Callon Petroleum Company Reports Results For Fourth Quarter, Full Year 2011

Natchez, MS (March 14, 2012)-Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and 12-month periods ended December 31, 2011.

Fourth Quarter and Full Year 2011 Net Income.  For the year ended December 31, 2011, Callon reported net income of $104.1 million or $2.70 per fully-diluted share, as compared to $8.4 million or $0.28 per share for the year ended December 31, 2010.    Included in net income as of December 31, 2011 is an income tax benefit of $67 million, primarily related to the reversal of a valuation allowance previously recorded in 2008 against our deferred tax assets.  For the fourth quarter, the company's net income was $71.7 million, including approximately $63 million of the income tax benefit discussed above, or $1.79 per fully-diluted share, compared to net income of $0.7 million or $0.02 per fully-diluted share for the fourth quarter of 2010. As a result of the successes realized from the strategies developed in late 2008 which are reflected in our net income from 2009 to 2011, the company achieved income on an aggregate basis for the three-year period ended December 31, 2011 and together with our future outlook concluded the valuation allowance was no longer required. The company expects sufficient future income to fully utilize all of the deferred tax assets including its net operating losses prior to expiration.  

Other highlights for 2011 include:

• Completed a public offering of 10.1 million shares during February 2011 for which the company received $73.8 million in net proceeds.  Approximately 47% of the proceeds were used to reduce the Company's long term debt with the remaining proceeds available primarily to fund the company's acquisition and development activities in the Permian Basin.  

• Increased proved reserves 17% to 15.9 million barrels of oil equivalent (MMboe) as of December 31, 2011, with a corresponding 51% increase in the PV-10 value, a non-GAAP financial measure, using SEC pricing, to $310 million. (See "Non-GAAP Financial Measures" for a reconciliation of PV-10 value to the standardized measure value of $270 million.)  

• Grew the percentage of proved reserves associated with onshore assets to 61%, up from 50% at year-end 2010.  Proved reserves at December 31, 2011 were 63% crude oil and 37% natural gas.  The reserves had a combined crude oil and natural gas liquids component estimated to be in excess of 70%, and current year additions to proved reserves of 4.1 MMboe replaced 224% of production volumes for 2011.  

• As of December 31, 2011, our Permian Basin properties were producing 1,335 barrels of oil equivalent per day (Boe/d), a 143% increase over the December 31, 2010 exit production rate of 550 Boe/d. 

"Over the past three years Callon has transitioned from an offshore to an onshore operator by reinvesting the strong cash flows generated by our deepwater Gulf of Mexico production into low risk onshore oil assets in the Permian Basin," Fred Callon, Chairman and CEO points out. "Today, the company controls over 24,000 net acres in the Permian basin and operates 100% of current production on the acreage. This area is the foundation of our onshore operations and we will be looking to our Permian operations as our growth catalyst for the next several years."

Fourth Quarter and Full Year 2011 Operating Results.  Operating results for the three months ended December 31, 2011 include oil and gas sales of $31.8 million from average production of 4,652 barrels of oil equivalent per day (Boe/d).  These results compare with oil and natural gas sales of $24.4 million from average production of 5,087 Boe/d during the comparable 2010 period.  The average price realized per barrel of oil (Bbl) in the fourth quarter of 2011, after the impact of hedging, increased to $105.96, compared to $82.58 during the same period in 2010.  The average price realized per thousand cubic feet of natural gas (Mcf) in the fourth quarter of 2011, increased to $4.95, compared to $4.49 during the fourth quarter of 2010.  Oil and natural gas sales for full year 2011 totaled $127.6 million from average production of approximately 5,049 Boe/d. This corresponds to oil and natural gas sales of $89.9 million from average production of approximately 4,587 Boe/d during 2010.  The average price realized per barrel during full year 2011, after the impact of hedging, increased to $101.34, compared to $75.97 during the same period in 2010. The average price realized per Mcf for full year 2011 increased to $5.25, compared to $5.04 during the full year of 2010.

Fourth Quarter and Full Year 2011 Discretionary Cash Flow. Discretionary cash flow, a non-GAAP financial measure, for the three-month period ended December 31, 2011 totaled $21.3 million compared to $10.8 million during the comparable prior year period.  Net cash flow provided by operating activities, as defined by U.S. GAAP, was $21.2 million in the fourth quarter 2011, and $17.9 million in the fourth quarter of 2010. Discretionary cash flow for full year 2011 totaled $78.3 million, compared to $40.7 million in 2010.  Net cash flow provided by operating activities, as defined by U.S. GAAP, totaled $79.2 million and $100.1 million for the years ended December 31, 2011 and 2010, respectively. (See "Non-GAAP Financial Measures" that follows and the accompanying reconciliation of discretionary cash flow, a non-GAAP measure, to net cash flow provided by operating activities.)

Liquidity.  At December 31, 2011 the company's liquidity was $88.8 million comprised of a cash balance of $43.8 million and available borrowing base of $45.0 million under its Third Amended and Restated Senior Secured Credit Agreement.  On May 9, 2011, Regions Bank increased the company's borrowing base from $30 million to $45 million as a component of its $100 million Third Amended and Restated Senior Secured Credit Agreement. The $45 million borrowing base is reviewed and re-determined on a semi-annual basis. As of March 14, 2012, there were no outstanding borrowings on the facility, which matures on September 25, 2012.   During February 2011, the company received $73.8 million in net proceeds through the public offering of 10.1 million shares of its common stock, which included the issuance of 1.1 million common shares pursuant to the underwriters' exercise of the over-allotment option.   In March 2011, the company utilized approximately $35 million of these proceeds to redeem $31 million principal amount of its Senior Notes due 2016, plus the 13% call premium.  The remaining proceeds from the offering were used to fund a portion of its 2011 capital budget and for general corporate purposes, including the acquisition of additional Permian Basin acreage.

Non-GAAP Financial Measures.  This news release refers to non-GAAP financial measures as "discretionary cash flow" and "PV-10 value."  Callon believes that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt.  The company also has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred.   We also use the non-GAAP financial measure PV-10 value. PV-10 value is the present value of future net pre-tax cash flows attributable to estimated net proved reserves, discounted at 10% per annum.  PV-10 value is computed on the same basis as standardized measure, a GAAP financial measure, but does not include a provision for future income taxes.  We believe PV-10 value to be an important measure for evaluating the relative significance of our oil and gas properties, because it excludes income taxes which may vary materially among companies.  PV-10 is not, however, a substitute for standardized measure.

Reconciliation of Non-GAAP Financial Measures:
The following table reconciles the PV-10 value to the standardized measure (in thousands):

The following table reconciles discretionary cash flow to net cash flow provided by operating activities (in thousands):

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CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

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Consolidated Statements of Operations
(In thousands, except per share amounts)

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CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)

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.

This news release is posted on the company's website at www.callon.com and will be archived there for subsequent review.  It can be accessed from the "News Releases" link on the top of the homepage.

This news release contains projections 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. Forward-looking statements include all statements regarding our reserves as well as statements including the words "believe," "expect," "plans" and words of similar meaning.  These projections and 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.

For further information contact
Rodger W. Smith, 1-800-451-1294