HOUSTON, Nov. 4, 2019 /PRNewswire/ -- Callon
Petroleum Company (NYSE: CPE) ("Callon" or the "Company") issued
the following statement in response to a report by Institutional
Shareholder Services ("ISS") regarding Callon's all-stock
acquisition of Carrizo Oil & Gas, Inc. (NASDAQ: CRZO). Callon
strongly disagrees with ISS's recommendation and believes the
following points are essential to understanding the merits of the
transaction:
- Callon's stated strategy remains unchanged: As we have
articulated in numerous quarterly investor calls, and on slide 20
of our recently filed investor presentation, Callon has been
pursuing four strategic financial objectives: increase cash return
on invested capital, generate free cash flow, reduce leverage and
maintain a long-term focus. This transaction clearly advances each
point of Callon's strategy.
- Scale is critical in an evolving industry landscape: As the
shale industry turns from acreage acquisition to manufacturing
mode, the efficiencies gained from large pad development and
simultaneous operations are increasingly important for achieving a
competitive cost structure. While Callon has made important
progress implementing a scaled development model in select projects
within its existing portfolio, the larger capital base of the
combined company is expected to enhance its ability to optimize
asset development through larger pad investments across the
combined footprint on a sustained, repeatable basis.
- The highly achievable synergies reinforce the strategic
rationale of the transaction: The combination is expected to
generate $850 million in net present
value from G&A and operational synergies, delivering over
$2 per share of value to Callon
shareholders. The Company has conviction for the operational
synergies, reflecting in part the proven structural efficiencies
from scale described above, but the transaction is supported even
with conservative synergy assumptions. As ISS notes in its report,
"G&A synergies seem achievable, and the deal seems accretive
even without accounting for the operational
synergies." 1
- The transaction strengthens Callon's credit profile: The
combined high-quality asset base delivers both scale and geographic
diversification, including access to premium crude markets, driving
sustainable, high-margin oil-weighted production. The enhanced
EBITDA profile and accelerated free cash flow generation also
better position Callon to meet its target leverage metric of net
debt to EBITDA below 2.0x. Two independent rating agencies have
recognized the improved creditworthiness. Since the transaction
announcement, Callon has been placed on positive credit watch by
S&P and Moody's has confirmed a recent upgrade, commenting
"This acquisition will be a credit positive for Callon." While pro
forma credit metrics are largely unchanged, the combined business
is better positioned to deliver substantial improvements to these
metrics over time. Additionally, the combined company will benefit
from a strong balance sheet, no near-term debt maturities and pro
forma liquidity of more than $1
billion.
- A larger company brings greater predictability: ISS believes
"what [Callon's] shareholders seem to be seeking is greater
predictability." In fact, this combination is expected to enhance
predictability. With increased size and scale, the combined company
will be well positioned to withstand a changing industry landscape
and commodity price volatility with a lower corporate free cash
flow break-even cost of approximately $50 per barrel in 2020. In addition, the pro
forma company is expected to benefit from balanced diversity of
projects, cycle times and product markets, all supported by a
larger capital base.
- Callon's post-announcement performance is consistent with
peers: Against peers that most closely resemble Callon, our
performance since announcement has been relatively in-line or
better, reflecting the promise of the transaction. As ISS noted in
its report, "Rather than looking at medians of imperfect peer sets,
it may therefore be more informative for shareholders to compare
CPE's TSR to that of individual peers."1 This was
precisely what Callon articulated on slide 17 of our recent
investor presentation, with additional detail on slides 28-30, when
we identified peers by criteria especially relevant to investors as
sector sentiment has been challenged these past several months:
market cap, oil mix and leverage.
- Callon is confident in a successful integration: Callon is led
by an experienced management team with a track-record of successful
value-enhancing acquisitions. In recent years, the Company has
repeatedly demonstrated the ability to achieve significant well
cost savings and productivity improvements relative to predecessor
operators and offset operators in both the Delaware and Midland basins. Importantly,
Callon expects that a large portion of Carrizo employees will join
the combined company, providing stability and support throughout
the integration process.
- Research analysts overwhelmingly support the transaction: The
vast majority of independent research analysts who follow Callon
and Carrizo closely have expressed support for the combination and
maintain a buy recommendation for Callon.
Callon encourages investors to review its recently filed
investor presentation that highlights the benefits of the Carrizo
transaction in more detail. The presentation is available on the
Investor Relations section of the Company's website at
https://ir.callon.com/ as well as on https://www.sec.gov/.
As previously announced on July 15,
2019, Callon and Carrizo have entered into a definitive
agreement under which Callon will acquire Carrizo in an all-stock
transaction that was unanimously approved by each company's boards
of directors. Callon expects that the transaction will close
during the fourth quarter of 2019, subject to approval by both
Callon and Carrizo shareholders and other customary closing
conditions.
The Special Meeting of Callon shareholders will be held on
November 14, 2019, at 9:00 A.M. Central Time in the Advice &
Counsel meeting room of the Hotel ZaZa, 9787 Katy Freeway,
Houston, Texas. All shareholders
of record of Callon common stock as of the close of business on
October 7, 2019, will be entitled to
vote their shares either in person or by proxy at the shareholder
meeting. Each vote is very important, regardless of the number of
shares owned. Your failure to vote your shares of common stock or
your abstention from voting will have the same effect as a vote
"AGAINST" the transaction.
The Callon Board reiterates its belief that approving the
Carrizo transaction is in the best interests of all Callon
shareholders and urges all shareholders to vote FOR the Carrizo
merger agreement as well as all other proposals set forth in the
proxy materials at the upcoming Special Meeting.
If you have any questions, need assistance in
completing the proxy card, or need additional copies of the proxy
materials, please call the firm assisting Callon with the
solicitation of proxies:
INNISFREE M&A INCORPORATED
TOLL-FREE at +1 (888) 750-5834 (From the U.S. or Canada)
About Callon
Callon is an independent energy company focused on the acquisition
and development of unconventional onshore oil and natural gas
reserves in the Permian Basin in West
Texas. This news release is posted on Callon's website at
www.callon.com, and will be archived for subsequent review under
the "News" link on the top of the homepage.
No Offer or Solicitation
Communications herein do not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval with respect to the proposed transaction or
otherwise, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. Communication herein do
not constitute a notice of redemption with respect to or an offer
to purchase or sell (or the solicitation of an offer to purchase or
sell) any preferred stock of Carrizo Oil & Gas, Inc.
Additional Information and Where to Find It
In connection with the proposed transaction, Callon has filed, and
the Securities and Exchange Commission (the "SEC") has declared
effective, a registration statement on Form S-4 (the "Registration
Statement"), which contains a joint proxy statement of Callon and
Carrizo that also constitutes a prospectus of Callon. This
communication is not a substitute for the joint proxy
statement/prospectus or the Registration Statement or for any other
document that Callon or Carrizo may file with the SEC and/or send
to Callon's shareholders and/or Carrizo's shareholders in
connection with the proposed transaction. INVESTORS AND SECURITY
HOLDERS OF CALLON AND CARRIZO ARE URGED TO READ THE REGISTRATION
STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS, AS EACH MAY BE
AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT
DOCUMENTS FILED BY CALLON AND CARRIZO WITH THE SEC CAREFULLY WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT CALLON, CARRIZO AND THE PROPOSED TRANSACTION.
Investors will be able to obtain free copies of the Registration
Statement and joint proxy statement/prospectus, as each may be
amended from time to time, and other relevant documents filed by
Callon and Carrizo with the SEC (when they become available)
through the website maintained by the SEC at www.sec.gov. Copies of
documents filed with the SEC by Callon will be available free of
charge from Callon's website at www.callon.com under the
"Investors" tab or by contacting Callon's Investor Relations
Department at (281) 589-5200 or IR@callon.com. Copies of documents
filed with the SEC by Carrizo will be available free of charge from
Carrizo's website at www.carrizo.com under the "Investor Relations"
tab or by contacting Carrizo's Investor Relations Department at
(713) 328-1055 or IR@carrizo.com.
Participants in the Proxy Solicitation
Callon, Carrizo and their respective directors and certain of their
executive officers and other members of management and employees
may be deemed, under SEC rules, to be participants in the
solicitation of proxies from Callon's shareholders and Carrizo's
shareholders in connection with the proposed transaction.
Information regarding the executive officers and directors of
Callon is included in its definitive proxy statement for its 2019
annual meeting filed with the SEC on March
27, 2019. Information regarding the executive officers and
directors of Carrizo is included in its definitive proxy statement
for its 2019 annual meeting filed with the SEC on April 2, 2019. Additional information regarding
the persons who may be deemed participants and their direct and
indirect interests, by security holdings or otherwise, will be set
forth in the Registration Statement and joint proxy
statement/prospectus and other materials when they are filed with
the SEC in connection with the proposed transaction. Free copies of
these documents may be obtained as described in the paragraphs
above.
Cautionary Statement Regarding Forward-Looking
Information
Certain statements in this communication concerning the proposed
transaction, including any statements regarding the expected
timetable for completing the proposed Carrizo transaction, the
results, effects, benefits and synergies of the proposed
transaction, future opportunities for the combined company, future
financial performance and condition, guidance and any other
statements regarding Callon's or Carrizo's future expectations,
beliefs, plans, objectives, financial conditions, assumptions or
future events or performance that are not historical facts are
"forward-looking" statements based on assumptions currently
believed to be valid. Forward-looking statements are all statements
other than statements of historical facts. The words "anticipate,"
"believe," "ensure," "expect," "if," "intend," "estimate,"
"probable," "project," "forecasts," "predict," "outlook," "aim,"
"will," "could," "should," "would," "potential," "may," "might,"
"anticipate," "likely" "plan," "positioned," "strategy," and
similar expressions or other words of similar meaning, and the
negatives thereof, are intended to identify forward-looking
statements. The forward-looking statements are intended to be
subject to the safe harbor provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those anticipated, including, but not limited to, failure to
obtain the required votes of Callon's shareholders or Carrizo's
shareholders to approve the transaction and related matters;
whether any redemption of Carrizo's preferred stock will be
necessary or will occur prior to the closing of the transaction;
the risk that a condition to closing of the proposed transaction
may not be satisfied, that either party may terminate the merger
agreement or that the closing of the proposed transaction might be
delayed or not occur at all; potential adverse reactions or changes
to business or employee relationships, including those resulting
from the announcement or completion of the transaction; the
diversion of management time on transaction-related issues; the
ultimate timing, outcome and results of integrating the operations
of Callon and Carrizo; the effects of the business combination of
Callon and Carrizo, including the combined company's future
financial condition, results of operations, strategy and plans; the
ability of the combined company to realize anticipated synergies in
the timeframe expected or at all; changes in capital markets and
the ability of the combined company to finance operations in the
manner expected; regulatory approval of the transaction; the
effects of commodity prices; and the risks of oil and gas
activities. Expectations regarding business outlook, including
changes in revenue, pricing, capital expenditures, cash flow
generation, strategies for our operations, oil and natural gas
market conditions, legal, economic and regulatory conditions, and
environmental matters are only forecasts regarding these
matters.
Additional factors that could cause results to differ materially
from those described above can be found in Callon's Annual Report
on Form 10-K for the year ended December 31,
2018 and in its subsequent Quarterly Reports on Form 10-Q
for the quarter ended March 31, 2019,
and the quarter ended June 30, 2019,
each of which is on file with the SEC and available from Callon's
website at www.callon.com under the "Investors" tab, and in other
documents Callon files with the SEC, and in Carrizo's Annual Report
on Form 10-K for the year ended December 31,
2018 and in its subsequent Quarterly Reports on Form 10-Q
for the quarter ended March 31, 2019,
and the quarter ended June 30, 2019,
each of which is on file with the SEC and available from Carrizo's
website at www.carrizo.com under the "Investor Relations" tab, and
in other documents Carrizo files with the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Neither Callon nor Carrizo assumes any obligation to update
forward-looking statements to reflect circumstances or events that
occur after the date the forward-looking statements were made or to
reflect the occurrence of unanticipated events except as required
by federal securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
Contact for Callon
Mark
Brewer
Director of Investor Relations
or
Kate Schilling
Investor Relations
Callon Petroleum Company
ir@callon.com
(281) 589-5200
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SOURCE Callon Petroleum Company