-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S2CVL23Zro2YuYzGc+B09VtdlZDQceqy0qqcqdkl2lR6YB432jLT33vvVs424PGm RU5zOHixyfDXWA782iiPqw== 0000890566-97-002308.txt : 19971105 0000890566-97-002308.hdr.sgml : 19971105 ACCESSION NUMBER: 0000890566-97-002308 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971031 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971104 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALLON PETROLEUM CO CENTRAL INDEX KEY: 0000928022 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 640844345 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-25192 FILM NUMBER: 97707045 BUSINESS ADDRESS: STREET 1: 200 N CANAL ST CITY: NATCHEZ STATE: MS ZIP: 39120 BUSINESS PHONE: 6014421601 MAIL ADDRESS: STREET 1: 200 N CANAL ST CITY: NATCHEZ STATE: MS ZIP: 39120 FORMER COMPANY: FORMER CONFORMED NAME: CALLON PETROLEUM HOLDING CO DATE OF NAME CHANGE: 19940805 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 31, 1997 CALLON PETROLEUM COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 0-16866 64-0844345 (State or other jurisdiction of Commission (I.R.S. Employer incorporation or organization) File Number Identification No.) 200 NORTH CANAL STREET NATCHEZ, MISSISSIPPI 39120 (Address of Principal Executive Offices) (Including Zip Code) (601) 442-1601 (Registrant's telephone number, including area code) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS In October 1997, the Company agreed to purchase Chevron U.S.A. Inc.'s interest in the Mobile Block 864 Area (the "Chevron Acquisition") for $34 million effective July 1, 1997. The Chevron Acquisition is expected to close in November 1997 for a net purchase price of $30.9 million. One other owner of working interests in the properties covered by the Chevron Acquisition has the preferential right to acquire interests in the properties, which, if exercised could reduce the interest acquired by the Company and the purchase price up to 39%. No assurances can be made that the Company will be able to successfully consummate the Chevron Acquisition or as to whether preferential rights will be exercised. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Properties Acquired The following audited financial statements are filed with this report: Report of Independent Accountants Page F-1 Statement Revenues and Direct Operating Expenses of the Property for the Years Ended December 31, 1996, 1995 and 1994 Page F-2 Notes to Statement of Revenues and Direct Operating Expenses of the Property Page F-3 (b) Pro Forma Financial Information The following unaudited pro forma consolidated financial statements are filed with this report: Introduction Page F-8 Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1997 Page F-9 Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1996 Page F-10 Unaudited Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 1997 Page F-11 Notes to Pro Forma Financial Statements Page F-12 (c) Exhibits. 1. Underwriting Agreement* 2. Plan of acquisition, reorganization, arrangement, liquidation or succession 2.1 Letter of Intent to Purchase 4. Instruments defining the rights of security holders, including indentures* 16. Letter re change in certifying accountants* 17. Letter re director resignation* 20. Other documents or statements to security holders* 23. Consents of experts and counsel 23.1 Consent of Price Waterhouse LLP 24. Power of attorney* 27. Financial Data Schedule* 99. Additional exhibits* ---------------------- * Inapplicable to this filing SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CALLON PETROLEUM COMPANY Date NOVEMBER 4, 1997 By:/S/ JOHN S. WEATHERLY John S. Weatherly, Senior Vice President, Chief Financial Officer and Treasurer PAGE F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Callon Petroleum Company We have audited the accompanying statement of revenues and direct operating expenses of Chevron U.S.A. Inc.'s working interest in Mobile 864 Unit Outer Continental Shelf (the "Property") to be acquired by Callon Petroleum Operating Company (the "Company"), a wholly owned subsidiary of Callon Petroleum Company, for each of the three years in the period ended December 31, 1996. This statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and direct operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and direct operating expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and direct operating expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and direct operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the registration statement on Form S-2 of Callon Petroleum Company) as described in Note 1 and is not intended to be a complete presentation of the Property's revenues and expenses. In our opinion, the statement of revenues and direct operating expenses referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the Property described in Note 1 for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. PRICE WATERHOUSE LLP San Francisco, California October 29, 1997 PAGE F-2 STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTY (in thousands) FOR THE NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30,----------------------------- 1997 1996 1995 1994 ------- ------- ------- ------- (UNAUDITED) Oil and gas revenues................ $ 7,607 $14,238 $10,777 $18,901 Direct operating expenses .......... 86 480 544 340 ------- ------- ------- ------- Revenues in excess of direct operating Expenses ........................ $ 7,521 $13,758 $10,233 $18,561 ======= ======= ======= ======= See accompanying notes. PAGE F-3 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTY (in thousands) 1. BASIS OF PRESENTATION Callon Petroleum Operating Company (the "Company"), a wholly owned subsidiary of Callon Petroleum Company, agreed in October 1997 to acquire Chevron U.S.A. Inc.'s working interest in Mobile 864 Unit Outer Continental Shelf which includes the twelve-inch Mobile 908 Area Gathering Pipeline (the "Property") for $34 million, effective July 1, 1997. The pending acquisition is expected to close in November 1997 for a net acquisition cost of $30.9 million. One other owner of working interests in the Property covered by the pending acquisition has the preferential right to acquire the Property which if exercised could reduce the interest acquired by the Company and the purchase price up to 39%. The accompanying statement of revenues and direct operating expenses relates only to the working interest in the producing oil and gas property to be acquired and may not be representative of future operations. The statement includes revenues from natural gas sales and direct operating expenses for each of the periods presented. The statement does not include federal and state income taxes, interest, depletion, depreciation and amortization or general and administrative expenses because such amounts would not be indicative of those expenses which would be incurred by the Company. Presentation of complete historical financial statements for each of the three years ended December 31, 1996 and the nine months ended September 30, 1997 is not practicable because the Property was not accounted for as a separate entity; therefore, such statements are not available. Revenues in the accompanying statement of revenues and direct operating expenses are recognized on the entitlement method. The accompanying statement has been prepared on the accrual basis in accordance with generally accepted accounting principles. Preparation of the statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the statement and accompanying notes. Actual results could differ from those estimates. The interim revenues and direct operating expenses for the nine months ended September 30, 1997 are unaudited; however, in the opinion of the Company, the interim revenues and direct operating expenses include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim period. 2. COMMITMENTS AND CONTINGENCIES In the normal course of business the Company is subject to possible loss contingencies arising from federal, state and local environmental, health and safety laws and regulations, joint venture audit claims and third party litigation. There are no matters which, in the PAGE F-4 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTY (in thousands) opinion of management, will have a material adverse effect on the revenues and direct operating expenses of the Property. 3. RELATED PARTY TRANSACTIONS The Property was not operated as a separate entity for the periods presented in the accompanying statement, but was included in the operations of Chevron U.S.A. Inc. Effective September 1, 1996, all revenues from production were transferred to an equity affiliate of Chevron Corporation, the parent of Chevron U.S.A. Inc., at approximate market prices. 4. SUPPLEMENTAL OIL AND GAS RESERVE DATA (UNAUDITED) The Property's proved oil and gas reserves at December 31, 1996, 1995 and 1994 have been estimated by the Company's independent petroleum consultants in accordance with guidelines established by the Securities and Exchange Commission ("SEC"). There are numerous uncertainties inherent in establishing quantities of proved reserves. The following reserve data represent estimates only and should not be construed as being exact. In addition, the present values should not be construed as the current market value of the Property or the cost that would be incurred to obtain equivalent reserves. PAGE F-5 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTY (in thousands) ESTIMATED RESERVES Changes in the estimated net quantities of natural gas reserves are as follows: GAS NET PROVED RESERVES OF NATURAL GAS (MMCF) ------- PROVED DEVELOPED AND UNDEVELOPED RESERVES AT: December 31, 1993 ......................................... 56,066 Production ................................................ (10,166) ------- December 31, 1994 ......................................... 45,900 Production ................................................ (6,462) ------- December 31, 1995 ......................................... 39,438 Production ................................................ (5,533) ------- December 31, 1996 ......................................... 33,905 ------- PROVED DEVELOPED RESERVES AT: December 31, 1994 ......................................... 45,900 December 31, 1995 ......................................... 39,438 December 31, 1996 ......................................... 33,905 PAGE F-6 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTY (in thousands) STANDARDIZED MEASURE The following tables present the Property's standardized measure of discounted future net cash flows and changes therein relating to proved reserves and were computed using reserve valuations based on regulations prescribed by the SEC. These regulations provide that the gas price structure utilized to project future net cash flows reflects current prices at each date presented. Future production, development and net abandonment costs are based on current costs without escalation. Estimated future income taxes are calculated by applying appropriate year-end statutory tax rates. These rates reflect allowable deductions and tax credits and are applied to estimated future pre-tax net cash flows, less the tax basis of related assets. The resulting net future cash flows have been discounted to their present values based on a 10% annual discount factor. STANDARDIZED MEASURE DECEMBER 31, ----------------------------------- 1996 1995 1994 --------- -------- -------- Future cash inflows .................... $ 133,247 $ 90,313 $ 80,325 Future production and development costs ..................... (6,361) (7,080) (7,509) Future income taxes .................... (30,545) (10,451) (3,224) --------- -------- -------- Future net cash flows undiscounted .......................... 96,341 72,782 69,592 10% annual discount for estimated timing of cash flows ........ (33,066) (25,261) (24,373) --------- -------- -------- Standardized measure of discounted future net cash flows ................. $ 63,275 $ 47,521 $ 45,219 ========= ======== ======== PAGE F-7 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTY (in thousands) CHANGES IN STANDARDIZED MEASURE DECEMBER 31, ---------------------------------- 1996 1995 1994 -------- -------- -------- Standardized measure of discounted future net cash flows at beginning of period .............................. $ 47,521 $ 45,219 $ 66,437 Changes resulting from: Sales of natural gas produced, net of production costs .............. (13,758) (10,233) (18,561) Net changes in sales prices, net of production costs .............. 37,315 12,533 (14,732) Accretion of discount .................. 5,435 4,731 7,331 Net change in income taxes ............. (13,238) (4,729) 4,744 -------- -------- -------- Standardized measure of discounted future net cash flows at end of period ................................. $ 63,275 $ 47,521 $ 45,219 ======== ======== ======== PAGE F-8 CALLON PETROLEUM COMPANY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS INTRODUCTION The following unaudited pro forma financial statements present the combined financial position and results of operations of Callon Petroleum Company (the "Company"). Such unaudited pro forma combined information is based on the historical balance sheet and results of operations of Callon Petroleum Company after giving effect to the acquisition described below. In October 1997, the Company agreed to purchase Chevron U.S.A. Inc.'s interest in the Mobile Block 864 Area (the "Chevron Acquisition") for $34 million effective July 1, 1997. The Chevron Acquisition is expected to close in November 1997 for a net purchase price of $30.9 million. One other owner of working interests in the properties covered by the Chevron Acquisition has the preferential right to acquire interests in the properties, which, if exercised could reduce the interest acquired by the Company and the purchase price up to 39%. No assurances can be made that the Company will be able to successfully consummate the Chevron Acquisition or as to whether preferential rights will be exercised. In June 1997, Callon Petroleum Operating Company purchased a Working interest in the Mobile Area Block Unit from Elf Exploration, Inc. (the "Elf Acquisition") for a net purchase price of $11.8 million. See Note 1 in the Notes to Unaudited Pro Forma Consolidated Financial Statements for the basis of presentation of the above described events. PAGE F-9 CALLON PETROLEUM COMPANY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997
HISTORICAL PRO FORMA PRO FORMA COMPANY ADJUSTMENTS AS ADJUSTED -------- ----------- -------- (IN THOUSANDS) ASSETS Current assets ................................... $ 16,298 $ -- $ 16,298 Net oil and gas properties, full cost method: .... 127,296 30,900(b) 158,196 Other assets, net ................................ 12,756 -- 12,756 -------- ----------- -------- Total assets ............................. $156,350 $ 30,900 $187,250 ======== =========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities .............................. $ 12,672 $ -- $ 12,672 -------- ----------- -------- Long-term debt ................................... 60,250 30,900(b) 91,150 Other liabilities ................................ 546 -- 546 Stockholders' equity ............................. 82,882 -- 82,882 -------- ----------- -------- Total liabilities and stockholders' equity $156,350 $ 30,900 $187,250 ======== =========== ========
See Notes to Unaudited Pro Forma Consolidated Financial Statements PAGE F-10 CALLON PETROLEUM COMPANY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
HISTORICAL ELF CHEVRON PRO FORMA PRO FORMA COMPANY ACQUISITION ACQUISITION ADJUSTMENTS AS ADJUSTED ------- ------ ------- -------- ------- (In thousands, except per share data) REVENUES: Oil and gas sales ............................................... $25,764 $4,455(a) $14,238 $ -- $44,457 Interest and other .............................................. 946 -- -- -- 946 ------- ------ ------- -------- ------- Total revenues ............................................... 26,710 4,455 14,238 -- 45,403 ------- ------ ------- -------- ------- COSTS AND EXPENSES: Lease operating expenses ....................................... 7,562 245(a) 480 -- 8,287 Depreciation, depletion and amortization ........................................... 9,832 -- -- 7,051(d) 16,883 General and administrative...................................... 3,495 -- -- -- 3,495 Interest ....................................................... 313 -- -- 4,437(c) 4,750 ------- ------ ------- -------- ------- Total costs and expenses ..................................... 21,202 245 480 11,488 33,415 ------- ------ ------- -------- ------- Income from operations .......................................... 5,508 4,210 13,758 (11,488) 11,988 Income tax expense .............................................. 50 -- -- 4,146(e) 4,196 ------- ------ ------- -------- ------- Net income ...................................................... 5,458 4,210 13,758 (15,634) 7,792 Preferred stock dividends ....................................... 2,795 -- -- -- 2,795 ------- ------ ------- -------- ------- Net income available to common shares ................................................ $ 2,663 $4,210 $13,758 $(15,634) $ 4,997 ======= ====== ======= ======== ======= Net income per common share: Primary .................................................... $ 0.45 $ 0.84 ======= ======= Assuming full dilution$ .................................... 0.43 $ 0.81 ======= ======= Shares used in computing net income per common share: Primary .................................................... 5,952 5,952 ======= ======= Assuming full dilution ..................................... 6,135 6,135 ======= =======
See Notes to Unaudited Pro Forma Consolidated Financial Statements. PAGE F-11 CALLON PETROLEUM COMPANY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997
HISTORICAL ELF CHEVRON PRO FORMA PRO FORMA COMPANY ACQUISITION ACQUISITION ADJUSTMENTS AS ADJUSTED -------- ------- ------ ------- ------- (In thousands, except per share data) REVENUES: Oil and gas sales ............................................... $ 29,578 $ 1,813(a) $7,607 $ -- $38,998 Interest and other .............................................. 1,162 -- -- -- 1,162 -------- ------- ------ ------- ------- Total revenues ............................................... 30,740 1,813 7,607 -- 40,160 -------- ------- ------ ------- ------- COSTS AND EXPENSES: Lease operating expenses........................................ 6,235 (69)(a) 86 -- 6,252 Depreciation, depletion and amortization ........................................... 11,288 -- -- 4,110(d) 15,398 General and administrative...................................... 3,263 -- -- -- 3,263 Interest ....................................................... 945 -- -- 2,669(c) 3,614 -------- ------- ------ ------- ------- Total costs and expenses ..................................... 21,731 (69) 86 6,779 28,527 -------- ------- ------ ------- ------- Income from operations .......................................... 9,009 1,882 7,521 (6,779) 11,633 Income tax expense .............................................. 2,926 -- -- 1,146(e) 4,072 -------- ------- ------ ------- ------- Net income ...................................................... 6,083 1,882 7,521 (7,924) 7,562 Preferred stock dividends ....................................... 2,097 -- -- -- 2,097 -------- ------- ------ ------- ------- Net income available to common shares ................................................ $ 3,986 $ 1,882 $7,521 $(7,924) $ 5,465 ======== ======= ====== ======= ======= Net income per common share: Primary .................................................... $ 0.63 $ 0.86 ======== ======= Assuming full dilution...................................... $ 0.62 $ 0.80 ======== ======= Shares used in computing net income per common share: Primary .................................................... 6,332 6,332 ======== ======= Assuming full dilution ..................................... 6,440 9,430 ======== =======
See Notes to Unaudited Pro Forma Consolidated Financial Statements PAGE F-12 CALLON PETROLEUM COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION In October 1997, the Company agreed to purchase Chevron U.S.A. Inc.'s interest in the Mobile Block 864 Area (the "Chevron Acquisition") for $34 million effective July 1, 1997. The Chevron Acquisition is expected to close November 1997 for a net purchase price of $30.9 million. Because all working interest owners in this property, including the Company, have a preferential right to acquire a proportionate share of this Chevron interest, the Company's total interest acquired could be reduced by 39%. No assurances can be made that the Company will be able to successfully consummate the Chevron Acquisition or as to whether preferential rights will be exercised. In June 1997, Callon Petroleum Operating Company purchased a Working interest in the Mobile Area Block Unit from Elf Exploration, Inc. (the "Elf Acquisition") for a net purchase price of $11.8 million The accompanying Pro Forma Consolidated Statements of Operations of the Company for the year ended December 31, 1996 and the nine months ended September 30, 1997 give effect to the Elf Acquisition and the Chevron Acquisition as if the transactions occurred at the beginning of the earliest period presented. The effect of the Elf Acquisition detailed in the Pro Forma Consolidated Statements of Operations of the Company for the nine months ended September 30, 1997, includes only that portion of the Elf Acquisition up to the date of purchase. Amounts related to the Elf Acquisition after the date of purchase are included in the operations of the Company. The accompanying Pro Forma Consolidated Balance Sheet at September 30, 1997 gives effect to the Chevron Acquisition and the Elf Acquisition as if the transactions occurred on September 30, 1997. The Pro Forma Consolidated Balance Sheet and Statements of Operations are based on the assumptions set forth in the Notes to such statements. Such pro forma information should be read in conjunction with the related financial information of the Company and is not necessarily indicative of the results which would actually have occurred had the transaction been in effect on the date or for the period indicated or which may occur in the future. PAGE F-13 2. PRO FORMA ADJUSTMENTS Pro Forma entries necessary to adjust the historical financial statements of the Company are as follows: (a) To reflect the Elf Acquisition and the related results of operations as described in Note 1. (b) To reflect the Chevron Acquisition and the related results of operations as described in Note 1. (c) Reflects an increase of interest expense related to the purchase of the Chevron Acquisition as if the transaction had occurred at the beginning of the year ended December 31, 1996. The estimated interest rate used was 8.5%. A one-eighth change in this estimated rate would affect interest expense by $65,000 and $39,000 for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively. (d) To record a provision for Federal income taxes at a corporate statutory rate of 35% on pro forma income as a result of the acquisition (e) To adjust depletion for the combined full cost pool based on the purchase of the Chevron Acquisition as described in Note 1. EX-2.1 2 EXHIBIT 2.1 August 29, 1997 Callon Petroleum Operating Company 200 North Canal Street P. O. Box 1287 Natchez, Mississippi 39121 Attention: Ms. Kathy Tilley Re: Offer to Purchase Mobile Blocks 863, 864, 907 and 908 Surface to 4200' Dear Ms. Tilley: Chevron U.S.A., Inc. (Chevron) has completed its evaluation of the referenced property and is prepared to recommend Callon Petroleum Operating Company's (Callon) July 10, 1997 purchase offer to management for approval. The dollar value involved requires that we obtain the concurrence of our Executive Committee (EXCOM) in San Francisco and we are preparing for a late September EXCOM meeting for final approval. Any proposed transaction would be subject to such approval as well as the execution of a mutually acceptable Asset Sale Agreement ("ASA") between Chevron and Callon. It is understood from your telephone conversation with Mr. Dave Fenton that Callon's offer was to include Chevron's interest in the 12" gas gathering line from Mobile 908 to Mobile 861. Chevron is willing to include such interest provided that some accommodation can be reach on the following issues: 1) On occasion, Chevron has had to purchase gas from Mobile 908 as make-up gas for our Mobile 864B facility. The ASA would provide that Chevron would reserve the right to make such purchases from Mobile 908 in the future as required. 2) Production from Mobile 864B currently flows northeast to shore through a Chevron Pipeline (CPL) 12" line. Any disruption of service on this line would require that Mobile 864B gas flow southwest to Mobile 908 through a CPL pipeline, then into the 12" gas gathering line from Mobile 908 to Mobile 861 and into the Chandeleur system. The ASA would provide that Chevron would retain the right to move Mobile 864B gas through the 12" gas gathering line at some pre-established cost. 3) Chevron currently maintains certain valving and piping at the Mobile 908 facility for CPL relative to the CPL line from Mobile 864B to Mobile 908. The ASA would provide that Chevron and/or CPL would reserve access to the facility for any operational or maintenance requirements on that equipment. Callon Petroleum Operating Company August 29, 1997 Page 2 Also in your conversation with Mr. Fenton, you were informed that Chevron's production from the field is subject to a processing and marketing agreement with Natural Gas Clearinghouse. Any purchaser must agree to continue this arrangement and enter into new contracts with NGC and/or Warren Petroleum Company at closing. In order to further the process along, Chevron will provide Callon the details of the agreements subject to the execution of the attached confidentiality agreement. Please sign and return one copy to me. If you have any questions, please call me at (713) 754-2430 or Mr. Fenton at (713) 754-5090. I look forward to working with you as we move through our approval process and, hopefully, to an ultimate closing of the transaction. Sincerely, Ann E. Wacker Sr. I. and Representative encl. cc: Elaine Mendel-John EX-23.1 3 EXHIBIT 23.1 CONSENT OF INDEPENDANT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-29537 and 333-29529) of Callon Petroleum Company of our report dated October 29, 1997 appearing on page F-1 of this Current Report on Form 8-K. /s/ PRICE WATERHOUSE LLP Price Waterhouse LLP San Francisco, California October 29, 1997 -----END PRIVACY-ENHANCED MESSAGE-----