Callon eyes third Delaware Basin bolt-on

By Luke Geiver | June 04, 2018

Callon Petroleum Co. believes in its current acreage and has taken a $570 million step to expand it. Through a pending acquisition with Cimarex Energy Co., the Mississippi-based exploration and production company could bolt-on nearly 30,000 additional acres in the Delaware Basin.

The operator announced the news last week, noting that the acreage includes proven production and hundreds of new drilling locations. Roughly 90 percent of the acreage that could be included in the deal is held by production. Cimarex said that 73 percent of the production base is oil. More than half of the wells that Callon expects to drill in the future will feature horizontal laterals of 7,500 feet or greater. The Third Bone Spring, Wolfcamp A and Wolfcamp B zones will be the main landing zones. In the future, the second Bone Spring and Wolfcamp C zones could be drilled.

Callon entered the Delaware Basin in 2016 and has since performed bolt-on acquisitions in December 2017 and the pending May 2018 move.

“Given the location of the acquired position and associated established infrastructure, we are positioned to benefit from increased lateral lengths on the combined position as well as scale benefits from larger pad development concepts,” said Joe Gatto, president and CEO.

To pay for the acquisition, the company issued a public offering of 22 million shares of its common stock. The issuance was then priced at $259.6 million. After additional shares were also purchased, the company gained just over $288 million, most of which will be used for the acquisition.