Callon Petroleum Co., Houston, has agreed to acquire the leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates.
Primexx is a private oil and gas operator in the Delaware basin with a contiguous footprint of 35,000 net acres in Reeves County and second-quarter 2021 net production of 18,000 boe/d (61% oil). The acquisition consideration includes $440 million in cash and 9.19 million shares of Callon stock issued for a total deal value of $788 million, representing a purchase price multiple of $43,800 per boe/d based on second-quarter production.
The acquisition will increase Callon's Delaware basin position to over 110,000 net acres. Callon intends to add Primexx's current two-rig program into its multi-year development plans. With some 300 identified core net locations, about two-thirds of which are 2-mile laterals, the acquired assets will support Callon's continued shift to larger, more capital efficient development projects in the Delaware basin, the company said in an Aug. 4 release.
Primexx has invested in a gathering and water management infrastructure that includes 80,000 b/d of water recycling capacity and 60 miles of water transfer lines, more than doubling Callon's current water recycling capacity.
Callon expects to finance the cash portion of the purchase with available capacity under the current credit facility with near-term repayment coming from forecasted free cash flow and proceeds from in-process divestiture initiatives. The company also will look to the debt capital markets to term out all or a portion of the cash payment in lieu of credit facility borrowings, it said.
Kimmeridge Energy has agreed to convert its remaining portion of the Callon second lien senior notes that were issued in 2020 into common shares after the close of the Primexx transaction, expected in this year’s fourth quarter subject to conditions and approvals.
Callon entered into an agreement with Chambers Investments LLC, a private investment vehicle managed by Kimmeridge, to exchange $197 million of its outstanding second lien notes for $223.1 million of company common stock. This exchange is contingent upon closing of the Primexx acquisition as well as a shareholder vote.