Joe Gatto, President and Chief Executive Officer commented, “We are delivering on our commitment to drive enhanced capital efficiency by monetizing lower margin, non-core properties that have not competed for capital on a sustained basis. The proceeds from this divestiture will accelerate our debt reduction initiatives and also provide the opportunity to retire our preferred stock, reducing our cash financing costs. In addition, the transaction streamlines our business with a resulting focus on three core operating areas. We are actively optimizing our operations, which we believe will reduce capital intensity and increase returns on capital for our shareholders.”
The divestiture encompasses our Ranger operating area in the southern Midland Basin which includes approximately 9,850 net Wolfcamp acres (66% working interest), over 80 currently producing horizontal wells that have been drilled since 2012 and 70 net, delineated locations that exceed our internal threshold of an IRR of greater than 25% at strip pricing. Daily production from these assets averaged approximately 4,000 Boe/d (52% oil) in February 2019. Our capital plans for the year are unchanged as there was no planned activity in the Ranger area for 2019. Updated full year guidance will be provided upon closing of the sale.
In addition to the pending divestiture, we completed a strategic trade during the first quarter of 2019 that expanded our contiguous position in northwest Howard County through the addition of two incremental long-lateral DSUs in exchange for low working interest properties in Midland County. The trade resulted in a net increase of approximately 167 net acres to Callon’s Midland Basin leasehold position and generated $14 million in cash proceeds to Callon. Our resulting asset base is now well-positioned for the efficient, large pad development model that we are increasingly deploying across our portfolio.
Jefferies LLC acted as exclusive financial advisor to Callon in connection with the Ranger divestiture transaction.
About Callon Petroleum
Callon Petroleum Company 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.