Shares of Callon Petroleum (CPE - Get Report) ticked higher Wednesday morning continuing an after hours rally as the oil and gas explorer said it had signed a pair of asset purchases, a share issuance and small asset sale.
The Natchez, Miss., company said after the markets closed Tuesday, April 19, that it has reached agreements with three private entities to buy properties in West Texas' Permian Basin operated by Big Star Oil & Gas for around $303 million.
Shares rose about 4% in after hours trading and traded up about 30 cents, or 3%, Wednesday morning at $9.21 per share.
Callon didn't name the entities, but a Securities and Exchange Commission filing revealed them as BSM Energy, Crux Energy and Zaniah Energy, all of Midland, Texas.
The price includes $220 million in cash and 9.3 million Callon shares valued at $82.9 million as of Tuesday's close.
The Deal, the sister company of TheStreet, reported earlier this month that Callon might do a large acquisition. The Deal also reported in February 2014 that Big Star was selling 10,500 acres for a hoped-for $150 million.
The transaction includes 14,089 net surface acres primarily in Howard County with additional acreage in Martin, Borden and Dawson counties. The properties produced 1,931 barrels of oil equivalent per day in the first quarter and had 4.1 million barrels of oil equivalent of net proved developed producing reserves as of Jan. 1.
Callon will operate 80% of the acreage and own an estimated 81% average working interest.
The company also said it bought properties from an unnamed private seller north of Garrison Draw field in western Reagan County, Texas, and sold 27.5% of the field to Trilantic Capital Management-backed TRP Energy in deals valued at $33 million. That transaction with Trilantic, an energy-focused private equity firm, will expand Callon's acreage in the area by 1,759 acres.
Analysts say the larger deal doubles Callon's footprint in the Midland basin and comes in at $17,000 per acre, versus recent deals in the $25,000 to $35,000 range. Industrial- and energy-focused investment bank Seaport Global Securities raised Callon's price target on the news to $13 per share versus $11 and reiterated its buy rating.
Chairman and CEO Fred Callon said the transactions deliver high-quality, de-risked assets that compete favorably for capital and that the company offered a senior role to Big Star founding partner Bradley Cross.
Callon expected the deals to close in the second quarter. It will finance the cash portion with cash on hand, borrowings under its revolving credit facility and proceeds from a stock offering. The company said its borrowing base was reaffirmed in early April at $300 million, which includes related commitments of $300 million.
In a separate statement, Callon said it would sell 22 million shares of its stock in an offering led by Credit Suisse Group and Scotia Howard Weil.
If the acquisitions weren't consummated, the company would use the net proceeds to fund part of its exploration and development activities and for other purposes, including acquisitions, repaying debt and working capital.