Callon Petroleum: new acquisition in the Permian, link here.
The lede:
Callon Petroleum Co. disappointed investors with its biggest-ever acquisition aimed at expanding in America’s most prolific shale patch.
The Houston-based oil explorer agreed to buy closely held Primexx Energy Partners Ltd. for about $788 million in cash and stock, while separately agreeing to swap debt for equity with Callon’s largest shareholder, Kimmeridge Energy Management Co. Callon lost almost one-fifth of its market value as the stock posted its steepest daily loss in more than a year.
“The deal does come with increased gross debt near term,” JPMorgan Chase & Co. analysts including Arun Jayaram wrote Wednesday in a note to investors. With more than 9 million shares issued to Primexx owners and another 5.5 million deployed in the debt-for-equity swap, Callon investors are seeing a 31% dilution as well, according to the bank.
The deal:
- $788 million in cash and stock
- 35,000 net acres in Reeves County of west Texas
- apparently Reeves County sits atop both the Midland and the Delaware basins
- $788 million / 35,000 net acres = $20,000 / acre (rounding)
- to pay for this, a 31% dilution of outstanding stock, as well as the cash the company will need to pay for this transaction
Note:
- Callon acquired Permian rival Carrizo Oil & Gas, Inc, for $736 million two years ago.
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