SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 26, 1997
CALLON PETROLEUM COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 0-16866 64-0844345
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number Identification No.)
200 North Canal Street
Natchez, Mississippi 39120
(Address of Principal Executive Offices) (Including Zip Code)
(601) 442-1601
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 26, 1997, Callon Petroleum Operating Company ("CPOC"), a wholly owned
subsidiary of Callon Petroleum Company (the "Company"), and Elf Exploration,
Inc. ("Elf") executed a purchase and sale agreement whereby CPOC purchased an
18.8% working interest in the Mobile Area Block 864 Unit. The purchase included
a 17.5% working interest in Mobile Area Blocks 863 and 907 and a 35% working
interest in Mobile Area Block 908. The Unit, operated by Chevron, is located
approximately 12 miles south-southwest of the Company's North Dauphin Island
Field which is located in shallow Alabama state waters.
The net purchase price of $11.8 million was funded from the credit facility of
the Company. The purchase price was based on the discounted present value
of reserves attributable to the wells and the fair value of the related pro-
duction platforms, facilities, equipment and acreage outside of the producing
Unit.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Properties Acquired
The following audited financial statements are filed with
this report:
Report of Independent Public Accountant Page F-1
Statement Revenues and Direct Operating
Expenses of the Property for the Year Ended
December 31, 1996 and the Three Months Ended
March 31, 1997 Page F-2
Notes to Statement of Revenues and Direct
Operating Expenses of the Property Page F-3
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated
financial statements are filed with this report:
Introduction Page F-5
Pro Forma Consolidated Balance Sheet as of
March 31, 1997 Page F-6
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1996 Page F-7
Pro Forma Consolidated Statement of Operations
for the Three Months Ended March 31, 1997 Page F-8
Notes to Pro Forma Financial Statements Page F-9
The Pro Forma Consolidated Balance Sheet at March 31, 1997 gives effect
to the purchase of the MAB 864 Acquisition as if the transaction occur-
red on March 31, 1997.
The Pro Forma Consolidated Statements of Operations of the Company for
the year ended December 31, 1996 and the three months ended March 31,
1997 give effect to the purchase of the MAB 864 Acquisition as if the
transaction occurred at the beginning of each of the periods presented.
The Unaudited Pro Forma Consolidated Balance Sheet and Statements of
Operations are based on the assumptions set forth in the Notes to such
statements. Such pro forma information should be read in conjunction
with the related financial information of the Company and is not neces-
sarily indicative of the results which would actually have occurred had
the transaction been in effect on the date or for the period indicated
or which may occur in the future.
<PAGE>
(c) Exhibits.
1. Underwriting Agreement*
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession
2.1 Purchase and Sale Agreement dated June 26, 1997
between CPOC and Elf Exploration, Inc. (incorporated
by reference from Form 8K filed July 10, 1997).
4. Instruments defining the rights of security holders,
including indentures*
16. Letter re change in certifying accountants*
17. Letter re director resignation*
20. Other documents or statements to security holders*
23. Consents of experts and counsel
23.1 Consent of Ernst & Young LLP
24. Power of attorney*
27. Financial Data Schedule*
99. Additional exhibits*
______________________
* Inapplicable to this filing
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALLON PETROLEUM COMPANY
Date August 7, 1997 By: /s/ John S. Weatherly
John S. Weatherly, Senior Vice
President, Chief Financial Officer
and Treasurer
<PAGE>
Page F-1
Report of Independent Auditors
Stockholders and Board of Directors
Callon Petroleum Company
We have audited the accompanying statement of revenues and direct operating
expenses of the working interest in Mobile Area Block 864 Unit (the "Property")
acquired by Callon Petroleum Operating Company (the "Company"), a wholly-owned
subsidiary of Callon Petroleum Company, from Elf Exploration, Inc. (see Note 1
to the accompanying statement) for the year ended December 31, 1996. This
statement is the responsibility of the Company's management. Our respons-
ibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as eval-
uating the overall statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was pre-
pared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and is not intended to be a complete
presentation of revenues and expenses of the Property.
In our opinion, the statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenues
and direct operating expenses of the Property for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Houston, Texas
July 24, 1997
<PAGE>
<TABLE>
<CAPTION>
Page F-2
Statement of Revenues and Direct Operating Expenses of the Property
Three Months
Ended
Year Ended March 31,
December 31, 1997
1996 (Unaudited)
----------------------------------
<S> <C> <C>
(In Thousands)
Oil and gas revenues $ 4,455 $ 1,099
Direct operating expenses 245 (34)
----------- ----------
Revenues in excess of direct operating expenses $ 4,210 $ 1,133
=========== ==========
See accompanying notes.
</TABLE>
<PAGE>
Page F-3
Notes to Statement of Revenues and Direct Operating
Expenses of the Property
December 31, 1996
1. Basis of Presentation
Callon Petroleum Operating Company (the "Company"), a wholly owned subsidiary
of Callon Petroleum Company, acquired a working interest in Mobile Area Block
864 Unit (the "Property") from Elf Exploration, Inc. (the "Seller"). The
closing date of the acquisition was June 26, 1997, and the net purchase price
was $11.8 million.
The accompanying statement of revenues and direct operating expenses, which is
prepared on the accrual basis of accounting, relates only to the working
interest in the producing oil and gas property acquired and may not be
representative of future operations. The statement includes revenues and
direct operating expenses, including production and ad valorem taxes, for the
entire period presented. The statement does not include federal and state
income taxes, interest, depletion, depreciation and amortization, or general
and administrative expenses because such amounts would not be indicative of
those expenses which would be incurred by the Company. Presentation of com-
plete historical financial statements for the year ended December 31, 1996
and the three months ended March 31, 1997 is not practicable because the
Property was not accounted for as a separate entity; therefore, such state-
ments are not available.
Revenues in the accompanying statement of revenues and direct operating expenses
are recognized on the entitlement method.
The preparation of the statement of revenues and direct operating expenses in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the state-
ment and accompanying notes. Actual results could differ from those estimates.
The unaudited statement of revenues and direct operating expenses for the three-
month period ended March 31, 1997, in the opinion of management, was prepared on
a basis consistent with the audited statement of revenues and direct operating
expenses and includes all adjustments necessary to present fairly the results of
the period.
2. Supplemental Information on Oil and Gas Reserves (Unaudited)
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting the future rates of production and timing of develop-
ment expenditures. Therefore, actual production, revenues, and development and
operating expenses may not occur as estimated. The reserve data are estimates
only, are subject to many uncertainties, and are based on data gained from pro-
duction histories and on assumptions as to geologic formations and other
matters. Actual quantities may differ materially from the amounts estimated.
<PAGE>
Page F-4
Notes to Statement of Revenues and Direct Operating
Expenses of the Property (continued)
December 31, 1996
The following reserve data, prepared by the Company, represents estimates of
proved natural gas reserves of the Property, which is located in the United
States. There are no oil reserves associated with the Property.
1996
---------
Natural Gas (Mmcf)
Proved reserves:
Beginning of period 11,842
Production 1,795
---------
End of period 10,047
=========
Proved developed reserves:
Beginning of period 11,842
=========
End of period 10,047
=========
The estimated standardized measure of discounted future net cash flows relating
to proved reserves of the Property at December 31, 1996 is shown below and
should not be construed as the current market value. No deductions were made
for general overhead, depletion, depreciation and amortization, debt service,
or any indirect costs. Since the Property is not a separate taxpaying entity,
the standardized measure of discounted future net cash flows for the Property
is presented before deduction of income taxes.
1996
---------
(In Thousands)
Future cash inflows $ 38,680
Future production costs (3,241)
-----------
Future net cash flows before income taxes 35,439
10% annual discount for estimated timing of cash flows (10,186)
-----------
Standardized measure of discounted future net cash
flows relating to proved reserves before income taxes $ 25,253
===========
Changes in the standardized measure of discounted future net cash flows relating
to proved reserves of the Property are shown below.
1996
---------
(In Thousands)
Balance at beginning of period $ 16,643
Increase (decrease) in discounted future net cash flows:
Sales and transfers of natural gas produced,
net of production costs (4,210)
Accretion of discount 1,419
Net change in sales price and production costs 11,401
-----------
Balance at end of period $ 25,253
===========
The weighted average prices of natural gas at December 31, 1995 and 1996 used
in the calculation of the standardized measure of discounted future net cash
flows were $2.28 and $3.85 per Mcf, respectively.
<PAGE>
Page F-5
CALLON PETROLEUM COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Introduction
The following unaudited pro forma financial statements present the combined
financial position and results of operations of Callon Petroleum Company (the
"Company"). Such unaudited pro forma combined information is based on the
historical balance sheet and results of operations of Callon Petroleum Company
after giving effect to the acquisition described below.
On June 26, 1997, Callon Petroleum Operating Company, a wholly owned subsidiary
of the Company, purchased an 18.8% working interest in the Mobile Area Block
864 Unit from Elf Exploration, Inc. The Company's net purchase price of $11.8
million was funded from the credit facility of the Company.
See Note 1 in the Notes to Unaudited Pro Forma Consolidated Financial State-
ments for the basis of presentation of the above described event.
<PAGE>
<TABLE>
<CAPTION>
Page F-6
CALLON PETROLEUM COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1997
(Unaudited)
Adjustments
Historical MAB 864 Pro Forma
Company Acquisition As Adjusted
(In thousands)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,679 $ -- $ 10,679
Accounts receivable 9,836 -- 9,836
Other current assets 810 -- 810
---------- -------- ----------
Total current assets 21,325 -- 21,325
---------- -------- ----------
Oil and gas properties, full cost accounting method:
Evaluated properties 330,708 11,800 (a) 342,508
Less accumulated depreciation, depletion and amortization (270,455) -- (270,455)
---------- --------- ----------
60,253 11,800 72,053
Unevaluated properties excluded from amortization 26,918 -- 26,918
---------- --------- ----------
87,171 11,800 98,971
Pipeline facilities, net 6,541 -- 6,541
Other property and equipment, net 1,848 -- 1,848
Deferred tax asset 3,679 -- 3,679
Long-term gas balancing receivable 806 -- 806
Other assets, net 901 -- 901
---------- --------- ----------
Total assets $ 122,271 $ 11,800 $ 134,071
========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 7,715 $ -- $ 7,715
Undistributed oil and gas reserves 2,705 -- 2,705
Accrued net profits interest payable 5,946 -- 5,946
---------- --------- ----------
Total current liabilities 16,366 -- 16,366
---------- --------- ----------
Long-term debt 24,250 11,800 (a) 36,050
Other long-term liabilities 109 -- 109
Long-term gas balancing payable 621 -- 621
---------- --------- ----------
Total liabilities 41,346 11,800 53,146
---------- --------- ----------
Stockholders' equity:
Preferred Stock, $0.01 par value; 2,500,000 shares authorized; 1,315,500
shares of Convertible Exchangeable Preferred Stock, Series A, issued
and outstanding with a liquidation preference of $32,887,500 13 -- 13
Common Stock, $0.01 par value; 20,000,000 shares authorized;
5,763,407 at March 31, 1997 and 5,758,667 shares of outstanding at
December 31, 1996 58 -- 58
Capital in excess of par value 74,105 -- 74,105
Retained earnings 6,749 -- 6,749
---------- --------- ----------
Total stockholders' equity 80,925 -- 80,925
---------- --------- ----------
Total liabilities and stockholders' equity $ 122,271 $ 11,800 $ 134,071
========== ========= ==========
See Notes to Pro Forma Consolidated Financial Statement
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Page F-7
CALLON PETROLEUM COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(Unaudited)
Adjustments
Historical MAB 864 Pro Forma
Company Acquisition As Adjusted
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Oil and gas sales $ 25,764 $ 4,455 (a) $ 30,219
Interest and other 946 -- 946
---------- --------- -----------
Total revenues 26,710 4,455 31,165
---------- --------- -----------
Costs and Expenses:
Lease operating expenses 7,562 245 (a) 7,807
Depreciation, depletion and amortization 9,832 1,518 (d) 11,350
General and administrative 3,495 -- 3,495
Interest 313 1,138 (b) 1,451
---------- --------- -----------
Total costs and expenses 21,202 2,901 24,103
---------- --------- -----------
Income from operations 5,508 1,554 7,062
Income tax expense 50 544 (c) 594
---------- --------- -----------
Net income 5,458 1,010 6,468
Preferred stock dividends 2,795 -- 2,795
---------- --------- -----------
Net income available to common shares $ 2,663 $ 1,010 $ 3,673
========== ========= ===========
Net income per common share:
Primary $ 0.45 $ 0.62
Assuming full dilution $ 0.43 $ 0.60
Shares used in computing net income per common share:
Primary 5,952 5,952
Assuming full dilution 6,135 6,135
See Notes to Pro Forma Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page F-8
CALLON PETROLEUM COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1997
(Unaudited)
Adjustments
Historical MAB 864 Pro Forma
Company Acquisition As Adjusted
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Oil and gas sales $ 12,474 $ 1,099 (a) $ 13,573
Interest and other 307 -- 307
---------- --------- -----------
Total revenues 12,781 1,099 13,880
---------- --------- -----------
Costs and expenses:
Lease operating expenses 2,408 (34) (a) 2,374
Depreciation, depletion and amortization 3,816 586 (d) 4,402
General and administrative 1,031 -- 1,031
Interest 111 259 (b) 370
---------- --------- -----------
Total costs and expenses 7,366 811 8,177
---------- --------- -----------
Income from operations 5,415 288 5,703
Income tax expense 1,733 101 (c) 1,834
---------- --------- -----------
Net income 3,682 187 3,869
Preferred stock dividend 699 -- 699
---------- --------- -----------
Net income available to common shares $ 2,983 $ 187 $ 3,170
========== ========= ===========
Net income per common share:
Primary $ 0.47 $ 0.50
Assuming full dilution $ 0.39 $ 0.41
Shares used in computing net income per common share:
Primary 6,342 6,342
Assuming full dilution 9,332 9,332
See Notes to Pro Forma Consolidated Financial Statements
</TABLE>
<PAGE>
Page F-9
CALLON PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On June 26, 1997, Callon Petroleum Operating Company, a wholly owned
subsidiary of Callon Petroleum Company (the "Company"), purchased an
18.8% working interest in the Mobile Area Block 864 Unit from Elf
Exploration, Inc. (the "MAB 864 Acquisition"). The Company's net
purchase price of $11.8 million was funded from the credit facility
of the Company.
The accompanying Pro Forma Consolidated Balance Sheet at March 31, 1997
gives effect to the purchase of the MAB 864 Acquisition as if the trans-
action occurred on March 31, 1997.
The accompanying Pro Forma Consolidated Statements of Operations of the
Company for the year ended December 31, 1996 and the three months ended
March 31, 1997 give effect to the purchase of the MAB 864 Acquisition as
if the transaction occurred at the beginning of each of the periods
presented.
The Pro Forma Consolidated Balance Sheet and Statements of Operations
are based on the assumptions set forth in the Notes to such statements.
Such pro forma information should be read in conjunction with the
related financial information of the Company and is not necessarily
indicative of the results which would actually have occurred had the
transaction been in effect on the date or for the period indicated or
which may occur in the future.
2. PRO FORMA ADJUSTMENTS
Pro Forma entries necessary to adjust the historical financial
statements of the Company are as follows:
(a) To reflect the purchase of the MAB 864 Acquisition and the
related results of operations as described in Note 1.
(b) Reflects an increase of interest expense related to the
purchase of the MAB 864 Acquisition as if the transaction had
occurred at the beginning of the periods for the year ended
December 31, 1996 and for the three months ended March 31, 1997.
The interest rate used was 8.25%. A one-eighth change in this
estimated rate would affect interest expense by $17,200 and $3,900
for the year ended December 31, 1996 and the three months ended
March 31, 1997, respectively.
(c) To record a provision for Federal income taxes at a corporate
statutory rate of 35% on pro forma income as a result of the acquisi-
tion.
(d) To adjust depletion for the combined full cost pool based on
the purchase of the MAB 864 Acquisition as described in Note 1.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 333-29537 and 333-29529) pertaining to the 1996 Stock Incentive
Plan and the 1997 Employee Stock Purchase Plan oc Callon Petroleum Company of
our report dated July 24, 1997, with respect to the Statement Revenues and
Direct Operating Expenses of the Working Interests in Mobile Area Block 864
Unit acquired by Callon Petroleum Operating Company for the year ended
December 31, 1996 included in Form 8-K/A filed with the Securities and
Exchange Commission on August 8, 1997.
Ernst & Young LLP
Houston, Texas
August 8, 1997
