Callon Petroleum Company Reports 25% Increase in Net Income

NATCHEZ, Miss.--

Callon Petroleum Company (NYSE: CPE) today reported results of operations for the quarter ended March 31, 2008.

First Quarter 2008 Net Income. For the quarter ended March 31, 2008, the company reported net income of $7.6 million, or $0.35 per share, a 25% increase over net income of $5.8 million, or $0.27 per share, for the same period in 2007.

First Quarter 2008 Operating Results. First quarter 2008 oil and gas sales totaled $45.0 million from production of 42.1 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $45.5 million from production of 60.3 MMcfe/d during the same period in 2007. The average price received per thousand cubic feet of natural gas in the first quarter of 2008 increased to $9.50, compared to $7.97 during the first quarter of 2007, while the average price received per barrel of oil in the first quarter of 2008 increased to $86.66, compared to $55.53 during the same period in 2007. All average realized price amounts are after the impact of hedging.

First Quarter 2008 Discretionary Cash Flow. Discretionary cash flow for the quarter ended March 31, 2008 totaled $29.0 million compared to $33.5 million during the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled $35.1 million and $32.9 million during the quarters ended March 31, 2008 and 2007, 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.


Production and Price Information:                  Three Months Ended
--------------------------------------------------
                                                        March 31,
                                                   -------------------
                                                     2008      2007
                                                   --------- ---------
Production:
   Oil (MBbls)                                          290       288
   Gas (MMcf)                                         2,090     3,702
   Gas equivalent (MMcfe)                             3,828     5,427
   Average daily (MMcfe)                               42.1      60.3

Average prices:
   Oil ($/Bbl) (a)                                 $  86.66  $  55.53
   Gas ($/Mcf)                                     $   9.50  $   7.97
   Gas equivalent ($/Mcfe)                         $  11.75  $   8.38

Additional per Mcfe data:
   Sales price                                     $  11.75  $   8.38
   Lease operating expenses                            1.35      1.22
                                                   --------- ---------
   Operating margin                                $  10.40  $   7.16
                                                   ========= =========

   Depletion                                       $   3.93  $   4.03
   General and administrative (net of management
    fees)                                          $   0.69  $   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                            $  97.90  $  58.27
   Basis differentials and quality adjustments       ( 3.65)   ( 5.11)
   Transportation                                    ( 1.25)   ( 1.14)
   Hedging                                           ( 6.34)     3.51
                                                   --------- ---------
Averaged realized oil price                        $  86.66  $  55.53
                                                   ========= =========

Reconciliation of Non-GAAP Financial Measure:      Three Months Ended
--------------------------------------------------
(In thousands)                                          March 31,
                                                   -------------------
                                                     2008      2007
                                                   --------- ---------
   Discretionary cash flow                         $  29,043 $ 33,506
   Net working capital changes and other changes       6,088    ( 637)
                                                   --------- ---------
   Net cash flow provided by operating activities  $  35,131 $ 32,869
                                                   ========= =========

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

                                              March 31,   December 31,
                                                 2008         2007
                                             ------------ ------------
                   ASSETS
--------------------------------------------
Current assets:
   Cash and cash equivalents                 $    42,312  $    53,250
   Accounts receivable                            22,899       22,073
   Restricted investments                            141          100
   Other current assets                            1,890        6,592
                                             ------------ ------------
      Total current assets                        67,242       82,015
                                             ------------ ------------

Oil and gas properties, full-cost accounting
 method:
   Evaluated properties                        1,391,964    1,349,904
   Less accumulated depreciation, depletion
    and amortization                            (753,403)    (738,374)
                                             ------------ ------------
                                                 638,561      611,530

   Unevaluated properties excluded from
    amortization                                  61,347       70,176
                                             ------------ ------------
      Total oil and gas properties               699,908      681,706
                                             ------------ ------------

Other property and equipment, net                  2,137        1,986
Restricted investments                             4,525        4,525
Investment in Medusa Spar LLC                     12,740       12,673
Other assets, net                                  7,473        9,577
                                             ------------ ------------
      Total assets                           $   794,025  $   792,482
                                             ============ ============
    LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------
Current liabilities:
   Accounts payable and accrued liabilities  $    25,096  $    37,698
   Asset retirement obligations                    9,470        9,810
   Fair market value of derivatives                8,613        5,205
                                             ------------ ------------
      Total current liabilities                   43,179       52,713
                                             ------------ ------------

Long-term debt                                   392,589      392,012
Asset retirement obligations                      27,849       27,027
Deferred tax liability                            35,094       32,190
Other long-term liabilities                        2,018        1,465
                                             ------------ ------------
      Total liabilities                          500,729      505,407
                                             ------------ ------------
Stockholders' equity:
   Preferred Stock, $.01 par value,
    2,500,000 shares authorized;                      --           --
   Common Stock, $.01 par value, 30,000,000
    shares authorized; 20,941,779 and
    20,891,145 shares outstanding at March
    31, 2008 and December 31, 2007,
    respectively                                     209          209
   Capital in excess of par value                224,140      223,336
   Other comprehensive income                     (5,598)      (3,383)
   Retained earnings                              74,545       66,913
                                             ------------ ------------
      Total stockholders' equity                 293,296      287,075
                                             ------------ ------------
      Total liabilities and stockholders'
       equity                                $   794,025  $   792,482
                                             ============ ============

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

                                                   Three Months Ended
                                                        March 31,
                                                   -------------------
                                                     2008      2007
                                                   --------- ---------
Operating revenues:
   Oil sales                                       $ 25,096  $ 15,968
   Gas sales                                         19,864    29,516
                                                   --------- ---------
      Total operating revenues                       44,960    45,484
                                                   --------- ---------

Operating expenses:
   Lease operating expenses                           5,178     6,599
   Depreciation, depletion and amortization          15,029    21,847
   General and administrative                         2,652     2,221
   Accretion expense                                  1,032     1,112
                                                   --------- ---------
      Total operating expenses                       23,891    31,779
                                                   --------- ---------

   Income from operations                            21,069    13,705
                                                   --------- ---------

   Other (income) expenses:
   Interest expense                                   9,940     4,585
   Other income                                        (472)     (325)
                                                   --------- ---------
      Total other (income) expenses                   9,468     4,260
                                                   --------- ---------

   Income before income taxes                        11,601     9,445
   Income tax expense                                 4,082     3,803
                                                   --------- ---------

   Income before equity in earnings of Medusa Spar
    LLC                                               7,519     5,642
   Equity in earnings of Medusa Spar LLC, net of
    tax                                                 113       161
                                                   --------- ---------

   Net income                                      $  7,632  $  5,803
                                                   ========= =========

   Net income per share:
      Basic                                        $   0.37  $   0.28
                                                   ========= =========
      Diluted                                      $   0.35  $   0.27
                                                   ========= =========

   Shares used in computing net income per share:
      Basic                                          20,871    20,722
                                                   ========= =========
      Diluted                                        21,644    21,193
                                                   ========= =========

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

                                                   Three Months Ended
                                                   -------------------
                                                   March 31, March 31,
                                                     2008      2007
                                                   --------- ---------
Cash flows from operating activities:
   Net income                                      $  7,632  $  5,803
Adjustments to reconcile net income to cash
 provided by operating activities:
      Depreciation, depletion and amortization       15,213    22,039
      Accretion expense                               1,032     1,112
      Amortization of deferred financing costs          873       569
      Equity in earnings of Medusa Spar LLC            (113)     (161)
      Deferred income tax expense                     4,082     3,803
      Non-cash charge related to compensation
       plans                                            371       341
      Excess tax benefits from share-based payment
       arrangements                                     (47)       --
      Changes in current assets and liabilities:
         Accounts receivable                           (648)    3,407
         Other current assets                         4,702       917
         Current liabilities                           (252)   (5,554)
      Change in gas balancing receivable                923        12
      Change in gas balancing payable                   557       122
      Change in other long-term liabilities              (4)       (3)
      Change in other assets, net                       810       462
                                                   --------- ---------
         Cash provided by operating activities       35,131    32,869
                                                   --------- ---------

Cash flows from investing activities:
   Capital expenditures                             (46,208)  (24,332)
   Entrada acquisition                                   --    (7,500)
   Distribution from Medusa Spar LLC                    108       186
                                                   --------- ---------
         Cash used by investing activities          (46,100)  (31,646)
                                                   --------- ---------

Cash flows from financing activities:
   Increases in debt                                     --    11,000
   Payments on debt                                      --   (11,000)
   Equity issued related to employee stock plans        (16)       --
   Excess tax benefits from share-based payment
    arrangements                                         47        --
   Capital leases                                        --       (55)
                                                   --------- ---------
         Cash provided (used) by financing
          activities                                     31       (55)
                                                   --------- ---------

Net decrease in cash and cash equivalents           (10,938)    1,168
Cash and cash equivalents:
   Balance, beginning of period                      53,250     1,896
                                                   --------- ---------
   Balance, end of period                          $ 42,312  $  3,064
                                                   ========= =========

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 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