Callon Petroleum plans 2020 capex cuts, operational changes

Callon Petroleum Co. plans 2020 capex cuts and operational changes including upspacing based on 2019 learnings, a more conservative flowback and reservoir management strategy, and fluid efficiency improvements to further reduce costs and improve well recoveries.

Capital spend will be reduced for full-year 2020 to $700-725 million from $975 million, significantly reducing average quarterly expenditures for the remainder of 2020 by some 50% from a previously budgeted first quarter level of over $275 million, resulting in relatively flat year-over-year production growth versus the predecessor companies' combined 2019 production volumes.

Other plans for 2020 includes reducing rig count from nine to five before the end of the second quarter and reducing frac crew count from five to two upon the completion of currently in-process projects.

Second half 2020 and preliminary 2021 plans employ three to four drilling rigs (two to three in the Permian Basin and one in the Eagle Ford) and one to two completion crews focused on a high-graded set of shorter cycle projects in the Midland Basin and the Eagle Ford.

In the Delaware basin, initial production from the five-well Wally project is on a restricted choke and performing above expectations. This multi-zone project was drilled on 800-foot horizontal spacings.

In the Eagle Ford, initial production began in February from the 16-well Brown Trust project. The wells currently average 700 b/d oil per well (gross) on restricted chokes. The project had more than 50% improvement in average recovery time for shut-in production and 33% reduction in the aerial range of interference with offset parent wells relative to similarly sized projects in the area. These improvements are the result of continued optimization of frac design, sequencing and flowback management.