Callon to enter Delaware basin with $615-million deal

Callon Petroleum Operating Co., a wholly owned subsidiary of Callon Petroleum Co., Natchez, Miss., has agreed to acquire 27,552 gross (16,098 net) surface acres in Ward, Pecos, and Reeves counties in Texas, part of the southern Delaware basin, from Austin-based American Resource Development LLC, American Resource Development Upstream LLC, and American Resource Development Midstream LLC for $615 million in cash.

Net production from the acreage during October averaged 1,945 boe/d, of which 71% was oil, including production from 20 gross operated horizontal wells producing from the Wolfcamp and Bone Spring formations.

Included in the deal is an estimated delineated base inventory of 481 gross (206 net) identified horizontal drilling locations targeting the Wolfcamp A and B zones with an average lateral length of 7,500 ft. Thirty-six percent of the inventory consists of 10,000 ft laterals. Callon says the acreage features more possible horizontal drilling locations from both delineated and emerging prospective zones in the Wolfcamp and Bone Spring formations.

The firm will take ownership of five salt water disposal wells and more than 13 miles of gathering lines and gas lift return lines.

Callon also has an agreement in place with Ameredev to acquire as much as an additional 1,006 net acres in Ward County if such leasehold acquisitions are consummated prior to closing of the initial deal.

Ameredev currently operates 80% of net surface acreage and has an average working interest in operated properties of 82%. On a pro forma basis, assuming the closing of the deal, Callon’s aggregate Permian basin position will include 55,500 net surface acres concentrated in four core operating areas within both the Midland and Delaware subbasins.

“The position is well-suited for long lateral development and offers the potential for the development of multiple shale and sand intervals in the core of the southern Delaware basin’s over-pressured oil window,” commented Fred Callon, chairman and chief executive officer. “We are looking forward to adding a fourth core operating area to our Permian portfolio and are currently planning to deploy an operated horizontal drilling rig to this acreage by mid-2017 in addition to our plans to be running four horizontal rigs in the Midland basin by the end of 2017.”

Callon earlier this year added 17,298 gross (14,089 net) surface acres in the Midland basin through a deal with Big Star Oil & Gas LLC (OGJ Online, June 1, 2016).

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