Callon Petroleum Company Reports Results for Third Quarter, First Nine Months of 2007

NATCHEZ, Miss.--

Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the three and the nine-month periods ended September 30, 2007.

Third Quarter and Nine Months 2007 Net Income. For the quarter ended September 30, 2007, the company reported net income of $2.3 million, or $0.11 per share. This compares to net income of $9.6 million, or $0.45 per share, for the same period in 2006. For the nine months ended September 30, 2007, Callon reported net income of $10.7 million, or $0.50 per share. This compares with net income of $34.7 million, or $1.64 per share during the same period of 2006. The declines in net income for the three and nine months ended September 30, 2007, when compared to 2006, are primarily attributable to an increase in interest expense associated with the financing of the previously announced acquisition of BP's interest in the Entrada Field, lower 2007 oil production at the Medusa Field after the completion of remedial work on the Medusa A-1 well in late 2006 restored production at a lower rate, and an increase in the depletion, depreciation and amortization rate. All per share amounts are on a diluted basis.

Third Quarter and Nine Months 2007 Operating Results. Operating results for the three months ended September 30, 2007 include oil and gas sales of $37.9 million from average production of 45.4 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $44.9 million from average production of 54.3 MMcfe/d during the comparable 2006 period. The average price, after the impact of hedging, received per thousand cubic feet of natural gas (Mcf) for the quarter ended September 30, 2007 decreased to $7.73, compared to $7.79 for the quarter ended September 30, 2006. The average price, after the impact of hedging, received per barrel of oil (Bbl) in the third quarter of 2007 increased to $71.29, compared to $62.31 during 2006. Oil and gas sales for the first nine months of 2007 totaled $126.8 million from average production of 53.2 MMcfe/d. This corresponds to sales of $137.5 million from average production of 56.0 MMcfe/d during the same period in 2006. The average price, after the impact of hedging, received per Mcf in the nine-month period ended September 30, 2007 decreased to $7.97, compared to $8.20 during the first nine months of 2006, while the average price, after the impact of hedging, received per Bbl in the first nine months of 2007 increased to $62.09, compared to $58.33 during the same period in 2006.

Third Quarter and Nine Months 2007 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended September 30, 2007 totaled $21.0 million compared to $31.2 million during the comparable prior year period. Net cash flow provided by operating activities, as defined by GAAP, totaled $19.8 million and $31.4 million during the quarters ended September 30, 2007 and 2006, respectively. Discretionary cash flow for the first nine months of 2007 totaled $79.4 million compared to $100.1 million during the same period in 2006. Net cash flow provided by operating activities, as defined by GAAP, totaled $89.9 million and $106.7 million during the nine-month periods ended September 30, 2007 and 2006, respectively. (See "Non-GAAP Financial Measure" that follows and the accompanying reconciliation of discretionary cash flow, a non-GAAP measure, to net cash flow provided by operating activities.)

Non-GAAP Financial Measure - This news release refers to a non-GAAP financial measure as "discretionary cash flow." Callon believes that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. The company also has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.



Reconciliation of Non-GAAP
 Financial Measure:               Three Months Ended Nine Months Ended
---------------------------------
(In thousands)                      September 30,      September 30,
                                  ------------------ -----------------
                                     2007     2006     2007     2006
                                  ---------- ------- -------- --------
  Discretionary cash flow           $21,012  $31,230  $79,404 $100,110
  Net working capital changes and
   other changes                     (1,248)     151   10,516    6,613
                                  ---------- ------- -------- --------
  Net cash flow provided by
   operating activities             $19,764  $31,381  $89,920 $106,723
                                  ========== ======= ======== ========


Production and Price Information: Three Months Ended Nine Months Ended
---------------------------------
                                    September 30,      September 30,
                                  ------------------ -----------------
                                    2007      2006     2007     2006
                                  --------- -------- -------- --------
Production:
  Oil (MBbls)                          223      381      774    1,340
  Gas (MMcf)                         2,840    2,710    9,883    7,241
  Gas equivalent (MMcfe)             4,179    4,998   14,527   15,278
  Average daily (MMcfe)               45.4     54.3     53.2     56.0

Average prices:
  Oil ($/Bbl) (a)                  $ 71.29  $ 62.31  $ 62.09  $ 58.33
  Gas ($/Mcf)                      $  7.73  $  7.79  $  7.97  $  8.20
  Gas equivalent ($/Mcfe)          $  9.06  $  8.98  $  8.73  $  9.00

Additional per Mcfe data:
  Sales price                      $  9.06  $  8.98  $  8.73  $  9.00
  Lease operating expenses            1.28     1.61     1.41     1.40
                                  --------- -------- -------- --------
  Operating margin                 $  7.78  $  7.37  $  7.32  $  7.60
                                  ========= ======== ======== ========

  Depletion                        $  3.81  $  3.00  $  3.90  $  2.85
  General and administrative (net
   of management fees)             $  0.62  $  0.58  $  0.49  $  0.43

(a) Below is a reconciliation of
 the average NYMEX price to the
 average realized sales price per
 barrel of oil:

Average NYMEX oil price            $ 75.37  $ 70.51  $ 66.21  $ 68.23
  Basis differentials and quality
   adjustments                      ( 2.96)  ( 6.91)  ( 4.45)  ( 7.81)
  Transportation                    ( 1.12)  ( 1.29)  ( 1.13)  ( 1.28)
  Hedging                               --       --     1.46   ( 0.81)
                                  --------- -------- -------- --------
Averaged realized oil price        $ 71.29  $ 62.31  $ 62.09  $ 58.33
                                  ========= ======== ======== ========


                       Callon Petroleum Company
                     Consolidated Balance Sheets
                  (In thousands, except share data)
                             (Unaudited)


                                            September 30, December 31,
                                                2007          2006
                                            ------------- ------------
                  ASSETS
-------------------------------------------
Current assets:
  Cash and cash equivalents                   $    3,175   $    1,896
  Accounts receivable                             21,664       32,166
  Restricted investments                             604        4,306
  Fair market value of derivatives                 2,185       13,311
  Other current assets                             6,385        5,973
                                            ------------- ------------
    Total current assets                          34,013       57,652
                                            ------------- ------------

Oil and gas properties, full-cost
 accounting method:
  Evaluated properties                         1,313,382    1,096,907
  Less accumulated depreciation, depletion
   and amortization                             (661,279)    (604,682)
                                            ------------- ------------
                                                 652,103      492,225

  Unevaluated properties excluded from
   amortization                                   67,394       54,802
                                            ------------- ------------
    Total oil and gas properties                 719,497      547,027
                                            ------------- ------------

Other property and equipment, net                  2,014        1,996
Restricted investments                             3,959        1,935
Investment in Medusa Spar LLC                     12,641       12,580
Other assets, net                                  8,289        4,337
                                            ------------- ------------
    Total assets                              $  780,413   $  625,527
                                            ============= ============
   LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------
Current liabilities:
  Accounts payable and accrued liabilities    $   27,035   $   46,611
  Asset retirement obligations                     7,175       14,355
  Current maturities of long-term debt                --          213
                                            ------------- ------------
    Total current liabilities                     34,210       61,179
                                            ------------- ------------

Long-term debt                                   391,451      225,521
Asset retirement obligations                      25,286       26,824
Deferred tax liability                            32,330       30,054
Accrued liabilities to be refinanced              10,000           --
Other long-term liabilities                        1,265          586
                                            ------------- ------------
  Total liabilities                              494,542      344,164
                                            ------------- ------------
Stockholders' equity:
  Preferred Stock, $.01 par value,
   2,500,000 shares authorized;                       --           --
  Common Stock, $.01 par value, 30,000,000
   shares authorized; 20,879,220 and
   20,747,773 shares outstanding at
   September 30, 2007 and December 31,
   2006, respectively
                                                     209          207
                                                 222,448      220,785
  Other comprehensive income                         843        8,652
  Retained earnings                               62,371       51,719
                                            ------------- ------------
    Total stockholders' equity                   285,871      281,363
                                            ------------- ------------
    Total liabilities and stockholders'
     equity                                   $  780,413   $  625,527
                                            ============= ============


                       Callon Petroleum Company
                Consolidated Statements of Operations
              (In thousands, except per share amounts)
                             (Unaudited)


                                Three Months Ended  Nine Months Ended
                                  September 30,       September 30,
                                ------------------ -------------------
                                  2007      2006     2007      2006
                                --------- -------- --------- ---------
Operating revenues:
  Oil sales                      $15,912  $23,754  $ 48,058  $ 78,133
  Gas sales                       21,957   21,124    78,769    59,383
                                --------- -------- --------- ---------
    Total operating revenues      37,869   44,878   126,827   137,516
                                --------- -------- --------- ---------

Operating expenses:
  Lease operating expenses         5,338    8,070    20,550    21,340
  Depreciation, depletion and
   amortization                   15,931   14,973    56,597    43,600
  General and administrative       2,606    2,908     7,098     6,558
  Accretion expense                  904    1,082     2,959     3,832
  Derivative expense                  --       30        --       150
                                --------- -------- --------- ---------
    Total operating expenses      24,779   27,063    87,204    75,480
                                --------- -------- --------- ---------

  Income from operations          13,090   17,815    39,623    62,036
                                --------- -------- --------- ---------

  Other (income) expenses:
  Interest expense                10,148    4,027    23,905    12,303
  Other (income)                    (387)    (354)     (814)   (1,354)
                                --------- -------- --------- ---------
    Total other (income)
     expenses                      9,761    3,673    23,091    10,949
                                --------- -------- --------- ---------

  Income before income taxes       3,329   14,142    16,532    51,087
  Income tax expense               1,165    4,856     6,283    17,700
                                --------- -------- --------- ---------

  Income before Medusa Spar LLC    2,164    9,286    10,249    33,387
  Income from Medusa Spar LLC
   net of tax                        104      344       403     1,313
                                --------- -------- --------- ---------

  Net income                     $ 2,268  $ 9,630  $ 10,652  $ 34,700
                                ========= ======== ========= =========

  Net income per common share:
    Basic                        $  0.11  $  0.47  $   0.51  $   1.74
                                ========= ======== ========= =========
    Diluted                      $  0.11  $  0.45  $   0.50  $   1.64
                                ========= ======== ========= =========

  Shares used in computing net
   income:
    Basic                         20,800   20,650    20,728    19,919
                                ========= ======== ========= =========
    Diluted                       21,230   21,326    21,220    21,154
                                ========= ======== ========= =========


                       Callon Petroleum Company
                Consolidated Statements of Cash Flows
                            (In thousands)
                             (Unaudited)


                                                Nine Months Ended
                                           ---------------------------
                                           September 30, September 30,
                                               2007          2006
                                           ------------- -------------
Cash flows from operating activities:
  Net income                                  $  10,652     $  34,700
Adjustments to reconcile net income to
cash provided by operating activities:
    Depreciation, depletion and
     amortization                                57,270        44,105
    Accretion expense                             2,959         3,832
    Amortization of deferred financing
     costs                                        2,153         1,667
    Non-cash derivative expense                      --           150
    Equity in earnings of Medusa Spar LLC          (403)       (1,313)
    Deferred income tax expense                   6,283        17,700
    Non-cash charge related to
     compensation plans                             490           718
    Excess tax benefits from share-based
     payment arrangements                            --        (1,449)
    Changes in current assets and
     liabilities:
      Accounts receivable                         7,891         4,569
      Other current assets                         (413)         (687)
      Current liabilities                           896         5,404
    Change in gas balancing receivable             (160)         (131)
    Change in gas balancing payable                 564           149
    Change in other long-term liabilities            (7)            1
    Change in other assets, net                   1,745        (2,692)
                                           ------------- -------------
      Cash provided by operating
       activities                                89,920       106,723
                                           ------------- -------------

Cash flows from investing activities:
  Capital expenditures                         (106,899)     (122,002)
  Entrada acquisition                          (150,000)           --
  Distribution from Medusa Spar LLC                 559           849
                                           ------------- -------------
      Cash used by investing activities        (256,340)     (121,153)
                                           ------------- -------------

Cash flows from financing activities:
  Change in accrued liabilities to be
   refinanced                                    10,000         2,000
  Increases in debt                             213,000        63,000
  Payments on debt                              (48,000)      (51,000)
  Deferred financing costs                       (6,429)           --
  Equity issued related to employee stock
   plans                                             --          (438)
  Excess tax benefits from share-based
   payment arrangements                              --         1,449
  Capital leases                                   (872)         (200)
                                           ------------- -------------
      Cash provided by financing
       activities                               167,699        14,811
                                           ------------- -------------

Net increase (decrease) in cash and cash
 equivalents                                      1,279           381
Cash and cash equivalents:
  Balance, beginning of period                    1,896         2,565
                                           ------------- -------------
  Balance, end of period                      $   3,175     $   2,946
                                           ============= =============

Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region. The majority of Callon's properties and operations are concentrated in Louisiana, Alabama and the offshore waters of the Gulf of Mexico.

This news release is posted on the company's website at www.callon.com and will be archived there for subsequent review. It can be accessed from the "News Releases" link on the left side of the homepage.

It should be noted that this news release contains projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These projections and statements reflect the company's current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved and actual results could differ materially from those projected as a result of certain factors. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements are discussed in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, available on our website or the SEC's website at www.sec.gov.

Source: Callon Petroleum Company