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Callon Petroleum in Perspective: Should CPE Be on Your Radar?

PART:
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Part 3
Callon Petroleum in Perspective: Should CPE Be on Your Radar? PART 3 OF 14

Callon Petroleum Makes Its First Delaware Basin Acquisition

Callon’s recent acquisition

On December 13, 2016, Callon Petroleum (CPE) announced that it had agreed to acquire certain acreage positions as well as oil- and gas-producing properties from American Resource Development, American Resource Development Upstream, and American Resource Development Midstream—collectively, “Ameredev.”

The company will pay $615 million in cash for the above assets. This acquisition marks Callon’s entry into the South Delaware basin region of the Permian Basin.

Callon Petroleum Makes Its First Delaware Basin Acquisition

In a recent press release, CPE Chief Executive Officer Fred Callon stated: “Our initial entry into the Delaware Basin caps a transformative year for Callon. The Ameredev acquisition is the result of a patient, concentrated effort to identify the appropriate de-risked, oily acreage position in the Delaware Basin that provides the opportunity to leverage our Permian Basin technical expertise while complementing our deep inventory of high-return well locations and capital efficient operations in the Midland Basin.”

Acquisition highlights

The transaction included nearly 28,000 gross acres in Ward County, Texas, along with additional acreage in Pecos and Reeves Counties, Texas. The assets have a current net production of ~1,945 Boepd (barrels of oil equivalent per day) (71% oil) (USO) and include production from 20 gross operated horizontal wells in the Wolfcamp and Bone Spring formations.

Pro forma, or prior to the closing of the acquisition, CPE’s aggregate Permian Basin position will likely rise to ~55,500 net acres, focusing on four core operating areas in the Midland and Delaware sub-Basins.

To fund the transaction, CPE announced a stock offering, along with the news of the acquisition. The transaction is expected to close in February 2017.

Permian in news

In August 2016, Pioneer Natural Resources (PXD) acquired 28,000 acres in the Midland basin from Devon Energy (DVN). In early September 2016, key Permian player Apache (APA) announced a new oil and gas discovery, Alpine High. Then, in late October, Occidental Petroleum (OXY) acquired interests in the Permian from an undisclosed seller.

On November 21, 2016, Concho Resources (CXO) announced that it has entered into an agreement to acquire ~24,000 gross acres, or 16,400 net acres, in the Northern Delaware Basin.

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