Callon Petroleum Co. (NYSE: CPE) has entered into definitive agreements with private entities to acquire certain undeveloped acreage and oil and gas producing properties located in Midland, Andrews, Martin and Ector Counties, Texas for an approximate aggregate price of $212.6 million in cash, subject to customary purchase price adjustments with an effective date of May 1, 2014.
Key attributes of the acquired fields include:
- 6,230 gross (3,862 net) surface acres, 95% of which are located in Midland and Andrews Counties, in close proximity to the company's existing Carpe Diem and Pecan Acres fields in Midland County;
- 188 gross (117 net) potential horizontal drilling locations targeting the Wolfcamp B, Lower Spraberry and Middle Spraberry zones which are currently producing in offsetting fields;
- 252 gross (156 net) additional potential horizontal drilling locations targeting four other prospective zones, including the Wolfcamp A, Wolfcamp D (Cline), Clearfork and Jo Mill;
- 1,465 Boe/d (68% oil) estimated average net daily production during the second quarter of 2014;
- 4.0 million Boe of net proved developed producing reserves as of June 30, 2014 based on internal Callon estimates (no proved undeveloped reserves have been estimated given legacy vertical development and the Company's intent to develop the field with horizontal wells);
- 100% of targeted horizontal zones held by production.
Callon will assume operatorship of the properties after closing of the transaction, and own an estimated 62% working interest (46.5% net revenue interest). One horizontal Wolfcamp B well has been drilled on the properties to date and two additional horizontal wells targeting this zone are in various stages of drilling and completion. In addition, a Lower Spraberry well has been permitted, and is currently scheduled to be drilled in the fourth quarter.
Pro forma for the pending acquisition (and including a separate pending acquisition of 577 net acres in Reagan County), Callon would have the following operating metrics:
- 6,745 Boe/d (80% oil) estimated average net daily production during the second quarter of 2014;
- 18,062 net surface acres located in the Southern and Central portions of the Midland Basin, an increase of 27% over the Company's comparable position prior to the acquisition;
- 100,092 net effective acres, targeting up to seven zones for multi-level development depending on the field location;
- 37 producing horizontal wells and 274 producing vertical wells as of August 26, 2014;
- 1,097 gross potential horizontal drilling locations (772 net) as of June 30, 2014, an increase of 67% over the Company's identified inventory prior to the acquisition;
The pending acquisition is expected to close in early October 2014, and is subject to the completion of customary due diligence and closing conditions. In connection with the acquisition, the company, based in Natchez, Miss. has secured a commitment for a term loan facility in an amount up to $275 million and an amended revolving credit facility with an initial borrowing base of $250 million. The availability of the debt financing package is expected to occur concurrently with the closing of the acquisition, and will be subject to the satisfaction of various customary closing conditions, including execution and delivery of definitive documentation.
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