The Callon, Carrizo merger is expected to create a highly complementary Delaware Basin footprint of more than 90,000 net acres to speed up scaled operations and leverage shared infrastructure to gain additional value
Callon Petroleum, a Permian Basin-focused company, is set to acquire rival Texas-based energy company Carrizo Oil & Gas in an all-stock deal worth $3.2bn (£2.56bn).
The merger between the two firms is expected to create a major oil and gas company with development operations across a portfolio of oil-weighted assets located in the Permian Basin and Eagle Ford Shale.
Callon is engaged in the acquisition and development of unconventional onshore oil and natural gas reserves across the Permian Basin in West Texas.
On the other hand, Carrizo is into the exploration, development, and production of oil and gas from resource plays across the US. The company’s current operations are focused primarily on proven, producing oil and gas plays located in the Permian Basin in West Texas, and the Eagle Ford Shale in South Texas.
Following the acquisition, Callon will have a footprint of nearly 200,000 net acres in the Permian Basin and Eagle Ford Shale, which includes more than 90,000 net acres in the Delaware Basin, and around 2,500 total gross horizontal drilling locations. The companies produced a combined 102.3MBoe/d in the first quarter of 2019.
Callon president and CEO Joe Gatto said: “Together with Carrizo, we will accelerate our free cash flow, capital efficiency and deleveraging goals through an optimized model of large-scale development across the portfolio.
“We will also benefit from leading cash margins to navigate commodity price volatility and allow for reliable, continuous development of the combined asset base. With a deep inventory of high rate-of-return well locations in well-established areas and substantial upside opportunities for organic inventory delineation, we will be able drive differentiated growth deploying our life-of-field development model for many years to come.”
Terms of the Callon, Carrizo merger
As per the merger terms, Carrizo shareholders will exchange each of their shares with 2.05 Callon shares. This values each of the shares of Carrizo at $13.12 (£10.55).
Upon completion of the merger, Callon’s shareholders will hold a nearly 54% stake in the combined company, while Carrizo’s shareholders will hold the remaining stake of around 46%.
Carrizo president and CEO S.P. “Chip” Johnson, IV said: “Through our combination, we bring together a strong foundation of Midland Basin and Eagle Ford Shale assets and overlay a substantial Delaware acreage position and value proposition that will be unlocked through an integrated plan of large-scale program development.
“This all-stock transaction provides Carrizo shareholders with the opportunity to participate in the significant near- and long-term upside potential of the merged company.”
The transaction, which will be based on regulatory approvals, shareholders’ approval of both the companies, and other customary closing conditions, is expected to be completed during the fourth quarter of this year.
In April 2019, Callon agreed to sell some of its non-core assets in the Midland Basin for up to $320m (£255.74m) to an undisclosed buyer.