Callon Acquires Delaware Basin Core Assets, Exits Eagle Ford :: Callon Petroleum Company (CPE)

Financial Advisors


Transaction Solidifies Permian Focus, Accelerates Debt Milestones
Initiate $300 million share repurchase at closing

houston, May 3, 2023 /PRNewswire/ — Callon Petroleum Company (NYSE: CPE) (“Callon” or the “Company”) today announced that it will streamline and focus Callon’s operations, accelerate the achievement of its debt reduction targets, and increase shareholder value in the third quarter of 2023. reimbursement program.

Callon has entered into a definitive agreement to acquire membership in Permian-based Percussion Petroleum Operating II, LLC (“Percussion”) in a cash and stock transaction valued at approximately $475 million, providing a potential Conditional payments are now up to $62.5 million. Under the terms of the agreement, Percussion will receive his $265 million in cash and up to 6.46 million shares of his Callon common stock. The transaction constitutes the acquisition by his Callon Petroleum Operating Company of 100% of Percussion’s limited liability company.

Under a separate agreement, Callon agrees to sell all assets of Eagle Ford Shale to Ridgemar Energy Operating, LLC (“Ridgemar”) for $655 million in cash and up to $45 million in contingent payments Did. The transaction constitutes Ridgemer’s acquisition of his 100% interest in a limited liability company of Karon (Eagle Ford) LLC, a wholly owned subsidiary of Karon.

The transaction is subject to customary closing conditions and is expected to close concurrently in July 2023 with an effective date of January 1, 2023.

A conference call is scheduled for May 4, 2023 at 8:00 am CDT to coincide with the release of first quarter results and the announcement of these transactions. Slides accompanying today’s release are available at www.callon.com/investors..

highlight

  • Solidifying the Permian Focus – Callon’s operations will be focused on more than 145,000 net acres in the fertile Permian Basin and will implement a proven “life in the field” co-development model in the expanded Delaware Basin footprint. Charon’s scale and sole focus on the Permian will improve operational and capital efficiency. We stock over 1,500 of his high quality locations in a centralized area of ​​the Permian Basin.
  • Increase permian oil weighting to improve margins – Charon production in the Permian Basin is expected to increase after closure. Pro forma cash operating costs per Boe are estimated to decrease by approximately 5% in the second half of 2023 due to identified G&A and LOE savings.
  • Instantly increase key financial metrics – Attractive acquisition price of 2.5x1 EV/EBITDA for the next 12 months, excluding the impact of contingent payments. The transaction will be immediately reflected in key financial metrics, including adjusted free cash flow and operating margin, both absolute and per share. In addition, the transaction is also expected to improve the conversion of EBITDAX to adjusted free cash flow through capital efficiency.
  • Accelerating our $2 billion total debt target – The transaction is expected to strengthen Caron’s balance sheet and bring total debt below $1.9 billion at closing.
  • Start shareholder return program – Callon’s Board of Directors has approved a two-year, $300 million share repurchase program, contingent on the closing of the transaction.

1 Based on strip price as of April 28, 2023

“Caron is uniquely positioned to capture value from this high-quality oil asset, complementing Delaware’s core position. Top Permian stocks will be long.Based on our net worth proposition, we expect to meet near-term gross debt milestones and initiate a capital return program to shareholders upon closing,” said President and CEO. says Joe Gatto of “Our strategic exit from Eagle Ford will fund our expansion in Delaware and focus our people, capital and operations on Permian premier positions. We are extremely grateful to the employees at Eagle Ford who worked safely and diligently to ultimately make the transaction possible today.”

The acquisition will add approximately 18,000 net acres in Ward, Winkler and Loving counties, and approximately 70 additional high yield well sites across the three counties.rd Bone Spring, Wolfcamp A and Wolfcamp B have an average lateral length of approximately 10,000 feet, with additional prospects in emerging zones. The acreage is nearly adjacent to Karon’s existing central location in the Delaware Basin and will benefit from our underground and operational expertise in the region. Estimated average production from Percussion’s assets in April 2023 is approximately 14,100 barrels of oil equivalent per day (boe/d), of which approximately 70% is oil.

Callon’s Eagle Ford’s assets consist of approximately 52,000 net acres with an estimated April 2023 average production of approximately 16,300 boe/d, of which 71% was oil.

Additional transaction details

Both membership purchase agreements contained potential contingent payments.

  • Callon has agreed to assume Percussion’s existing contingent liabilities of $12.5 million in 2023 and $25 million each in 2024 and 2025 if WTI NYMEX crude oil prices average above $60 per barrel.
  • Ridgemar will pay Caron an additional $25 million if the 2024 WTI NYMEX price is between $75 and $80 per barrel, and if the 2024 WTI NYMEX price is above $80 per barrel I agree.

The maximum number of shares of Callon common stock that will be used to finance this transaction is approximately 6.46 million shares. This occurs when Callon’s his 20-day trailing volume weighted average price (“VWAP”) is below his $32.50 at closing. If his 20-day trailing VWAP at the close exceeds $32.50, the number of shares issued to Percussion will be his $210 million divided by his 20-day trailing VWAP.

Upon closing, Callon will also assume Percussion’s existing oil and gas derivatives for a settlement of approximately $(7) million as of May 2, 2023. On a pro forma basis, his Callon oil production in the second half of 2023 will be hedged by around 30%. .

share buyback program

Subject to the closing of the transaction, Callon’s Board of Directors has authorized a stock repurchase program of up to $300 million of the Company’s outstanding common stock through the second quarter of 2025. By prevailing market price, privately negotiated transaction, or other means pursuant to federal securities laws. The actual timing, number and value of shares repurchased under the program will be determined at the discretion of management and subject to the market price of our common stock, general market and economic conditions, applicable legal requirements, Compliance with the terms of our outstanding debts.

Tentative 2023 pro forma outlook

current situation

pro forma

2023

2023

Gross production (MBoe/day)

104-107

103-106

Oil production (MBbls/day)

63-65

62-64

Lease Operating Cost ($/Boe)

$8.00 – $8.50

$7.75 – $8.25

Capital expenditure ($MM)

$1,000

$960 – $980

Operated TIL (well)

115 – 130

100 – 115

Additional guidance details will be provided upon completion of the transaction.

advisor

RBC Capital Markets is acting as sole financial advisor to Callon regarding the acquisition of Percussion. JP Morgan Securities LLC is acting as sole financial advisor to Karon on the sale of Eagle Ford. Haynes and Boone, LLP and Kirkland & Ellis LLP are acting as her legal advisors to Callon on the transaction.

Conference call and webcast information

The company plans to host a conference call on May 4, 2023 at 8:00 am CDT to discuss these transactions and first quarter financial and operating results. To join the webcast, please visit our website, www.callon.com/investors, under the Investors section, News and Events..

An archive of the conference call is available in the “Investors” section of the website.

Cautionary Note 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. Projections of future development activity and related production, capital expenditures and cash flows, and their projected uses. Our production and spending guidance. estimated reserves and their present value; future debt levels and leverage; the execution of our business plans and strategies and “believe,” “expect,” “plan,” “may,” “would,” “should,” “could,” and descriptive meanings including similar words. These statements represent the Company’s current view of future events and financial performance based on management’s experience and perceptions of historical trends, current conditions, expected future developments and such other factors as it believes appropriate. reflect a view. However, we cannot guarantee that these events will occur or that these projections will be achieved, and actual results may differ materially from those projected as a result of certain factors. Forward-looking statements speak only as of the date such statements are made, and we may revise or update any forward-looking statements as a result of new information, future events or otherwise. shall have no obligation to do so. Applicable law. Factors that may affect future results and cause results to differ materially from those expressed in forward-looking statements include volatility in oil and natural gas prices. Changes in supply and demand for oil and natural gas. This includes disputes as a result of prevailing economic conditions, or as a result of actions by OPEC members and other oil and gas producers, or regarding production levels or other issues. related to oil prices; our ability to drill and complete wells; operational, regulatory and environmental risks; Cost and availability of equipment and labor. our ability to fund development activities at anticipated costs, at anticipated times, or at all; Rising interest rates and inflation. Inability to realize the benefits of recent trading. currently unknown risks and liabilities associated with newly acquired assets and businesses; Adverse conduct by third parties involved in the transaction. Risks not yet known or not material to us. Other risks detailed in our filings with the U.S. Securities and Exchange Commission (“SEC”), including our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, are: Our website or the SEC website (www.sec.gov). Forward-looking statements speak only as of the date such statements are made, and unless necessary, as a result of new information, future events or otherwise, the Company may make no forward-looking statements. Under no obligation to correct or update. Subject to applicable law.

About Karon 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 major petroleum industries of South and West Texas.

contact:

Kevin Smith
Investor Relations Director
Karon Oil Company
ir@callon.com
(281) 589-5200

Sision See original content: https://www.prnewswire.com/news-releases/callon-to-acquire-core-delaware-basin-assets-and-exit-eagle-ford-301815214.html

SOURCE Caron Petroleum Company



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *