Callon Petroleum Company (CPE) ("Callon") announced that it has closed the acquisition of leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates.
Callon President and Chief Executive Officer Joe Gatto commented, "We are excited to get to work integrating this high-quality asset base into our Permian Basin operations, overlaying our life of field development philosophy on the acquired multi-zone resource base. Given our deep subsurface expertise in the Delaware Basin and operational preparation, we expect a seamless transition and will be focused on delivering the types of capital and expense synergies we have achieved in similar transactions. As we look ahead into the coming quarters, this latest acquisition provides a meaningful increase in free cash flow generation and is a catalyst for substantially improving the balance sheet."
Callon has entered into an agreement to sell non-core acreage in the Eagle Ford Shale for cash proceeds of approximately $100 million, subject to customary closing adjustments. This transaction increases total cash proceeds from Callon's 2021 divestiture program to over $140 million to date, within the guidance range for the year of $125 - $225 million.
The Eagle Ford properties include approximately 22,000 net acres in northern LaSalle and Frio counties. Net daily production from the properties was approximately 1,900 Boe/d (66% oil) on average in the third quarter through August 31st. The sale will eliminate approximately $50 million in capital expenditures related to continuous drilling obligations over the next two years and allows for capital redeployment to higher return projects. The transaction is anticipated to close in November 2021.
Third Quarter and Full Year 2021 Guidance Updates
Production in the third quarter has been above previous expectations due to strong well performance in the Delaware and Midland Basins. As a result, Callon is raising production guidance to 98.5 - 99.5 MBoe/d (64% oil) from a previous range of 95.5 - 97.5 MBoe/d (64% oil). Operational capital for the quarter is currently estimated to be $120 - $125 million.
Callon is reinstating and updating full year 2021 guidance, reflecting both the acquisition of the Delaware Basin assets and the pending divestiture described above.
During the fourth quarter, Callon intends to operate six drilling rigs and an average of 1.5 completions crews as the current Primexx development program is transitioned to larger scale development with increased project sizes targeting multiple landing zones. In addition to expanding the drilled, uncompleted well inventory on the acquired Delaware assets, the Company expects to place approximately 18 gross (15 net) wells on production in the quarter, all in the Permian Basin. Daily production for the fourth quarter, including the impact of the pending divestiture, is expected to be 110.0 – 112.5 MBoe/d (63% oil) and operational capital in the range of $150 - $160 million.