Callon Petroleum Co. (NYSE: CPE) has acquired additional working interests in the Carpe Diem and Casselman-Bohannon fields in the Central Midland Basin for an approximate aggregate price of $29.5 million in cash. The acquisition was funded with borrowings from its revolving credit facility.
Transaction highlights include:
- Average working interest of approximately 15.24% (12.07% net revenue interest) in the Carpe Diem field (2,586 gross acres), increasing Callon's working interest to approximately 100.00% (79.19% net revenue interest)
- Average working interest of approximately 3.75% (2.81% net revenue interest) in the Casselman-Bohannon fields (6,238 gross acres), increasing Callon's working interest to approximately 66.45% (49.83% net revenue interest)
- 628 net surface acres, predominantly in Midland and Andrews counties, Texas
- Estimated net daily production of 360 boe/d (84% oil) for the month of October
Following the company's recent operational shift to focus exclusively on the Central Midland Basin, Callon has dedicated both of its two horizontal rigs to this area. The company plans to direct 80% of its preliminary 2016 operational capital program to the Carpe Diem and Casselman-Bohannon fields. Callon estimates that the 360 boe/d of current net daily production acquired will increase at a similar rate as the company's preliminary forecast of 20% annual growth in 2016 for total company production volumes.
"These core fields form the foundation of our current drilling plans and are currently producing from the Lower Spraberry, Middle Spraberry and Wolfcamp B zones." said Fred Callon, chairman and CEO. "Our investment in additional working interests will immediately contribute to value creation through our drilling plan focused on the Lower Spraberry in the near term, with future opportunities in multiple delineated zones."
Following the announcement, analysts at Seaport Global Securities commented: “We agree with management's move to build out its Northern Midland position and to bolster the balance sheet. In total, CPE is bringing in $100.8MM in gross equity and paying out $29.5MM to acquire 625 net acres of what we consider some of the most attractive acreage in the Midland Basin. At a purchase price of $24K/acre and $444K/location, we don't think CPE overpaid in either relative or absolute terms.”
Related to the acquisitions, Callon Petroleum has also priced an upsized underwritten public offering of 12,000,000 shares of its common stock for total estimated gross proceeds of approximately $100.8 million. The underwriters will have an option for 30 days to purchase up to an additional 1,800,000 shares of common stock from the company.
Proceeds from the offering are expected to be used to repay amounts outstanding under Callon's credit facility, which were used in part to finance these recent acquisitions, with any remainder being used for general corporate purposes, which may include future acquisitions.
JP Morgan and Credit Suisse are acting as joint book-running managers for the offering. The offering is expected to close on Nov. 16.