Callon to Acquire Core Delaware Basin Assets and Exit Eagle Ford
Transactions solidify Company's Permian focus and accelerate achievement of debt milestone
Company to launch
Callon has entered into a definitive agreement to acquire the membership interests of Permian-based Percussion Petroleum Operating II, LLC ("Percussion") in a cash and stock transaction valued at approximately
Under a separate agreement, Callon agreed to sell all its assets in the Eagle Ford Shale to Ridgemar Energy Operating, LLC ("Ridgemar") for
The transactions are subject to customary terms and conditions and are expected to simultaneously close in July 2023, both with an effective date of January 1, 2023.
In conjunction with the release of its first quarter results and the announcement of these transactions, a conference call is planned for 8 a.m. CDT, May 4, 2023. Slides accompanying today's releases are available at www.callon.com/investors.
Highlights
- Solidifies Permian focus – Callon's operations will be focused on its more than 145,000 net acres in the prolific Permian Basin, executing its proven "Life of Field" Co-Development Model on an expanded
Delaware Basin footprint. Callon's scale and singular focus on the Permian will enhance operational and capital efficiencies. The Company will have an inventory of more than 1,500 high-quality locations on a concentrated acreage position in the Permian Basin. - Increases Permian oil-weighting, improves margins – The oil-weighting of Callon's production in the Permian Basin is expected to increase post-closing. Pro forma cash operating costs per Boe are estimated to drop approximately
5% in the second half of 2023 through identified G&A and LOE savings. - Immediately accretive to key financial metrics – Acquisition attractively priced at 2.5x1 next 12 months EV/ EBITDA, excluding the impact of contingency payments. The deal will be immediately accretive to key financial metrics, including absolute and per share adjusted free cash flow and operating margins. In addition, the transaction is also expected to improve the conversion rate of EBITDAX to adjusted free cash flow through capital efficiencies.
- Accelerates achievement of
total debt target – The transactions will strengthen Callon's balance sheet with total debt expected to be below$2 billion at closing.$1.9 billion - Initiates shareholder return program – Callon's Board has authorized, subject to the closing of the transactions, a
share buyback program over a two-year period.$300 million
1 Based on strip prices as of April 28, 2023 |
"Callon is uniquely positioned to capture value from this high-quality oil asset that is complementary to our core
The acquisition will add approximately 18,000 net acres in
Callon's Eagle Ford assets are comprised of approximately 52,000 net acres and April 2023 estimated average production is approximately 16,300 boe/d, of which
Additional Transaction Details
Both membership interest purchase agreements included potential contingency payments.
- Callon has agreed to assume Percussion's existing contingent payment liabilities of
for calendar year 2023 and$12.5 million each for calendar years 2024 and 2025 if WTI NYMEX oil prices average more than$25 million per barrel.$60 - Ridgemar has agreed to pay Callon contingent payments of
if oil prices average between$20 million and$75 /bbl WTI NYMEX in 2024 and an additional$80 if WTI NYMEX oil prices are$25 million per barrel, or higher, in 2024.$80
The maximum number of Callon common stock shares used to finance this transaction is approximately 6.46 million which occurs if Callon's 20-day trailing volume weighted average price ("VWAP") at closing is
At closing, Callon will also assume Percussion's existing oil and gas derivatives with a settlement value of approximately
Share Repurchase Program
Contingent upon the closing of the transactions, Callon's Board of Directors has authorized a stock repurchase program of up to
Preliminary 2023 Proforma Outlook
Status Quo | Pro Forma | ||
2023 | 2023 | ||
Total Production (MBoe/d) | 104 - 107 | 103 – 106 | |
Oil Production (MBbls/d) | 63 - 65 | 62 - 64 | |
Lease Operating Costs ($/Boe) | |||
Capital Expenditures ($MM) | |||
Operated TILs (wells) | 115 - 130 | 100 - 115 | |
Additional guidance details will be provided upon closing of the transactions. |
Advisors
RBC Capital Markets is serving as the sole financial advisor to Callon on the acquisition of Percussion. JP Morgan Securities LLC is serving as the sole financial advisor to Callon for the Eagle Ford divestiture. Haynes and Boone, LLP and Kirkland & Ellis LLP are serving as legal advisors to Callon for the transactions.
Conference Call and Webcast Information
The Company plans to host a conference call at 8 a.m. CDT on May 4, 2023, to discuss these transactions and its first quarter financial and operating results. To participate in the webcast, please visit "News and Events" under the "Investors" section of the Company's website at www.callon.com/investors.
An archive of the conference call will be available on the website under the "Investors" section of the website.
Cautionary Statement Regarding Forward-Looking Information
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. Forward-looking statements include all statements regarding wells anticipated to be drilled and placed on production; future levels of development activity and associated production, capital expenditures and cash flow expectations and expected uses thereof; the Company's production and expenditure guidance; estimated reserve quantities and the present value thereof; future debt levels and leverage; and the implementation of the Company's business plans and strategy, as well as statements including the words "believe," "expect," "plans," "may," "will," "should," "could," and words of similar meaning. These statements reflect the Company's current views with respect to future events and financial performance based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. 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. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. 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 volatility of oil and natural gas prices; changes in the supply of and demand for oil and natural gas, including as a result general economic conditions or as a result of actions by, or disputes among members of OPEC and other oil and natural gas producing countries with respect to production levels or other matters related to the price of oil; our ability to drill and complete wells; operational, regulatory and environment risks; the cost and availability of equipment and labor; our ability to finance our development activities at expected costs or at expected times or at all; rising interest rates and inflation; our inability to realize the benefits of recent transactions; currently unknown risks and liabilities relating to the newly acquired assets and operations; adverse actions by third parties involved with the transactions; risks that are not yet known or material to us; and other risks more fully discussed in our filings with the
About Callon Petroleum
Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and
Contact:
Kevin Smith
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200
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SOURCE Callon Petroleum Company