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.
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.
