Callon Petroleum Company Reports Results for Fourth Quarter, Full Year 2007

NATCHEZ, Miss.--

Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the quarter and the year ended December 31, 2007.

2007 Year-end Reserves. As of December 31, 2007, the company's year-end estimated net proved reserves were 263.6 billion cubic feet of natural gas equivalent (Bcfe). This represents an increase of 81% from 2006 year-end proved reserves of 145.6 Bcfe, which is primarily attributable to the company's acquisition of BP Exploration and Production Company's (BP) working interest in the Entrada Field in April 2007.

Liquidity. Following the acquisition of BP's interest in the Entrada Field in April 2007, our focus shifted to ensuring our ability to fund our development plan for the property. We decided to limit our 2007 exploration program to previously committed projects and sold our non-core, non-operated royalty and mineral interests in December 2007 for $61.5 million. As a result, we accumulated a cash balance of $53.3 million and had no borrowings under the senior secured credit facility as of December 31, 2007.

Fourth Quarter and Full Year 2007 Net Income. For the year ended December 31, 2007, the company reported net income of $15.2 million, or $0.71 per share. This compares with net income of $40.6 million, or $1.90 per share, for the same period in 2006. For the three months ended December 31, 2007, Callon reported net income of $4.5 million, or $0.21 per share. This compares with net income of $5.9 million, or $0.27 per share during the fourth quarter of 2006. The decline in net income for the year ended December 31, 2007, when compared to 2006, is primarily attributable to an increase in interest expense associated with the financing of the company's 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.

Fourth Quarter and Full Year 2007 Operating Results. Operating results for the year ended December 31, 2007 include oil and gas sales of $170.8 million from average production of 51.3 million cubic feet of natural gas equivalent per day (MMcfe/d). The divestiture of Mobile Bay Blocks 952,953,955 in the second quarter of 2007 lowered 2007 average daily production by approximately 2.0 MMcfe/d. This corresponds to sales of $182.3 million from average daily production of 56.9 MMcfe/d during 2006. The average price received per thousand cubic feet of natural gas for the year ended December 31, 2007 decreased to $8.01, compared to $8.07 for the year ended December 31, 2006, while the average price received per barrel of oil in 2007 increased to $67.63, compared to $57.33 during 2006. Fourth quarter of 2007 oil and gas sales totaled $43.9 million from production of 45.6 MMcfe/d. This corresponds to sales of $44.8 million from production of 59.8 MMcfe/d during the same period in 2006. The average price received per thousand cubic feet of natural gas in the fourth quarter of 2007 increased to $8.18, compared to $7.82 during the fourth quarter of 2006, while the average price received per barrel of oil in the fourth quarter of 2007 increased to $82.47, compared to $52.77 during the same period in 2006. All average realized price amounts are after the impact of hedging. Reference the table below for a reconciliation of oil pricing.

Fourth Quarter and Full Year 2007 Discretionary Cash Flow. Discretionary cash flow for the year ended December 31, 2007 totaled $104.6 million compared to $133.0 million during the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled $109.3 million and $135.5 million during the years ended December 31, 2007 and 2006, respectively. Fourth quarter of 2007 discretionary cash flow totaled $25.1 million compared to $32.9 million during the same period in 2006. Net cash flow provided by operating activities, as defined by GAAP, totaled $19.4 million and $28.8 million during the three-month periods ended December 31, 2007 and 2006, respectively. (See "Non-GAAP Financial Measure" that follows and the accompanying reconciliation of discretionary cash flow 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        Three Months Ended  Full Year Ended
 Financial Measure:
---------------------------------
(In thousands)                       December 31,      December 31,
                                  ------------------ -----------------
                                    2007      2006     2007     2006
                                  --------- -------- -------- --------
   Discretionary cash flow         $25,146  $32,913  $104,550 $133,023
   Net working capital changes
    and other changes               (5,783)  (4,152)    4,733    2,461
                                  --------- -------- -------- --------
   Net cash flow provided by
    operating activities           $19,363  $28,761  $109,283 $135,484
                                  ========= ======== ======== ========


Production and Price Information:    Three Months        Full Year
                                         Ended             Ended
----------------------------------
                                     December 31,      December 31,
                                   ----------------- -----------------
                                     2007     2006     2007     2006
                                   -------- -------- -------- --------
Production:
  Oil (MBbls)                          289      294    1,063    1,634
  Gas (MMcf)                         2,457    3,736   12,340   10,977
  Gas equivalent (MMcfe)             4,191    5,500   18,718   20,780
  Average daily (MMcfe)               45.6     59.8     51.3     56.9

Average prices:
  Oil ($/Bbl) (a)                  $ 82.47  $ 52.77  $ 67.63  $ 57.33
  Gas ($/Mcf)                      $  8.18  $  7.82  $  8.01  $  8.07
  Gas equivalent ($/Mcfe)          $ 10.48  $  8.14  $  9.12  $  8.77

Additional per Mcfe data:
  Sales price                      $ 10.48  $  8.14  $  9.12  $  8.77
  Lease operating expenses            1.73     1.37     1.48     1.39
                                   -------- -------- -------- --------
  Operating margin                 $  8.75  $  6.77  $  7.64  $  7.38
                                   ======== ======== ======== ========

  Depletion                        $  3.86  $  3.94  $  3.89  $  3.14
  General and administrative (net
   of management fees)             $  0.66  $  0.37  $  0.53  $  0.41

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

Average NYMEX oil price            $ 90.68  $ 60.19  $ 72.33  $ 66.22
  Basis differentials and quality
   adjustments                      ( 5.06)  ( 6.56)  ( 4.08)  ( 7.03)
  Transportation                    ( 1.20)  ( 1.16)  ( 1.15)  ( 1.25)
  Hedging                           ( 1.95)    0.30     0.53   ( 0.61)
                                   -------- -------- -------- --------
Averaged realized oil price        $ 82.47  $ 52.77  $ 67.63  $ 57.33
                                   ======== ======== ======== ========


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


                                                    December 31,
                                               -----------------------
                                                  2007        2006
                                               ----------- -----------
                    Assets
Current assets:
  Cash and cash equivalents                    $   53,250  $    1,896
  Accounts receivable                              22,073      32,166
  Restricted investments                              100       4,306
  Fair market value of derivatives                     --      13,311
  Other current assets                              6,592       5,973
                                               ----------- -----------
    Total current assets                           82,015      57,652
                                               ----------- -----------

Oil and gas properties, full-cost accounting
 method:
  Evaluated properties                          1,349,904   1,096,907
  Less accumulated depreciation, depletion and
   amortization                                  (738,374)   (604,682)
                                               ----------- -----------
                                                  611,530     492,225

  Unevaluated properties excluded from
   amortization                                    70,176      54,802
                                               ----------- -----------
    Total oil and gas properties                  681,706     547,027
                                               ----------- -----------

Other property and equipment, net                   1,986       1,996
Restricted investments                              4,525       1,935
Investment in Medusa Spar LLC                      12,673      12,580
Other assets, net                                   9,577       4,337
                                               ----------- -----------
      Total assets                             $  792,482  $  625,527
                                               =========== ===========


     Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable and accrued liabilities     $   37,698  $   46,611
  Asset retirement obligations                      9,810      14,355
  Fair market value of derivatives                  5,205          --
  Current maturities of long-term debt                 --         213
                                               ----------- -----------
    Total current liabilities                      52,713      61,179
                                               ----------- -----------

Long-term debt                                    392,012     225,521
Asset retirement obligations                       27,027      26,824
Deferred tax liability                             32,190      30,054
Other long-term liabilities                         1,465         586
                                               ----------- -----------
    Total liabilities                             505,407     344,164
                                               ----------- -----------

Stockholders' equity:
  Preferred Stock, $.01 par value; 2,500,000
   shares authorized;                                  --          --
  Common Stock, $.01 par value; 30,000,000
   shares authorized; 20,891,145 shares and
   20,747,773 shares issued outstanding at
   December 31, 2007 and 2006, respectively           209         207
  Capital in excess of par value                  223,336     220,785
  Other comprehensive income (loss)                (3,383)      8,652
  Retained earnings                                66,913      51,719
                                               ----------- -----------
    Total stockholders' equity                    287,075     281,363
                                               ----------- -----------
      Total liabilities and stockholders'
       equity                                  $  792,482  $  625,527
                                               =========== ===========


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


                                Three Months Ended Twelve Months Ended
                                   December 31,       December 31,
                                ------------------ -------------------
                                  2007      2006     2007      2006
                                --------- -------- --------- ---------
Operating revenues:
  Oil sales                      $23,833  $15,532  $ 71,891  $ 93,665
  Gas sales                       20,108   29,220    98,877    88,603
                                --------- -------- --------- ---------
    Total operating revenues      43,941   44,752   170,768   182,268
                                --------- -------- --------- ---------

Operating expenses:
  Lease operating expenses         7,245    7,541    27,795    28,881
  Depreciation, depletion and
   amortization                   16,165   21,683    72,762    65,283
  General and administrative       2,778    2,033     9,876     8,591
  Accretion expense                1,026    1,128     3,985     4,960
  Derivative expense                  --       --        --       150
                                --------- -------- --------- ---------
    Total operating expenses      27,214   32,385   114,418   107,865
                                --------- -------- --------- ---------

  Income from operations          16,727   12,367    56,350    74,403
                                --------- -------- --------- ---------

Other (income) expenses:
  Interest expense                10,424    4,177    34,329    16,480
  Other income                     ( 358)    (515)   (1,172)   (1,869)
                                --------- -------- --------- ---------
    Total other (income)
     expenses                     10,066    3,662    33,157    14,611
                                --------- -------- --------- ---------

  Income before income taxes       6,661    8,705    23,193    59,792
  Income tax expense               2,223    3,007     8,506    20,707
                                --------- -------- --------- ---------

  Income before equity in
   earnings of Medusa Spar LLC     4,438    5,698    14,687    39,085
  Equity in earnings of Medusa
   Spar LLC, net of tax              104      162       507     1,475
                                --------- -------- --------- ---------

Net income                       $ 4,542  $ 5,860  $ 15,194  $ 40,560
                                ========= ======== ========= =========

Net income per common share:
    Basic                        $  0.22  $  0.28  $   0.73  $   2.00
                                ========= ======== ========= =========
    Diluted                      $  0.21  $  0.27  $   0.71  $   1.90
                                ========= ======== ========= =========

Shares used in computing net
 income per share:
    Basic                         20,858   20,719    20,776    20,270
                                ========= ======== ========= =========
    Diluted                       21,435   21,350    21,290    21,363
                                ========= ======== ========= =========


                       Callon Petroleum Company
                Consolidated Statements of Cash Flows
            For the Years Ended December 31, 2007 and 2006
                            (In thousands)


                                                    2007       2006
                                                 ---------- ----------
Cash flows from operating activities:
  Net income                                     $  15,194  $  40,560
  Adjustments to reconcile net income to cash
   provided by operating activities:
    Depreciation, depletion and amortization        73,677     65,929
    Accretion expense                                3,985      4,960
    Amortization of deferred financing costs         3,009      2,221
    Equity in earnings of Medusa Spar, LLC            (507)    (1,475)
    Non-cash derivative expense                         --        150
    Deferred income tax expense                      8,506     20,707
    Non-cash charge related to compensation
     plans                                             849      1,420
    Excess tax benefits from share-based payment
     arrangements                                     (163)    (1,449)
    Changes in current assets and liabilities:
      Accounts receivable                            6,658     (2,107)
      Other current assets                            (619)    (3,975)
      Current liabilities                           (2,057)    11,311
    Change in gas balancing receivable                (938)      (311)
    Change in gas balancing payable                    889        133
    Change in other long-term liabilities              (10)        (2)
    Change in other assets, net                        810     (2,588)
                                                 ---------- ----------
    Cash provided by operating activities          109,283    135,484
                                                 ---------- ----------

Cash flows from investing activities:
  Capital expenditures                            (127,409)  (167,979)
  Entrada acquisition                             (150,000)        --
  Proceeds from sale of mineral interests           60,931         --
  Distribution from Medusa Spar, LLC                   687      1,078
                                                 ---------- ----------
    Cash used by investing activities             (215,791)  (166,901)
                                                 ---------- ----------

Cash flows from financing activities:
  Change in accrued liabilities to be refinanced        --     (5,000)
  Increases in debt                                229,000     88,000
  Payments on debt                                 (64,000)   (53,000)
  Deferred financing costs                          (6,429)        --
  Equity issued related to employee stock plans         --       (438)
  Excess tax benefits from share-based payment
   arrangements                                        163      1,449
  Capital leases                                      (872)      (263)
                                                 ---------- ----------
    Cash provided by financing activities          157,862     30,748
                                                 ---------- ----------

Net increase (decrease) in cash and cash
 equivalents                                        51,354       (669)

Cash and cash equivalents:
  Balance, beginning of period                       1,896      2,565
                                                 ---------- ----------

  Balance, end of period                         $  53,250  $   1,896
                                                 ========== ==========

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 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