Callon to acquire Carrizo in $3.2-billion deal
Callon Petroleum Co. has agreed to acquire Carrizo Oil & Gas Inc. in an all-stock transaction valued at $3.2 billion to create a Texas operator with some 200,000 net acres in the Permian basin (120,000 net acres) and Eagle Ford shale (80,000 net acres).
Callon Petroleum Co., Houston, has agreed to acquire Carrizo Oil & Gas Inc. in an all-stock transaction valued at $3.2 billion to create a Texas operator with some 200,000 net acres in the Permian basin (120,000 net acres) and Eagle Ford shale (80,000 net acres), including more than 90,000 net acres in the Delaware basin and about 2,500 total gross horizontal drilling locations.
In this year’s first quarter, the companies produced a combined 102,300 boe/d, 71% of which was oil. In 2020, the combine expects to run 9-10 drilling rigs and 3-4 completion crews, predominantly in the Permian basin. The increased level of large project initiatives in the Permian basin will be balanced by sustained investment in shorter cycle and less capital-intensive projects in the Eagle Ford, the companies said.
The combination is expected to generate a total of $850 million in net present value. This includes annual run-rate operational synergies of $65-80 million from a shift in the combined program development model, consisting of expanded large-scale development in the Permian basin, deploying simultaneous drilling and completion operations, improving production cycle times, and reducing well costs; optimized, integrated development schedule to capture efficiencies from continuous utilization of dedicated completion crews; and improved uptime from concentrated development, resulting in reduced production downtime from offsetting completion operations. Also included are estimated annual cash general and administrative savings of $35-45 million.
Additional possible synergies expected to be realized over time include integration of Delaware infrastructure and water management; a larger portfolio of noncore acreage for divestment and trades; increased hydrocarbon volumes for marketing arrangements and initiatives to control parts of the value chain; and cost of capital reductions, including opportunistic debt refinancings.
Under the terms of the agreement, Carrizo shareholders will receive 2.05 Callon shares for each share of Carrizo common stock they own. This represents $13.12/share of Carrizo stock based on Callon’s closing common stock price on July 12 and a premium of 18% to Carrizo’s trailing 60-day volume weighted average price.
Upon closing, the combine will be led by Callon’s executive management team and remain headquartered in Houston. The board will consist of 11 members, including Callon’s eight current board members and three to be appointed from Carrizo’s board.
Following the deal’s closing—expected in this year’s fourth quarter subject to customary closing conditions and regulatory approvals, including the approval of shareholders of both companies—Callon shareholders will own 54% of the combine and Carrizo shareholders will own 46%.