Callon to reduce drilling rigs to three by May

Callon Petroleum Co., Houston, will immediately downsize to one completion crew, and reduce its number of drilling rigs to three by May, and shift completion activity and wells placed on production out of the second quarter. The changes will further reduce the company’s average run-rate capital spending for the remainder of the year.

On Mar. 17, the reduced full year capital expectations by more than 25% from $975 million to $700-725 million. Since then, additional steps have been taken to further reduce planned spending for the year (OGJ Online, Mar. 18, 2020). 

Callon is targeting $15-20 million of cash G&A cost reductions for a total decrease of 40% from combined 2019 levels. The reduction includes voluntary compensation cuts by all directors and officers.

Additional details will come with first-quarter 2020 disclosures. Currently, the company expects operational capital spending of $275 million for the first quarter and production of 100,000-102,000 boe/d with an oil cut of 63% (three-stream basis).

On Apr. 10, the company received formal notice from the New York Stock Exchange that the average closing price of Callon's shares of common stock had fallen below $1.00/share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE.

Callon has responded regarding its intent to cure the deficiency to return to compliance within the 6-month cure period. Callon intends to put forth a proposal for a reverse stock split in connection with its annual meeting of shareholders.