Callon Divests Noncore Eagle Ford Acreage
The US producer also closed its acquisition of assets in the Permian through a deal with Primexx.
Callon Petroleum has entered into an agreement with an undisclosed party to sell noncore acreage in the Eagle Ford shale for cash proceeds of around $100 million. The Eagle Ford properties include about 22,000 net acres in northern LaSalle and Frio counties. Net daily production from the properties was approximately 1,900 BOE/D (66% oil) on average in the third quarter through 31 August.
Callon entered the Eagle Ford shale in 2009 through an all-stock acquisition of Carrizo Oil and Gas. As of September, the company held roughly 73,000 net acres producing approximately 27,000 BOE/D. The sale will eliminate approximately $50 million in capital expenditures related to continuous drilling obligations over the next 2 years and allows for capital redeployment to higher return projects, according to Callon. The transaction is anticipated to close in November 2021.
The transaction increases total cash proceeds from Callon’s 2021 divestiture program to more than $140 million to date, within the guidance range for the year of between $125 million and $225 million. The sale is subject to customary closing adjustments.
Separately, Callon closed the acquisition of leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates. The deal adds approximately 35,000 net acres and 18,000 BOE/D of production (61% oil) to the company's holdings. Callon is currently running two rigs on the Primexx acreage in Reeves County that will carry into 2022.
“We are excited to get to work integrating this high-quality asset base into our Permian Basin operations, overlaying our life of field development philosophy on the acquired multizone resource base,” said Joe Gatto, Callon president and chief executive officer. “As we look ahead into the coming quarters, this latest acquisition provides a meaningful increase in free cash flow generation and is a catalyst for substantially improving the balance sheet.”
Callon expects the purchase to increase annual free cash flow by more than $100 million in 2022.