Callon Petroleum Company Provides Operational Update and 2012 Capital Budget, Announces Permian Acreage Acquisitions
Initiates a Horizontal Drilling Program Targeting the Wolfcamp B
Expands Permian Leasehold Position 150% to Over 24,000 Net Acres
Announces a 2012 Capital Budget of $139 Million
Increased Proved Reserves 17% To 15.9 MMboe At Year-End 2011
Callon Petroleum Company (NYSE: CPE) today announced its year-end 2011
proved reserves and 2012 capital budget, and provided an operational
update, including the acquisition of additional leasehold positions in
the Permian Basin.
Net production from Callon's Permian properties increased 135% to 965
barrels of oil equivalent per day (Boe/d) in 2011 from 411 Boe/d in
2010. The company drilled 36 gross (33 net) vertical Wolfberry wells in
2011 and net production from the properties at year-end 2011 was
approximately 1,300 Boe/d.
At the Pecan Acres Field, the two initial wells have been drilled and
stimulated, and are currently flowing back in preparation for first
production. In addition, a third well has been drilled, but not yet
completed, and a fourth well is currently being drilled. Callon plans to
complete the third and fourth wells in March 2012.
Based upon Callon's ongoing evaluation of its acreage position in the
East Bloxom Field, located in Upton County, TX, and recent industry
drilling results in northern Upton County and western Reagan County, TX,
the company plans to commence a horizontal drilling program at its East
Bloxom Field targeting the Wolfcamp B shale during the second quarter of
2012. Callon recently contracted a new-generation drilling rig under a
two-year contract to execute the East Bloxom program.
Additionally, Callon has recently expanded its Permian Basin acreage
position by 150% to 24,009 net acres from 9,539 net acres at December
31, 2011 with the acquisition of 16,020 gross (14,470 net) acres. The
new leasehold is located in the northern portion of the Midland Basin
which has had limited drilling activity relative to recent drilling and
evaluation efforts in the southern portion of the basin. Callon has an
average 90% working interest across the contiguous acreage positions and
is the operator. The lease bonus payments were funded from existing cash
balances. The company expects to acquire 3-D seismic data in the first
half of 2012 and commence drilling to delineate the acreage in the third
quarter of 2012. Callon has performed technical analysis of the newly
acquired acreage and believes that the acreage is prospective for
horizontal drilling of the Cline shale and vertical drilling of multiple
intervals. Callon is continuing to pursue additional leasing
opportunities in the area.
Deepwater Gulf of Mexico
Callon received confirmation from the operator of the Habanero Field
that drilling of the #2 sidetrack well targeting up-dip proved
undeveloped reserve volumes will commence during the fourth quarter of
2012. In addition, Callon has been notified that the Habanero Field will
be shut-in for scheduled maintenance operations on the Auger platform,
which processes Habanero production volumes. As a result, the operator
of the Habanero Field expects production to be offline for a total of
approximately 60 days during the second and third quarters 2012.
As discussed during Callon's third quarter 2011 results of operations
conference call, the Medusa A-6 well experienced a downhole mechanical
problem that reduced Callon's net production volumes by approximately
450 barrels of oil equivalent per day (Boe/d). Production from the field
has stabilized, and Callon is in discussions with the operator regarding
potential repairs that would restore previous production rates.
Separately, Callon has confirmed with the operator that the Medusa
platform will be shut-in approximately 25 days during the second quarter
of 2012 due to planned construction activities on the West Delta 143 oil
pipeline. Medusa produces through this pipeline system.
Gulf of Mexico Shelf
Production from the East Cameron Block 257 Field was suspended in the
fourth quarter of 2011 due to a natural gas leak in a section of the
Stingray Pipeline which transports production volumes from the field.
The East Cameron Block 257 Field contributed net production of 262 Boe/d
during the third quarter of 2011. Production will re-commence once the
Stingray Pipeline is brought back online which is currently anticipated
to occur before July 1, 2012.
Callon's one producing well in the Haynesville shale play (located in
Bossier Parish, LA) was shut-in for 35 days in the fourth quarter of
2011 due to well interference from an offsetting well. A workover is
currently being performed on the well to restore production in February
2012. Callon is not currently engaged in any other operational
activities in this area.
2012 Capital Budget
Callon's Board of Directors approved a 2012 capital budget of $139
million. Approximately 80% of the total budget is allocated to activity
in the Permian Basin. Specifically, Callon expects to drill 21 (gross)
vertical and seven (gross) horizontal Permian oil wells, acquire new
acreage positions (inclusive of the recent Permian leaseholds described
in the Operational Update section of this news release), and perform
geologic and geophysical work. The remainder of the capital budget is
primarily allocated to the planned Habanero #2 sidetrack well and
Callon intends to fund its 2012 capital program, which represents an
increase of 32% over 2011 actual capital expenditures of $105 million,
entirely from internal cash flow generation, existing cash balances and
revolving credit availability.
Year-End 2011 Proved Reserves
At December 31, 2011, Callon's estimated proved reserves totaled 15.9
million barrels of oil equivalent (MMboe), an increase of 17% over
year-end 2010 proved reserves of 13.6 MMboe. Approximately 63% of the
company's 2011 year-end proved reserves were classified as crude oil and
56% were undeveloped. The 4.1 MMboe of proved reserve additions replaced
224% of the company's 2011 production of 1.8 MMboe.
The present value of the company's estimated future net revenues from
proved reserves, excluding income taxes (which is a non-GAAP financial
measure), was estimated at $310 million as of December 31, 2011 using
Securities and Exchange Commission (SEC) pricing guidelines for year-end
2011 discounted at 10% (PV-10). The PV-10 estimate was based upon an
analysis performed by Callon's independent petroleum engineers. The
year-end pricing used in calculating such present value averaged $98.98
per barrel of oil and $5.60 per thousand cubic feet of natural gas (as
adjusted for differentials and natural gas liquids content, and
excluding the impact of existing hedges).
2011 Production and 2012 Production Guidance
Callon produced 1.8 MMboe for the year 2011, comprised of 54% crude oil
and 46% natural gas and natural gas liquids. The company's production
and reserve growth initiatives continue to focus primarily on the
Permian Basin, building a multi-year portfolio of oil-weighted drilling
locations. In order to advance its growth plans, Callon will be
directing a significant amount of its capital budget in 2012 to
horizontal drilling and new acreage initiatives in the Permian Basin.
The company believes the potential for increased production rates and
improved capital efficiency from its horizontal drilling initiatives
will enhance the quality of Callon's asset base as this program evolves
Given the near-term production impact of a transition to horizontal
drilling in 2012, including reduced vertical activity and the timing of
initial production from horizontal completions, and scheduled downtime
at the Medusa and Habanero Fields, the company estimates that full-year
production for 2012 will approximate 1.7 1.9 MMboe. Importantly,
Callon anticipates that Permian production will grow approximately 100%
in 2012, reflecting the growing contribution of this basin to the
company's total production.
Callon will host a conference call at 10 a.m. Central Standard Time (11
a.m. Eastern) Thursday, February 16, 2012 to discuss the operational
update and the 2012 capital budget in additional detail. The conference
call and accompanying visual presentation materials may be accessed live
over the internet through the Events and Presentations Section of the
company's website at www.callon.com,
and will be archived there for subsequent review.
In addition, a telephone recording of the conference call will be
available from noon February 16th until noon February 17th Central
Standard Time, and may be accessed by dialing 1-800-633-8284 and
entering Reservation Number 21577747.
Callon Petroleum Company is engaged in the acquisition, development,
exploration and operation of oil and gas properties in Texas, Louisiana
and the offshore waters of the Gulf of Mexico.
It should be noted that 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. These
statements reflect the company's current views with respect to future
events and financial performance. 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. Some of the factors which could affect our
future results and could cause results to differ materially from those
expressed in our forward-looking statements are discussed in our filings
with the Securities and Exchange Commission, including our Annual
Reports on Form 10-K, available on our website or the SEC's website at www.sec.gov.
Callon Petroleum Company Rodger Smith, 1-800-451-1294