Callon Petroleum Company announced additional initiatives to enhance liquidity, consistent with the Company’s commitment to proactively addressing its capital structure. The transactions announced today immediately strengthen Callon’s balance sheet and enhance near-term liquidity, well ahead of debt maturities and with the support of key financial stakeholders.
The Company has entered into an overriding royalty interest (“ORRI”) transaction with a private investment vehicle managed by Kimmeridge Energy (“Kimmeridge”), an energy-focused private equity firm, that generated gross cash proceeds of $140 million dollars. Callon has also issued $300 million of principal value second lien secured notes (“2nd Lien Notes”) to Kimmeridge. The proceeds of the Kimmeridge transactions will be used to reduce borrowings on the Company’s credit facility by nearly a third to approximately $1 billion. Separately, Callon recently entered into a definitive agreement to sell substantially all of its non-operated assets for gross cash proceeds of $30 million.
The Company has completed the fall borrowing base redetermination for its senior secured credit facility resulting in a reaffirmation of Callon’s borrowing base at $1.7 billion. The borrowing base and elected commitment were subsequently reduced to $1.6 billion in consideration of the ORRI sale and total 2nd Lien Notes capacity.
President and CEO Joe Gatto commented, “These transactions represent an important step forward in delivering on our stated goals to improve Callon’s liquidity position. Absolute debt reduction is also accelerated, complementing our free cash flow generation that has been bolstered by the significant synergies realized from the Carrizo acquisition. Importantly, the asset monetizations are accretive to our 2021 leverage metrics given a blended transaction multiple of approximately 6.5 times projected operating cash flow at current strip pricing. We will continue to pursue initiatives that improve our financial position and are encouraged by the expanding spectrum of actionable alternatives that have emerged as we execute on our strategic plan as a scaled operator in premier operating areas.”
Highlights of the combined transactions:
2nd Lien Notes overview:
ORRI overview:
Non-operated working interest overview:
Advisors
Jefferies LLC acted as financial advisor to Callon for the issuance of the 2nd Lien Notes and for the ORRI transaction. RBC Capital Markets acted as lead financial advisor for the ORRI transaction. Kirkland & Ellis LLP acted as legal advisor to Callon for the issuance of the 2nd Lien Notes and for the ORRI transaction. TenOaks Energy Advisors acted as sell-side advisor for the non-operated working interest sale.
Barclays acted as exclusive financial advisor and Sidley Austin LLP acted as legal advisor to Kimmeridge.
Callon Petroleum Company
Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration, and development of high-quality assets in the leading oil plays of West and South Texas.
Kimmeridge
Founded in 2012, Kimmeridge is a private equity firm based in New York and Denver focused purely on the development of low-cost unconventional oil and gas assets in the US upstream energy sector. The firm is differentiated by its direct investment approach, deep technical knowledge, active portfolio management and proprietary research and data gathering.
Contact:
Mark Brewer
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200