Acquisitions and Divestitures
|6 Months Ended|
Jun. 30, 2023
|Business Combination and Asset Acquisition [Abstract]|
|Acquisitions and Divestitures||Acquisitions and Divestitures
Eagle Ford Divestiture
On May 3, 2023, the Company entered into an agreement with Ridgemar Energy Operating, LLC (“Ridgemar”) for the sale of all its oil and gas properties in the Eagle Ford for consideration of $655.0 million in cash, subject to customary purchase price adjustments, as well as contingent consideration where the Company could receive up to $45.0 million if the WTI price of oil exceeds certain thresholds in 2024 (the “Eagle Ford Divestiture”). Upon signing, Ridgemar paid approximately $49.1 million as a deposit into a third-party escrow account. The transaction is structured as the acquisition by Ridgemar of 100% of the limited liability company interests of the Company’s wholly owned subsidiary, Callon (Eagle Ford) LLC.
On July 3, 2023, the Company closed the Eagle Ford Divestiture for cash consideration of approximately $551.0 million, inclusive of the deposit paid at signing, subject to customary post-closing purchase price adjustments.
As of June 30, 2023, the assets held for sale and the liabilities associated with assets held for sale in the consolidated balance sheets are in connection with the Eagle Ford Divestiture. In May 2023, the Company ceased depreciation on the assets associated with the Eagle Ford Divestiture. As a result of the classification of assets held for sale, an impairment of $406.9 million was recorded against the properties associated with the Eagle Ford Divestiture as the fair value less cost to sell was less than the carrying amount of the net assets. The assets held for sale as of June 30, 2023 were $606.6 million, comprised of approximately $575.1 million of total oil and natural gas properties, net and $31.5 million of other assets. The liabilities associated with assets held for sale as of June 30, 2023 were $71.1 million, comprised of approximately $24.0 million of asset retirement obligations and $47.1 million of other liabilities.
On May 3, 2023, the Company entered into an agreement (the “Percussion Agreement”) with Percussion Petroleum Management II, LLC (“Percussion”) for the purchase of its oil and gas properties in the Delaware Basin (the “Percussion Acquisition”) for consideration of $475.0 million, which consisted of $255.0 million in cash, inclusive of the repayment of Percussion’s indebtedness of approximately $220.0 million, and $210.0 million of shares of the Company’s common stock, subject to customary purchase price adjustments. Additionally, the Company would assume Percussion Target’s (as defined below) existing hedges and transportation contract liabilities, and could have to pay up to $62.5 million of contingent consideration if the WTI price of oil exceeds certain thresholds in 2023, 2024, and 2025. Upon signing, the Company paid $36.0 million as a deposit into a third-party escrow account. The transaction is structured as the acquisition by Callon Petroleum Operating Company of 100% of the limited liability company interests of Percussion’s wholly owned subsidiary, Percussion Petroleum Operating II, LLC (“Percussion Target”).
On July 3, 2023, the Company closed the Percussion Acquisition for consideration of approximately $458.6 million, which consisted of $248.6 million in cash, inclusive of the repayment of Percussion Target’s indebtedness of approximately $220.0 million as well as the deposit paid at signing, and approximately 6.3 million shares of the Company’s common stock, subject to customary post-closing purchase price adjustments. The Company funded the cash portion of the total consideration with proceeds from the Eagle Ford Divestiture. Immediately after the closing, Percussion Target was renamed Callon Permian II, LLC.
The Percussion Acquisition will be accounted for as a business combination. The Company has not completed its initial allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated acquisition date fair values. The Company will disclose the preliminary allocation of the purchase price as well as other related business combination disclosures in its Quarterly Report on Form 10-Q for the three months ended September 30, 2023.
The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef