Callon Petroleum Company is to buy the leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates for $788m.
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 approximately 18,000 barrels of oil equivalent per day (61% oil).
The cash and stock transaction is valued at approximately $788 million, representing a headline purchase price multiple of approximately $43,800 per Boe/d, based on second quarter production.
Callon said the acquisition is a step in its 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.
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 approximately 300 identified core net locations, approximately 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 $20m per year in interest costs.
Callon president and CEO Joe Gatto said: “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.”
The acquisition will increase Callon’s Delaware Basin position to over 110,000 net acres. Primexx’s assets will immediately compete for capital within the Callon portfolio and increase Callon’s capital allocation to the Delaware Basin. In addition, numerous opportunities for cost and capital efficiency gains create upside to current forecasted performance.
For more information visit: www.callon.com