Callon Petroleum has agreed to acquire the membership interests of US-based Percussion Petroleum Operating II in a cash and stock deal worth up to $537.5m to gain access to certain core Delaware assets.
The consideration is made up of a payment of around $475m and potential contingent payments that could reach a maximum of $62.5m.
As per the terms of the deal, the Permian Basin-focused Percussion Petroleum Operating II will be paid cash of $265m and issued up to 6.46 million shares of Callon Petroleum.
Through the acquisition, Callon Petroleum will add around 18,000 net acres in Ward, Loving, and Winkler counties and nearly 70 high-return well locations in the 3rd Bone Spring, Wolfcamp A, and Wolfcamp B. The well locations have an average lateral length of around 10,000ft, with further prospectivity in emerging zones.
According to Callon Petroleum, the acreage to be acquired is mostly contiguous with its existing core positions in the Delaware Basin and will profit from its subsurface and operational know-how in the area.
Percussion Petroleum Operating II’s assets produced an estimated 14,100 barrels of oil equivalent per day (boe/d) in April 2023 on average, of which nearly 70% is oil.
In a separate deal, Callon Petroleum will sell all its Eagle Ford Shale assets to Ridgemar Energy Operating for $655m in cash and up to $45m in potential contingent payments.
The deal will see Ridgemar Energy Operating acquire 100% of the limited liability company interests of Callon (Eagle Ford), which is a fully-owned subsidiary of Callon Petroleum.
Callon Petroleum president and CEO Joe Gatto said: “The combined transactions strengthen our capital structure, improve our margins, and lengthen our top-tier Permian inventory. In addition to improving our net asset value proposition, we will achieve our near-term total debt milestone and intend to initiate a capital return program for shareholders at closing.
“Our strategic Eagle Ford exit funds our Delaware expansion and focuses our people, capital and operations on our premium Permian position.”
The two transactions, which are contingent on customary terms and conditions, are anticipated to close simultaneously in July 2023.
In 2021, Callon Petroleum acquired Delaware Basin operator Primexx Energy Partners and its affiliates for $788m.
