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Cimarex to sell West Texas oil, gas assets for $570M to Callon Petroleum

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Cimarex to sell West Texas oil, gas assets for $570M to Callon Petroleum

Cimarex Energy Co. agreed to sell oil and gas production assets located mainly in Ward County, Texas, to Callon Petroleum Operating Co. for $570 million, according to a May 24 news release.

The West Texas assets in the deal produced about 6,831 barrels of oil equivalent per day, 73% of which was oil, in the first quarter. Most of the production is from the Bone Spring formation. The agreement also included about 18,925 net Wolfcamp acres, of which 11,500 net acres have rights to the base of the Wolfcamp.

The deal is expected to close in the third quarter. When it does, the Callon Petroleum Co. subsidiary said it will hold 86,000 net surface acres in the Permian Basin, mostly in four core operating areas within the Midland Basin and Delaware Basin.

Callon concurrently launched an underwritten public offering of 22,000,000 shares of its common stock to help fund the acquisition. The company plans to give underwriters an overallotment option to purchase up to an additional 3,300,000 shares. If the acquisition falls through, Callon plans to use net proceeds to fund exploration and development activities and for a potential redemption of preferred stock and general corporate purposes.

Scotiabank served as financial adviser to Cimarex. J.P. Morgan and Morgan Stanley are acting as joint book-running managers for Callon's common stock offering.