Oil & Gas News

Callon Petroleum Exits Eagle Ford, Acquires Permian Assets for $475MM

Callon, Shale Deal

Callon Petroleum Company has announced two definitive agreements that will consolidate and refocus its operations, speed up the attainment of its debt reduction target, and enable the initiation of a shareholder return program in Q3 2023.

Callon has entered a definitive agreement to acquire the membership interests of Permian-based Percussion Petroleum Operating II, LLC, in a cash and stock transaction valued at roughly $475 million with potential contingent payments of up to $62.5 million. As per the agreement terms, Percussion will receive $265 million in cash and a maximum of 6.46 million shares of Callon common stock.

Simultaneously, Callon agreed to sell all its Eagle Ford Shale assets to Ridgemar Energy Operating, LLC, for $655 million in cash and potential contingent payments of up to $45 million.

Callon’s operations will now focus on its over 145,000 net acres in the prolific Permian Basin, implementing its proven “Life of Field” Co-Development Model on an expanded Delaware Basin footprint. The company’s increased scale and single-minded focus on the Permian will improve operational and capital efficiencies, boasting an inventory of over 1,500 high-quality locations on a concentrated acreage position in the basin.

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The oil-weighting of Callon’s production in the Permian Basin is expected to rise post-closing, with pro forma cash operating costs per boe estimated to decrease by around 5% in H2 2023 due to identified G&A and LOE savings. The transactions will strengthen Callon’s balance sheet, with total debt expected to fall below $1.9 billion at closing.

Joe Gatto, President, and CEO, emphasized that Callon is uniquely positioned to extract value from this high-quality oil asset, which complements its core Delaware position. The combined transactions will enhance their capital structure, increase margins, and extend their top-tier Permian inventory. Gatto added that this move will improve their net asset value proposition, achieve their near-term total debt milestone, and launch a capital return program for shareholders.

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