Current CPE Stock Info

Callon Petroleum Company (ticker: CPE), a Permian Basin pure-play E&P, announced the addition of 6,230 gross acres (3,862 net) in the oil province on September 2, 2014. The properties were purchased for $212.6 million in cash and are near CPE’s existing operations in Carpe Diem and Pecan Acres in Midland County, Texas. The sale is effective May 1, 2014 and the company will assume operatorship upon closing of the transaction, which is expected to occur in early October 2014.

“The fields are located in the core of the industry’s multiple zon...

Analyst Commentary

Johnson Rice & Co. Note (9.2.14)

Transaction details – Callon is acquiring 6,230 gross (3,862 net; 62% w.i.; 100% HBP) acres, located in Midland, Andrews, Martin and Ector Counties for $212.6 million. The properties are located near its existing Carpe Diem and Pecan Acres properties and offset significant industry activity (see page 3). Production from the properties averaged 1,465 boe/d (68% oil) during 2Q:14, virtually all of which comes from legacy vertical Wolfberry wells (only one Wolfcamp B horizontal producing) and the properties have 4 mmboe of PDP reserves (no PUDs estimated at this time) with an associated PDP PV-10 of ~$100 million. Adjusting the acquisition price for the acquired production (assuming $80k per daily flowing boe, given the nature of the vertical producers), the adjusted acreage price is ~$25,000 per acre (~$32,000/acre assuming $60k per daily flowing boe), which is in-line with a number of transactions announced in the past few weeks. The shallow decline of the acquired properties can be clearly seen on page 3 of this report, which shows the production level of the acquired properties since January 2012. Callon will assume operatorship of the properties upon closing of the transaction, which is expected on October 1.

Adds critical mass to drilling inventory - This transaction increases its acreage in the southern and central Midland Basin to 18,062 net acres (up from 14,200 net acres) adds 440 gross (273 net) locations with an average lateral length of ~6,325' to its inventory across all of the prospective zones, increasing its total inventory in the Midland Basin to 1,097 gross (772 net) locations.  

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