Callon Petroleum said that the agreement also includes potential incremental cash payments of up to $60m based on the future commodity prices with upside participation starting at the $60/Bbl West Texas Intermediate level.
The sale consists of the company’s 66% working interest in Ranger operating area in the southern Midland Basin which includes approximately 9,850 net Wolfcamp acres, 80 currently producing horizontal wells and 70 net, delineated locations that exceed have internal threshold.
Callon Petroleum said that in February 2019, it has produced an average of approximately 4,000 Boe/d (52% oil) per day from its assets.
The company said that the capital plans for the year remains unchanged, as no activity is planned in the Ranger area for 2019.
Callon Petroleum president and chief executive officer Joe Gatto said: “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.”
In addition to the sale, the company has completed a strategic trade during the first quarter of 2019 that expanded the company’s contiguous position in northwest Howard County with the addition of two incremental long-lateral DSUs in exchange for low working interest properties in Midland County.
The transaction led to a net increase of approximately 167 net acres to Callon’s Midland Basin leasehold position and generated $14m in cash proceeds.
Callon Petroleum claims that the resulting asset base is now well-positioned for the efficient, large pad development model that the company is increasingly deploying across its portfolio.
Gatto added: “We are actively optimizing our operations, which we believe will reduce capital intensity and increase returns on capital for our shareholders.”
