US shale player Carrizo acquired by Callon Petroleum for $3.2bn

Callon acquisition of Carrizo : Callon Petroleum, a Texas-based oil and natural gas company, has wrapped up its previously announced $3.2 billion worth acquisition of shale player Carrizo Oil & Gas.

The Houston-based energy company Carrizo is involved in the exploration, development, and production of oil and gas from resource plays located in the US.

The combined entity, following the Callon, Carrizo merger is expected to be a major oil and gas firm with a presence in core oil-weighted assets in both the Permian Basin and Eagle Ford Shale.

Callon acquisition of Carrizo will enable the former to have nearly 200,000 net acreage in the Permian Basin and Eagle Ford Shale. The footprint will also consist of more than 90,000 net acres in the Delaware Basin, and nearly 2,500 total gross horizontal drilling locations.

The deal is said to combine a well-established and repeatable free cash flow generating business in the Eagle Ford Shale with Permian Basin assets.

The enlarged company is expected to possess the critical mass to achieve supply chain savings, with an estimated 9-10 drilling rigs and 3-4 completion crews working during 2020, primarily in the Permian Basin.

Further, Callon expects its expanded large project initiatives in the Permian Basin to be balanced by sustained investment in shorter cycle and less capital-intensive projects in the Eagle Ford Shale.

Callon acquisition of Carrizo is expected to lead to annual run-rate operational synergies of $65 to $80 million due to a structural shift in the combined program development model.

Callon acquisition of Carrizo. Photo courtesy of tzevena from Pixabay.

Besides, expanded hydrocarbon volumes resulting from the Callon, Carrizo merger are anticipated to offer a major boost to marketing arrangements and ongoing efforts to control critical parts of the value chain, including firm transportation on pipelines.

Commenting on Callon acquisition of Carrizo at the time of signing the deal in July 2019, Joe Gatto – President and CEO of Callon, said: “As a larger organization, Callon will be well-positioned to benefit from an expanded infrastructure footprint and critical mass for our production marketing and supply chain functions and also leverage our technology and data capture initiatives across a broader base.

“Importantly, this combination brings together two organizations grounded in strong values and a shared commitment to responsible operations, integrity, and a drive to deliver leading results. We look forward to welcoming Carrizo’s employees and joining forces as a Houston-based company focused on the development of a premier Texas asset base to create enhanced value for all of our stakeholders.”

As per the deal terms, Carrizo shareholders have exchanged each of their shares for 1.75 Callon shares. After the close of the transaction, Callon’s shareholders will own nearly 58% of the combined oil and gas company, while Carrizo’s shareholders will own around 42%.

S.P. Johnson, IV, President and CEO of Carrizo, had commented on the Callon, Carrizo merger, saying: “We believe that Callon is the ideal partner for Carrizo. 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.”