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Property Acquisition and Operating Leases
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3 Months Ended |
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Mar. 31, 2012
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| Property, Plant and Equipment [Abstract] | |
| Property Acquisition and Operating Leases |
Property Acquisition and Operating Leases
During February 2012, the Company acquired approximately 16,020 gross (14,470 net) acres in Borden County, which is located in the northern portion of the Midland Basin. This acquisition significantly expanded Callon's Permian Basin acreage position by 152% to approximately 24,010 net acres from the approximately 9,540 net acres at year-end 2011. The purchase price was funded from existing cash balances. The northern portion of the Midland Basin has had limited drilling activity compared with the southern portion of the Basin (where our current production is located), making drilling activities in this area much more high risk. The Company has an average 90% working interest across the contiguous acreage positions and is the operator, and has initiated a 3-D seismic survey in the second quarter of 2012. The Company currently expects to commence exploratory drilling on the acreage in the third quarter of 2012.
During February 2012, we contracted a drilling rig for a term of two years to support our horizontal drilling program in the Permian Basin. The drilling rig was delivered in April 2012, and no lease expense was recorded during the three months ended March 31, 2012. Lease payments will approximate $6,957 in 2012, $9,234 in 2013 and $2,277 in 2014. The agreement includes early termination provisions that would reduce the minimum rentals under the agreement, assuming the lessor is unable to re-charter the rig and staffing personnel to another lessee, to $4,434 in 2012, $5,475 in 2013 and $1,350 in 2014.
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