HOUSTON, April 8, 2019 /PRNewswire/ -- Callon Petroleum Company (NYSE: CPE) ("Callon" or "we") today announced it has entered into a definitive agreement regarding the sale of certain non-core assets in the Midland Basin for initial cash proceeds of $260 million, subject to customary purchase price adjustments. The agreement also provides for potential incremental cash payments of up to $60 million based upon future commodity prices with upside participation starting at the $60/Bbl West Texas Intermediate level.
Joe Gatto, President and Chief Executive Officer commented, "We are delivering on our commitment to drive enhanced capital efficiency by monetizing lower margin, non-core properties that have not competed for capital on a sustained basis. The proceeds from this divestiture will accelerate our debt reduction initiatives and also provide the opportunity to retire our preferred stock, reducing our cash financing costs. In addition, the transaction streamlines our business with a resulting focus on three core operating areas. We are actively optimizing our operations, which we believe will reduce capital intensity and increase returns on capital for our shareholders."
The divestiture encompasses our Ranger operating area in the southern Midland Basin which includes approximately 9,850 net Wolfcamp acres (66% working interest), over 80 currently producing horizontal wells that have been drilled since 2012 and 70 net, delineated locations that exceed our internal threshold of an IRR of greater than 25% at strip pricing. Daily production from these assets averaged approximately 4,000 Boe/d (52% oil) in February 2019. Our capital plans for the year are unchanged as there was no planned activity in the Ranger area for 2019. Updated full year guidance will be provided upon closing of the sale.
In addition to the pending divestiture, we completed a strategic trade during the first quarter of 2019 that expanded our contiguous position in northwest Howard County through the addition of two incremental long-lateral DSUs in exchange for low working interest properties in Midland County. The trade resulted in a net increase of approximately 167 net acres to Callon's Midland Basin leasehold position and generated $14 million in cash proceeds to Callon. Our resulting asset base is now well-positioned for the efficient, large pad development model that we are increasingly deploying across our portfolio.
Jefferies LLC acted as exclusive financial advisor to Callon in connection with the Ranger divestiture transaction.
About Callon Petroleum
Callon Petroleum Company is an independent energy company focused on the acquisition and development of unconventional onshore oil and natural gas reserves in the Permian Basin in West Texas.
This news release is posted on Callon's website at www.callon.com, and will be archived for subsequent review under the "News" link on the top of the homepage.
Cautionary Statement Regarding Forward Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include all statements regarding wells anticipated to be drilled and placed on production; future levels of drilling activity and associated production and cash flow expectations; Callon's 2019 production guidance and capital expenditure forecast; estimated reserve quantities and the present value thereof; and the implementation of Callon's business plans and strategy, as well as statements including the words "believe," "expect," "plans," "may," "will," "should," "could," and words of similar meaning. These statements reflect Callon's current views with respect to future events and financial performance based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. Any forward-looking statement speaks only as of the date on which such statement is made and Callon undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Some of the factors which could affect Callon's future results and could cause results to differ materially from those expressed in Callon's forward-looking statements include the volatility of oil and natural gas prices, ability to drill and complete wells, operational, regulatory and environment risks, cost and availability of equipment and labor, Callon's ability to finance Callon's activities and other risks more fully discussed in Callon's filings with the Securities and Exchange Commission, including Callon's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on Callon's website or the SEC's website at www.sec.gov.
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SOURCE Callon Petroleum Company