZ, Miss., Sept. 6, 2016 /PRNewswire/ --
PDF of this Release -
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Callon Petroleum Company (NYSE: CPE) ("Callon" or the "Company")
today announced it has entered into a definitive agreement to
acquire certain undeveloped acreage and producing oil and gas
properties for total consideration of $327
million in cash. The Company intends to fund substantially
all of the cash purchase price with the net proceeds of an equity
offering announced concurrently with this announcement of the
pending acquisition and any remaining amount with availability
under its revolving credit facility.
Key attributes of the pending acquisition include:
- Approximately 6,916 gross (5,667 net) surface acres, primarily
located in Howard County,
Texas;
- Over 75% of acreage offsetting Callon's position in northwest
Howard County, providing
opportunities for shared infrastructure and extended laterals
across Callon's pro forma footprint in this area;
- 167 gross (112 net) identified horizontal drilling locations
targeting the Wolfcamp A, Lower Spraberry and Wolfcamp B zones,
increasing Callon's existing inventory of drilling locations in
these delineated zones in its WildHorse operating region by over
90%, assuming current development spacing of six to eight wells per
section;
- Additional potential horizontal drilling locations from
emerging prospective zones and increased well density being
evaluated;
- Current net production of approximately 2,300 barrels of oil
equivalent per day ("Boe/d") (86% oil) from 9 horizontal (gross)
and 16 vertical wells (gross) based on information provided by the
seller;
- Estimated 12.2 million barrels of oil equivalent ("MMBoe") (87%
oil) of net proved reserves as of September
1, 2016 based on Callon's evaluation and interpretation of
reserve and production information provided by the seller, as well
as Callon's analysis of available geologic and other data. The
Company cannot assure you that this estimate is accurate. Callon's
estimate of proved reserves has not been reviewed by Callon's
independent reserve engineers, and Callon may revise these
estimates following ownership and operation of these
properties;
- Overriding royalty interests in three 480 acre units offsetting
the acreage, one of which is operated by Callon; and
- Upon closing of the pending acquisition, we will assume
operatorship of over 90% of the acquired acreage and own an
estimated 82% average working interest (62% average net revenue
interest).
On a pro forma basis, assuming the closing of the pending
acquisition, the Company's Midland
Basin position will include approximately 40,000 net surface acres,
including approximately 20,000 net surface acres in northwest and
central Howard County and
immediately adjacent areas comprising Callon's WildHorse operating
region.
Fred Callon, Chairman and Chief
Executive Officer commented, "Our strong financial position,
combined with an operational model proven to deliver capital
efficient growth and strong cash margins, has positioned us to
capture value-creating acquisitions. We are driven to identify
opportunities that are underpinned by solid geology and proven well
results, and also offer meaningful upside potential through
application of new generation completion designs, increased well
density and incremental prospective zones. We believe this
acquisition has all of these attributes and its value proposition
is further enhanced due to its immediately offsetting footprint
within our WildHorse area, which will allow us to extend laterals
within the combined well inventory and leverage infrastructure
investments for future program development."
Callon is acquiring the assets from Plymouth Petroleum, operated
by affiliates of Element Petroleum, based in Midland, Texas. Both entities are indirectly
owned by ArcLight Capital Partners, LLC and management. The pending
acquisition is expected to close on or before October 20, 2016, subject to the completion of
customary due diligence and closing conditions.
RBC Richardson Barr acted as
exclusive financial advisor to Callon in connection with the
pending acquisition.
Howard County Operational Update
Callon's first operated horizontal well in the WildHorse area
was placed on production in early July
2016. The Silver City A #1H was completed in the Wolfcamp A
interval with a lateral length of 7,363 feet and is located within
five miles of over 75% of the pending acquisition acreage. The well
recently attained a 30-day average peak production rate of 2,123
Boe/d (90% oil), or 288 Boe/d per completed lateral foot, and has
cumulatively produced in excess of 110,000 Boe (90% oil) over the
initial 60 days since the date of first production.
About Callon Petroleum Company
Callon is an independent energy company focused on the
acquisition, development, exploration, and operation of oil and gas
properties in the Permian Basin in West
Texas.
Cautionary Statement Regarding Forward Looking
Statements
This news release 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, as amended.
Forward-looking statements include all statements regarding the
consummation of the pending acquisition and completion of related
financings, reserve quantities, estimates of future drilling
locations, the implementation of the Company's business plans
and strategy, as well as statements including the words "believe,"
"expect," "plans" and words of similar meaning. These statements
reflect the Company's current views with respect to future events
and financial performance. No assurances can be given, however,
that these events will occur or that these projections will be
achieved, and actual results could differ materially from those
projected as a result of certain factors. Some of the factors which
could affect our future results and could cause results to differ
materially from those expressed in our forward-looking statements
include the Company's ability to realize the anticipated benefits
of the pending acquisition, the forfeiture of our deposit under the
acquisition agreement, the volatility of oil and gas prices,
ability to drill and complete wells, operational, regulatory and
environment risks, our ability to finance our activities and other
risks more fully discussed in our filings with the Securities and
Exchange Commission, including our Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, available on our website or the
SEC's website at www.sec.gov.
This news release is posted on the Company's website at
www.callon.com and will be archived there for subsequent review. It
can be accessed from the "News" link on the top of the
homepage.
For further information contact:
Eric Williams
Manager, Investor Relations
1-800-451-1294
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SOURCE Callon Petroleum Company