HOUSTON, Oct. 1, 2020 /PRNewswire/ -- Callon Petroleum
Company ("Callon" or the "Company") (NYSE: CPE) today 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:
- Total gross cash proceeds of approximately $465 million after original issue discount
- Estimated pro forma liquidity of $600
million after transaction expenses, with the next regularly
scheduled borrowing base redetermination in spring 2021
- Flexibility to issue up to a total of $700 million of 2nd Lien Notes under
the indenture, including, $300
million notes issued to Kimmeridge, $300 million reserved for potential exchanges of
unsecured notes and up to an additional $100 million that may
be issued to Kimmeridge under certain conditions and at its
election
- Significant financial position improvements from the
monetization of approximately 3.5% of current daily production with
a resulting average net revenue interest (8/8ths basis) of over 74%
for both our existing producing wells, as well as our undeveloped
location inventory
2nd Lien Notes overview:
- Private placement of $300 million
in principal due 2025, issued at 98% of par and callable beginning
in two years from the issuance date
- Cash coupon of 9.00%, payable semi-annually
- Concurrent issuance of approximately 7.27 million warrants at a
strike price equal to the 20-day volume weighted average stock
price prior to the closing date to be settled on a net share basis
above the strike price if exercised (i.e., no additional common
shares issued unless warrants exercised above the strike price with
the number of shares issued calculated according to the warrant
agreement)
- No maintenance-based financial covenants
ORRI overview:
- $140 million of gross cash
proceeds received at closing
- 2.0% (on an 8/8ths basis) overriding royalty
interest, proportionately reduced to Callon's net revenue interest,
in substantially all Callon-operated oil and gas leaseholds with an
effective date of October 1,
2020
- ORRI burdened by ad valorem and severance taxes and
post-production costs, including gathering, handling, processing,
separating, treating, compression, dehydrating, transportation, and
marketing costs
Non-operated working interest overview:
- Estimated $30 million of gross
cash proceeds receivable upon an anticipated closing date in early
November
- Current daily production of approximately 1,600 barrels of oil
equivalent (55% oil)
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.
Cautionary Note Regarding Forward-Looking Statements
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. Forward-looking
statements include future levels of drilling activity and
associated production and cash flow expectations; the Company's
production guidance and capital expenditure forecast; anticipated
returns and financial position; and the implementation of the
Company's business plans and strategy, as well as statements
including the words "believe," "expect," "may," "will," "forecast,"
"outlook," "plans" and words of similar meaning. These statements
reflect the Company's current views with respect to future events
and financial performance based on management's experience and
perception of historical trends, current conditions, anticipated
future developments and other factors believed to be appropriate.
No assurances can be given, however, as of this date, 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. Any forward-looking statement speaks
only as of the date of which such statement is made and the Company
undertakes no obligation to correct or update any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by applicable law. 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 include the volatility of oil, natural
gas and natural gas liquids ("NGLs") prices or a prolonged period
of low oil, natural gas or NGLs prices and the effects of actions
by, or disputes among or between, members of the Organization of
Petroleum Exporting Countries, such as Saudi Arabia and other oil and natural gas
producing countries, such as Russia, with respect to production levels or
other matters related to the price of oil, general economic
conditions, including the availability of credit and access to
existing lines of credit, the effects of excess supply of oil and
natural gas resulting from reduced demand caused by the COVID-19
pandemic and the actions of certain oil and natural gas producing
countries, our ability to drill and complete wells, operational,
regulatory and environment risks, cost and availability of
equipment and labor, our ability to finance our activities, the
ultimate timing, outcome and results of integrating the operations
of Carrizo and Callon and the ability of the combined company to
realize anticipated synergies and other benefits in the timeframe
expected or at all, and other risks more fully discussed in our
filings with the Securities and Exchange Commission (the "SEC"),
including our most recent Annual Report on Form 10-K and Quarterly
Report on Form 10-Q and subsequent Quarterly Reports on Form 10-Q,
available on our website or the SEC's website at www.sec.gov.
Contact:
Mark
Brewer
Director of Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200
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SOURCE Callon Petroleum Company