HOUSTON, Oct. 22, 2019 Callon Petroleum Company
(NYSE: CPE) ("Callon" or the "Company") today announced that it has
filed an investor presentation with the Securities and Exchange
Commission (the "SEC") in connection with its previously announced
pending all-stock acquisition of Carrizo Oil & Gas, Inc.
(NASDAQ: CRZO).
The investor 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/.
Highlights of the transaction include:
- Combines Complementary High-Quality Assets to Create a
Self-Funded, High-Margin Oil Growth Company. On a pro forma
basis, Callon will have an approximate 200,000 net acre footprint
in the Permian Basin and Eagle Ford Shale, including over 90,000
net acres in the Delaware Basin,
and approximately 2,500 total gross horizontal drilling locations.
The Company expects that its high-margin, free cash flow generating
assets in the Eagle Ford Shale will accelerate its value
proposition from a deep drilling inventory in the Permian,
enhancing returns while sustainably generating corporate-wide free
cash flow. In addition, the combined company's balanced asset
portfolio provides flexible and increasingly efficient capital
allocation to manage cash conversion cycles and capital intensity
profiles. Together with Carrizo, Callon also expects to maintain
industry-leading margins and a low cost of supply on an "all-in"
corporate basis.
- Better Positions the Company for Changing Industry Landscape
and Commodity Price Volatility. The combined company will have
increased size and scale to deliver on shareholder priorities of
capital efficiency, corporate-level returns, and a path to returns
on capital. With expanded capacity for larger projects, Callon will
benefit from substantial improvements in capital efficiency and
production uptime. Importantly, the combined portfolio is projected
to lower the corporate free cash flow break-even from $55 per barrel to approximately $50 per barrel in 2020 and below $50 by 2021.
- Drives Significant and Achievable Synergies. The
combination is expected to generate synergies of $850 million in net present value, delivering
over $2 per share of value to Callon
shareholders, which represents more than half of Callon's current
share price. The Company expects to achieve annual run-rate
operational synergies of $65-$85 million
driven by Delaware drilling and
completion cost savings and improved Permian production uptime, as
well as cash G&A savings of $35-$45 million per
year. Over time, Callon anticipates additional synergy value to be
realized from optimized capital allocation, the integration of
Delaware infrastructure and water
management, increased hydrocarbon volumes for enhanced optionality
for marketing and transportation and reductions to the cost of
capital.
- Delivers Significant Value for Shareholders. This
combination is immediately accretive to all key financial metrics
including EPS, CFPS and FCFPS, debt adjusted growth per share and
net asset value per share. Moreover, Callon is contributing a lower
percentage of production and cash flow relative to its pro forma
ownership in the combined company. While Carrizo is contributing
essentially all near-term free cash flow, Callon shareholders are
receiving 54% ownership in the combined company.
- Reinforces Callon's Financial Strength and Versatility.
The combined company will have a strong balance sheet, investment
grade credit metrics and no near-term debt maturities. Incremental
free cash flow generation of approximately $100 million in 2020 at recent strip pricing will
drive the combined company's leverage ratio to below 2.0x by the
end of 2020, with additional upside from increased potential for
asset monetization. Specifically, Callon has established a target
of $300-$400
million of additional monetization proceeds for the combined
company by year-end 2020, primarily from a combination of the
following sources:
-
- Select acreage in the Eagle Ford Shale;
- Non-operated Permian properties and pruning of non-core
Delaware properties; and
- Upfront proceeds from a joint venture or similar structure
involving an expanded set of water infrastructure assets in both
the Permian Basin and Eagle Ford Shale.
- Callon is a Premier Operator with Track Record of Successful
M&A Integration. Callon is led by an experienced management
team with a track record of successful value-enhancing acquisitions
and portfolio optimization through non-core divestitures. In recent
years the Company has demonstrated the ability to achieve
significant well cost savings and productivity improvements
relative to offset operators in both the Delaware and Midland basins.
- Result of Extensive Review by Independent and Qualified
Board. The experienced Callon Board and its independent
standing Strategic Planning Committee evaluated a broad range of
strategic alternatives for maximizing shareholder value and
considered a number of potential counterparties. After discussions
at nine separate meetings, the Board approved the Carrizo
transaction believing it would deliver the highest value to Callon
shareholders. Importantly, this transaction does not preclude any
future alternatives for Callon; rather, it better positions the
combined company for future strategic opportunities, including a
sale or merger.
The Callon Board unanimously recommends shareholders vote
"FOR" the Carrizo merger agreement as well as all other proposals
set forth in the proxy materials at the upcoming Special
Meeting. The Special Meeting 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.
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.
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:
|
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INNISFREE M&A
INCORPORATED
|
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TOLL-FREE at +1
(888) 750-5834 (From the U.S. or Canada)
|
JP Morgan and Goldman Sachs are serving as financial advisors to
Callon and Kirkland & Ellis LLP is serving legal advisor to
Callon.
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 Petroleum Company
("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.
Supplemental Non-GAAP Financial Measures
This
communication includes free cash flow, which is a supplemental
non-GAAP financial measure that is used by management and external
users of our financial statements to assess our liquidity. We
define free cash flow as net cash provided by operating activities
before changes in working capital less capital expenditures.
Management believes that free cash flow provides useful information
in assessing the impact of our ability to generate cash flow in
excess of capital requirements and to return cash to shareholders.
Free cash flow should not be considered an alternative to net cash
provided by operating activities or any other GAAP measures. We
have not provided a reconciliation of projected free cash flow to
projected net cash provided by operating activities, the most
comparable financial measure calculated in accordance with GAAP. We
are unable to project net cash provided by operating activities for
any future period because such metric includes the impact of
changes in operating assets and liabilities related to the timing
of cash receipts and disbursements that may not relate to the
period in which the operating activities occurred. We are unable to
project these timing differences with any reasonable degree of
accuracy without unreasonable efforts such as predicting the timing
of our and our customers' payments, with accuracy to a specific
day, months in advance.
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