Callon Petroleum acquires Midland Basin assets for new core area

“These acquisitions are a significant step forward in Callon’s continued evolution as a leading operator in the Permian Basin”

Callon Petroleum Company says it has entered into definitive agreements with three private entities to acquire assets operated by Big Star Oil and Gas, LLC for total consideration of $220 million in cash and approximately 9.3 million shares of Callon common stock, subject to “customary purchase price adjustments.”

Source: Murchison Oil and Gas.

In addition, Callon has signed definitive agreements that increase its exposure to an existing core operating area in a separate transaction.

Key attributes of the Big Star transaction include:

• Approximately 17,298 gross (14,089 net) surface acres, primarily located in Howard County, Texas, with additional acreage in Martin, Borden and Dawson counties, Texas;
• 178 gross (165 net) identified horizontal drilling locations targeting the Wolfcamp A, Lower Spraberry and Wolfcamp B zones which are currently producing on the Big Star acreage and directly offsetting fields, using an initial assumption of horizontal development with six to eight wells per section;
• Largely contiguous lease positions allowing for average lateral lengths of over 8,300 feet;
• Five currently producing horizontal wells, including three Wolfcamp A and two Lower Spraberry horizontal wells with average 30-day peak production rates of 1,165 boe/d;
• 124 gross (112 net) additional potential horizontal drilling locations targeting the Wolfcamp D (Cline) and Middle Spraberry zones which are producing from surrounding fields in Howard County;
• Estimated net daily production of 1,931 Boe/d (82% oil) for the first quarter of 2016; and
• Approximately 4.1 million Boe (71% oil) of net proved developed producing reserves as of Jan. 1, 2016, based on our evaluation and interpretation of reserve and production information provided by the sellers, as well as our analysis of available geologic and other data. We cannot assure you that this estimate is accurate. Our estimate of proved reserves has not been reviewed by our independent reserve engineers, and we may revise our estimates following ownership and operation of these properties.

Upon closing of the Big Star transaction, Callon will assume operatorship of over 80 per cent of the acquired acreage and own an estimated 81 per cent average working interest (61% average net revenue interest).