Wednesday, February 3, 2010

Callon Petroleum Joins Haynesville Party

Callon Petroleum, a Natchez, MS-based producer, announced this week that the company has acquired acreage in the Haynesville Shale as part of its efforts to diversify its holdings from 100% offshore Gulf of Mexico production.  The company acquired a 70% working interest in 577 acres in Bossier Parish, LA for $3 million, or about $7,400/acre (when WI grossed up).  The company expects to spud its first well in mid-2010 and has dedicated $14.5 million of its 2010 capital budget to Haynesville drilling costs.

Callon is yet another company investing in the Haynesville Shale to diversify away from higher risk offshore drilling. Offshore plays are longer lived, but they require significant amounts of upfront capital and bear greater risk, as witnessed with the damage and shut-ins caused by hurricanes of the second half of the last decade. Shale plays, by contrast, require a fair bit of upfront capital but have a faster payback and lower risk. It makes sense to have both in your portfolio.

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