Callon Exits the Eagle Ford
The independent sells out of south Texas shale, while expanding its Permian presence in separate deals.
Callon Petroleum agreed to sell all its assets in the Eagle Ford Shale to Ridgemar Energy Operating LLC for $655 million in cash and potential contingent payments of up to $45 million. The transaction is structured as the acquisition by Ridgemar of 100% of the interests of Callon's subsidiary Callon (Eagle Ford) LLC.
Under a separate agreement, Callon will acquire the membership interests of Permian-based Percussion Petroleum Operating II LLC in a cash and stock transaction valued at $475 million and potential contingent payments of up to $62.5 million. Percussion will receive $265 million of cash and a maximum of 6.46 million shares of Callon common stock. The transaction is structured as the acquisition by Callon Petroleum Operating Company of 100% of the interests of Percussion.
The transactions are expected to simultaneously close in July 2023, both with an effective date of 1 January 2023.
Callon will focus operations on its more than 145,000 net acres on an expanded Permian’s Delaware Basin footprint. The company will have an inventory of more than 1,500 drilling locations.
“Callon is uniquely positioned to capture value from this high-quality oil asset that is complementary to our core Delaware position,” said Joe Gatto, president and chief executive. “The combined transactions strengthen our capital structure, improve our margins, and lengthen our top-tier Permian inventory. Our strategic Eagle Ford exit funds our Delaware expansion and focuses our people, capital, and operations on our premium Permian position. We greatly appreciate our Eagle Ford employees who worked safely and diligently to create value and ultimately make today's transactions possible.”
The acquisition will add 18,000 net acres in Ward, Winkler, and Loving counties and approximately 70 high-return well locations in the 3rd Bone Spring, Wolfcamp A and Wolfcamp B with an average lateral length of nearly 10,000 ft, with additional prospectivity in emerging zones. The acreage is largely contiguous with Callon’s existing core positions in the Delaware Basin.
Estimated average production from Percussion’s assets for April 2023 was approximately 14,100 BOE/D, of which about 70% was oil.
Callon’s Eagle Ford assets comprise about 52,000 net acres, and April 2023 estimated average production was 16,300 BOE/D, of which 71% was oil.
Eagle Ford History
Callon entered the Eagle Ford with its 2019 purchase of Carrizo Oil & Gas in an all-stock deal valued at $3.2 billion. Its land holdings grew to approximately 200,000 acres in the Eagle Ford and Permian basins. This included 90,000 acres in the Delaware Basin side of the Permian, where Callon estimated it had about 2,500 horizontal well locations upon closing of the acquisition.
The producer scaled back its Eagle Ford holdings in 2021 with the sale of noncore acreagein the play for cash proceeds of around $100 million for about 22,000 net acres in northern LaSalle and Frio counties.