Callon Petroleum Co. is exiting the Eagle Ford Shale and expanding its Permian Basin position through a pair of transactions, management said.
Callon is selling its Eagle Ford assets to Ridgemar Energy Operating LLC for $655 million in cash and potential contingent payments of up to $45 million.
Separately, Callon has agreed to purchase Permian-based Percussion Petroleum Operating II LLC in a cash-and-stock transaction valued at about $475 million and potential contingent payments of up to $62.5 million.
The transactions, expected to close in July, “strengthen our capital structure, improve our margins and lengthen our top-tier Permian inventory,” said Callon CEO Joe Gatto. “In addition to improving our net asset value proposition, we will achieve our near-term total debt milestone and intend to initiate a capital return program for shareholders at closing…”
Gatto added, “Our strategic Eagle Ford exit funds our Delaware expansion and focuses our people, capital and operations on our premium Permian position.”
The CEO called Percussion’s Permian acreage in the Delaware sub-basin a “high-quality oil asset that is complementary to our core Delaware position.”
The Percussion assets comprise about 18,000 net acres in Texas’ Ward, Winkler and Loving counties. They include about 70 “high-return well locations” in the 3rd Bone Spring, Wolfcamp A and Wolfcamp B formations, with average lateral length of nearly 10,000 feet.
Production from the assets during April averaged an estimated 14,100 boe/d, of which roughly 70% was oil, Callon said.
The Eagle Ford assets to be purchased from Callon by Ridgemar comprise about 52,000 net acres with estimated average production of 16,300 boe/d (71% oil) in April.
The Eagle Ford accounted for more than half of the $8.6 billion in U.S. upstream mergers and acquisitions transacted during the first quarter, according to Enverus Intelligence Research.
Houston-based Callon announced the Ridgemar and Percussion transactions alongside its first quarter 2023 results.
Callon’s production averaged 100,000 boe/d (60% oil) during the first three months of the year.
The company reported net income of $221 million ($3.57/share) for the period, versus $7.72 million (13 cents) in the same period last year.
