- Consolidates oil-weighted, high-margin Delaware Basin assets at an attractive valuation
- Accelerates deleveraging, reaching < 2x net debt / adjusted EBITDA sooner, pulling forward the timetable for potential shareholder returns
- Agreement with Kimmeridge to exchange Second Lien Senior Notes for common shares provides additional near-term deleveraging
- Combined transactions are accretive on key financial metrics (OCFPS, FCFPS, ROCE, CROCI) and provide a meaningfully enhanced multi-year cash flow profile
Callon Petroleum has announced an agreement to acquire the leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates. Primexx is a private oil and gas operator in the Delaware Basin with a contiguous footprint of 35,000 net acres in Reeves County and second quarter 2021 net production of approx. 18,000 barrels of oil equivalent per day ('Boe/d') (61% oil). The cash and stock transaction is valued at approx. $788 million, representing a headline purchase price multiple of approx. $43,800 per Boe/d, based on second quarter production.
The acquisition represents a significant step forward in Callon's strategy to deliver long-term value to shareholders through the application of its scaled, life-of-field development model while also strengthening its financial position. Callon's proven ability to integrate and further optimize assets in its core operating areas represents untapped upside to the already attractive pro forma accretion to all key per share financial metrics.
Demonstrated strong well results and established infrastructure pave the way for the seamless addition of Primexx's current two-rig program into Callon's multi-year development plans. With approx. 300 identified core net locations, approx. two-thirds of which are two-mile laterals, the acquired assets will support Callon's continued shift to larger, more capital efficient development projects in the Delaware Basin. Additionally, the acquisition increases the oil cut of Callon's Delaware business and improves corporate-level cash margins.
Kimmeridge, a leading investor in both the public and private oil and gas space, has agreed to convert their remaining portion of the Callon second lien senior notes that were issued in 2020 into common shares after the close of the Primexx transaction. This equitization further advances the Company's deleveraging timetable and saves nearly $20 million per year in interest costs.
Callon President and Chief Executive Officer Joe Gatto commented:
'The Primexx transaction checks every operational and financial box on the list of compelling attributes of consolidation. The asset base adds substantial current oil production and a top-tier inventory to our Delaware portfolio, and fits squarely into our model of scaled, co-development of a multi-zone resource base. Our integrated, future development plans will benefit greatly from the combined Delaware scale and we expect to generate approximately 30% more adjusted free cash flow from the third quarter of 2021 through year-end 2023 under our conservative planning price assumptions. The infusion of over $550 million of equity from the acquisition and Kimmeridge's exchange further heightens the overall benefits, immediately reducing leverage metrics and creating a visible path to net debt to adjusted EBITDA of below 2.0x next year.'
Source: Callon Petroleum