Callon Petroleum Company Reports First Quarter 2007 Results of Operations

NATCHEZ, Miss.--

Callon Petroleum Company (NYSE: CPE) today reported results of operations for the three-month period ended March 31, 2007.

The company reported that average production in the first quarter was 60.3 million cubic feet of natural gas equivalent per day (MMcfe/d) compared to 56.0 MMcfe/d in the first quarter of 2006, or an increase of 8%. Revenue in the first quarter of 2007, at $45.5 million, was essentially flat with the $45.6 million of revenue reported in the first quarter of 2006. Net income for the three-month period ended March 31, 2007 was $5.8 million, or $0.27 per diluted share, compared to $12.8 million, or $0.60 per diluted share, for the same period in 2006. The difference in net income is almost entirely attributable to a spike in the depreciation, depletion and amortization (DD&A) rate to $4.03 per thousand cubic feet equivalent (Mcfe) in the first quarter of 2007. The DD&A rate is expected to be within a range of $3.28 to $3.38 per Mcfe for the second quarter of 2007 and the balance of 2007. This range is very close to the full year rate in 2006 of $3.14 per Mcfe.

First Quarter 2007 Discretionary Cash Flow. For the quarter ended March 31, 2007, discretionary cash flow remained consistent at $33.5 million compared to $33.8 million during the same period in 2006. Net cash flow provided by operating activities, as defined by GAAP, totaled $32.9 million and $41.0 million during the quarter ended March 31, 2007 and 2006, respectively. (See "Non-GAAP Financial Measure" and the accompanying financial information for a 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            Three Months Ended
(In thousands)                                       March 31,
-------------------------------------------- -------------------------
(Unaudited)                                     2007         2006
                                             ------------ ------------
Discretionary cash flow                          $33,506      $33,780
Net working capital changes and other
 changes                                            (637)       7,236
                                             ------------ ------------
Net cash flow provided by operating
 activities                                      $32,869      $41,016
                                             ============ ============

Consolidated Condensed Balance Sheet
 Information:                                 March 31,   December 31,
-------------------------------------------- ------------ ------------
(In thousands)                                  2007         2006
                                             ------------ ------------
Cash and cash equivalents                         $3,064       $1,896
Oil and gas properties, net                      542,278      547,027
All other assets                                  66,090       76,604
                                             ------------ ------------
    Total assets                                $611,432     $625,527
                                             ============ ============

Long-term debt excluding current maturities     $225,999     $225,521
All other liabilities                            103,438      118,643
Stockholders' equity                             281,995      281,363
                                             ------------ ------------
    Total liabilities and stockholders'
     equity                                     $611,432     $625,527
                                             ============ ============

Production and Price Information:               Three Months Ended
(Unaudited)                                          March 31,
                                                2007         2006
                                             ------------ ------------
  Oil (MBbls)                                        288          515
  Gas (MMcf)                                       3,702        1,950
  Total Production (MMcfe)                         5,427        5,042
  Average daily (MMcfe)                             60.3         56.0

Average prices:
  Oil ($/Bbl) (a)                                 $55.53       $53.95
  Gas ($/Mcf)                                      $7.97        $9.12
  Gas equivalent ($/Mcfe)                          $8.38        $9.04

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

Average NYMEX oil price                           $58.27       $63.48
  Basis differentials and quality
   adjustments                                     (5.11)       (7.52)
  Transportation                                   (1.14)       (1.27)
  Hedging                                           3.51        (0.74)
                                             ------------ ------------
Average realized oil price                        $55.53       $53.95
                                             ============ ============
                                                Three Months Ended
                                                     March 31,
                                                2007         2006
                                             ------------ ------------
Operating revenues:
  Oil sales                                      $15,968      $27,799
  Gas sales                                       29,516       17,782
                                             ------------ ------------
     Total operating revenues                     45,484       45,581
                                             ------------ ------------

Operating expenses:
  Lease operating expenses                         6,599        5,905
  Depreciation, depletion and amortization        21,847       13,836
  General and administrative                       2,221        1,726
  Accretion expense                                1,112        1,419
  Derivative expense                                  --           90
                                             ------------ ------------
     Total operating expenses                     31,779       22,976
                                             ------------ ------------

  Income from operations                          13,705       22,605
                                             ------------ ------------

  Other (income) expenses:
  Interest expense                                 4,585        4,148
  Other (income)                                    (325)        (330)
                                             ------------ ------------
     Total other (income) expenses                 4,260        3,818
                                             ------------ ------------

  Income before income taxes                       9,445       18,787
  Income tax expense                               3,803        6,550
                                             ------------ ------------

  Income before equity in earnings of Medusa
   Spar LLC                                        5,642       12,237
  Equity in earnings of Medusa Spar LLC, net
   of tax                                            161          530
                                             ------------ ------------

  Net income available to common shares           $5,803      $12,767
                                             ============ ============

  Net income per common share:
    Basic                                          $0.28        $0.66
                                             ============ ============
    Diluted                                        $0.27        $0.60
                                             ============ ============

  Shares used in computing net income per
   share amounts:
    Basic                                         20,722       19,396
                                             ============ ============
    Diluted                                       21,193       21,329
                                             ============ ============

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 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

Source: Callon Petroleum Company