Houston Chronicle


An influential proxy advisory firm said Wednesday it now supports the merger of Houston oil producers Callon Petroleum and Carrizo Oil & Gas after the deal was sweetened for hesitant Callon shareholders.

ISS flips and supports sweetened Callon-Carrizo deal- oil and gas 360

Source: Houston Chronicle

Callon plans to acquire Carrizo in a merger of near equals, but the deal was at risk of falling apart because of concerns Callon was paying too much and taking on too big of a debt load. Instead, the companies agreed last week to a reduced offer to buy Carrizo.

Major Callon shareholder Paulson & Co., which owned about 10 percent of the Callon shares, sold off half of its stake and removed its opposition. And, now, the proxy advisory firm ISS is supporting the deal after previously advising against it.

The deal originally offered 2.05 Callon shares for each share of Carrizo common stock owned and that amount was reduced to 1.75 shares. So Callon shareholders would own 58 percent of the combined company instead of 54 percent as originally proposed.

Wall Street has opposed most energy acquisitions of late because of the feared debt loads and overpayment concerns, but smaller Permian Basin producers such as Callon and Carrizo argue they need to join forces to create scale and better compete with the larger players.

“Combining with Carrizo will accelerate our strategy and strengthen Callon’s positioning in the evolving industry landscape, creating a leading oil and gas company with scaled development operations poised to deliver durable free cash flow generation through commodity price volatility,” said Callon Chief Executive Joe Gatto.

The shareholder vote on the deal was pushed back from Nov. 14 to Dec. 20.

The deal would combine Callon, which focuses exclusively on the still-booming Permian Basin, with Carrizo’s position in both the Permian and South Texas’ Eagle Ford shale. The combined Callon would have about 200,000 net acres in the Permian and Eagle Ford, including more than 90,000 acres in the Permian’s more active western lobe, called the Delaware Basin.

Callon just moved its headquarters from Mississippi to Houston at the beginning of this year, and the combined company will remain in Houston.

In the last couple of years, Carrizo has focused on growing in the Permian while selling its other assets in Colorado and the gassy Appalachian Basin nearer to the East Coast.


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