exhibit99-1.htm

EXHIBIT 99.1

For further information contact

Rodger W. Smith, 1-800-451-1294

FOR IMMEDIATE RELEASE

Callon Petroleum Company Reports Results

For Second Quarter, First Six Months of 2010

Natchez, MS (August 5, 2010)—Callon Petroleum Company (NYSE: CPE) today reported net income of $2.1 million, or $0.07 per fully-diluted share, for the second quarter, and $6.1 million, or $0.21 per fully-diluted share, for the six-month period ended June 30, 2010. These results represent two consecutive quarters of improved earnings over the corresponding periods of 2009, during which the company reported a net loss of $0.9 million, or $0.04 per fully-diluted share for the second quarter of 2009 and net income of $1.5 million, or $0.07 per fully-diluted share, for the six month period ended June 30, 2009.

Highlights during the first half of 2010 include:

Drilled and placed on production six Permian Basin wells during the first six months of 2010. As of June 30, 2010 we were in the process of completing our seventh well of the year and drilling the eighth.

Spud the company’s first Haynesville shale well, which we expect to be completed and producing by September 2010. This is the first of seven planned Haynesville wells.

Received $7.9 million from the Minerals Management Service (MMS) for interest on royalties recouped on our Medusa Field. Inclusive of the principal reimbursement received during the first quarter of 2010, the receipt of this interest payment increased our total received from the MMS to $52.7 million.

Completed the redemption of the remaining $16.1 million of 9.75% Senior Notes outstanding. This redemption reduced our debt outstanding to $138 million as of June 30, 2010, reduced interest expense by $0.3 million during the second quarter, and will reduce full year 2010 interest expense by approximately $1.0 million.

Second Quarter and Six Months 2010 Operating Results. Operating results for the three months ended June 30, 2010 include oil and gas sales of $21.6 million from average production of 26.1 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $25.0 million from average production of 33.1 MMcfe/d during the comparable 2009 period. The average price per thousand cubic feet of natural gas (Mcf) received during the quarter ended June 30, 2010, after the impact of hedging, increased to $5.22, compared to $4.22 for the quarter ended June 30, 2009. The average price per barrel of oil (Bbl) received in the second quarter of 2010, after hedging impact, increased to $74.03, compared to $72.22 for the same period in 2009.

Oil and gas sales for the first six months of 2010 totaled $45.0 million from average production of 26.9 MMcfe/d. This corresponds to sales of $49.8 million from average production of 33.3 MMcfe/d during the same period in 2009. The average price received per Mcf in the six-month period of 2010, after the impact of hedging, increased to $5.50, compared to $5.18 during the first six months of 2009. Likewise, the average price received per Bbl in the first half of 2010, after hedging impact, increased to $74.41, compared to $66.39 during the same period in 2009.

Second Quarter and Six Months 2010 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended June 30, 2010 totaled $10.5 million compared to $8.8 million during the comparable prior year period. Net cash flow provided by operating activities, as defined by GAAP, totaled $18.3 million during the quarter ended June 30, 2010 while net cash flow used in operating activities was $2.8 million for the second quarter of 2009. Discretionary cash flow for the first six months of 2010 totaled $21.8 million compared to $23.0 million during the same period in 2009. Net cash flow provided by operating activities, as defined by GAAP, totaled $74.0 million during the six-month period ended June 30, 2010, while net cash flow used in operating activities was $0.5 million during the same period in 2009. (See “Non-GAAP Financial Measure” that follows and the accompanying 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 Measures:

(in thousands)

	Three-Months Ended June 30,							Six-Months Ended June 30,
	2010		2009			$ Change		2010		2009			$ Change

Discretionary cash flow	$	10,497	$	8,783		$	1,714	$	21,764	$	23,013		$	(1,249	)
Net working capital changes and other changes		7,839		(11,577	)		19,416		52,240		(23,561	)		75,801
Net cash flow provided by (used in) operating activities	$	18,336	$	(2,794	)	$	21,130	$	74,004	$	(548	)	$	74,552

The following tables set forth certain unaudited operating information with respect to the company's oil and gas operations for the periods indicated:

	Three-Months Ended June 30,
	2010			2009			Change			% Change
Net production:
Oil (MBbls)		215			263			(48	)		(18	)%
Gas (MMcf)		1,085			1,433			(348	)		(24	)%
Total production (MMcfe)		2,374			3,010			(636	)		(21	)%
Average daily production (MMcfe)		26.1			33.1			(7.0	)		(21	)%

Average sales price: (a)
Oil (Bbl)	$	74.03		$	72.22		$	1.81			3	%
Gas (Mcf)		5.22			4.22			1.00			24	%
Total (Mcfe)		9.09			8.32			0.77			9	%

Oil and gas revenues (in thousands):
Oil revenue	$	15,901		$	18,971		$	(3,070	)		(16	)%
Gas revenue		5,668			6,054			(386	)		(6	)%
Total	$	21,569		$	25,025		$	(3,456	)		(14	)%

Additional per Mcfe data:
Sales price	$	9.09		$	8.32		$	0.77			9	%
Lease operating expense		(1.70	)		(1.55	)		(0.15	)		10	%
Operating margin	$	7.39		$	6.77		$	0.62			9	%

Other expenses on a per Mcfe basis:
Depletion, depreciation and amortization	$	2.97		$	2.81		$	0.16			6	%
General and administrative (net of management fees)	$	1.86		$	1.79		$	0.07			4	%



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

Average NYMEX oil price	$	78.03		$	59.62		$	18.41			31	%
Basis differential and quality adjustments		(2.88	)		(3.30	)		0.42			(13	)%
Transportation		(1.16	)		(1.36	)		0.20			(15	)%
Hedging		0.04			17.26			(17.22	)		(100	)%
Average realized oil price	$	74.03		$	72.22		$	1.81			3	%

Average NYMEX gas price	$	4.34		$	3.82		$	0.52			14	%
Natural gas liquid content and volume conversion adjustments		0.70			0.40			0.30			75	%
Hedging		0.18			-			0.18			100	%
Average realized gas price	$	5.22		$	4.22		$	1.00			24	%

	Six-Months Ended June 30,
	2010			2009			Change			% Change
Net production:
Oil (MBbls)		438			526			(88	)		(17	)%
Gas (MMcf)		2,252			2,880			(628	)		(22	)%
Total production (MMcfe)		4,877			6,036			(1,159	)		(19	)%
Average daily production (MMcfe)		26.9			33.3			(6.4	)		(19	)%

Average sales price: (a)
Oil (Bbl)	$	74.41		$	66.39		$	8.02			12	%
Gas (Mcf)		5.50			5.18			0.32			6	%
Total (Mcfe)		9.22			8.26			0.96			12	%

Oil and gas revenues (in thousands):
Oil revenue	$	32,564		$	34,923		$	(2,359	)		(7	)%
Gas revenue		12,390			14,917			(2,527	)		(17	)%
Total	$	44,954		$	49,840		$	(4,886	)		(10	)%

Additional per Mcfe data:
Sales price	$	9.22		$	8.26		$	0.96			12	%
Lease operating expense		(1.78	)		(1.44	)		(0.34	)		24	%
Operating margin	$	7.44		$	6.82		$	0.62			9	%

Other expenses on a per Mcfe basis:
Depletion, depreciation and amortization	$	2.84		$	2.96		$	(0.12	)		(4	)%
General and administrative (net of management fees)	$	1.79		$	1.19		$	0.60			50	%


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

Average NYMEX oil price	$	78.37		$	51.35		$	27.02			53	%
Basis differential and quality adjustments		(2.83	)		(3.68	)		0.85			(23	)%
Transportation		(1.16	)		(1.35	)		0.19			(14	)%
Hedging		0.03			20.07			(20.04	)		(100	)%
Average realized oil price	$	74.41		$	66.39		$	8.02			12	%

Average NYMEX gas price	$	4.69		$	4.15		$	0.54			13	%
Natural gas liquid content and volume conversion adjustments		0.73			0.39			0.34			87	%
Hedging		0.08			0.64			(0.56	)		(88	)%
Average realized gas price	$	5.50		$	5.18		$	0.32			6	%

Callon Petroleum Company

Consolidated Balance Sheets

(in thousands, except share data)

	June 30, 2010			December 31, 2009
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	31,812		$	3,635
Accounts receivable		16,632			20,798
Accounts receivable - MMS royalty recoupment		-			51,534
Fair market value of derivatives		1,106			145
Other current assets		914			1,572
Total current assets		50,464			77,684

Oil and gas properties, full-cost accounting method:
Evaluated properties		1,248,051			1,593,884
Less accumulated depreciation, depletion and amortization		(1,137,978	)		(1,488,718	)
Net oil and gas properties		110,073			105,166
Unevaluated properties excluded from amortization		30,482			25,442
Total oil and gas properties		140,555			130,608

Other property and equipment, net		2,724			2,508
Restricted investments		4,365			4,065
Investment in Medusa Spar LLC		10,928			11,537
Other assets, net		2,215			1,589
Total assets	$	211,251		$	227,991

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities	$	12,111		$	12,887
Asset retirement obligations		3,377			4,002
9.75% Senior Notes, net of $0 and $232 discount, respectively		-			15,820
Subtotal		15,488			32,709
Callon Entrada non-recourse credit facility		-			84,847
Total current liabilities		15,488			117,556

13% Senior Notes
Principal outstanding		137,961			137,961
Deferred credit, net of accumulated amortization of $2,090 and $294, respectively		29,417			31,213
Total 13% Senior Notes		167,378			169,174

Senior secured revolving credit facility		-			10,000
Asset retirement obligations		11,542			10,648
Other long-term liabilities		2,424			1,467
Total liabilities		196,832			308,845

Stockholders' equity (deficit):
Preferred Stock, $.01 par value, 2,500,000 shares authorized;		-			-
Common Stock, $.01 par value, 60,000,000 shares authorized; 28,792,290 and 28,742,926 shares outstanding at June 30, 2010 and December 31, 2009, respectively		288			287
Capital in excess of par value		246,571			243,898
Other comprehensive loss		(6,027	)		(7,478	)
Retained earnings (deficit)		(226,413	)		(317,561	)
Total stockholders' equity (deficit)		14,419			(80,854	)
Total liabilities and stockholders' equity (deficit)	$	211,251		$	227,991

Callon Petroleum Company

Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

	Three-Months Ended June 30,						Six-Months Ended June 30,
	2010			2009			2010			2009
Operating revenues:
Oil sales	$	15,901		$	18,971		$	32,564		$	34,923
Gas sales		5,668			6,054			12,390			14,917
Total operating revenues		21,569			25,025			44,954			49,840

Operating expenses:
Lease operating expenses		4,031			4,656			8,679			8,695
Depreciation, depletion and amortization		7,042			8,452			13,855			17,865
General and administrative		4,411			5,391			8,715			7,210
Accretion expense		622			795			1,202			1,833
Total operating expenses		16,106			19,294			32,451			35,603
Income from operations		5,463			5,731			12,503			14,237

Other (income) expenses:
Interest expense		3,198			4,854			6,792			9,636
Callon Entrada non-recourse credit facility interest expense		-			1,935			-			3,491
Loss on early extinguishment of debt		339			-			339			-
Other (income) expense		(111	)		61			(472	)		(34	)
Total other (income) expenses		3,426			6,850			6,659			13,093

Income (loss) before income taxes		2,037			(1,119	)		5,844			1,144
Income tax expense		-			24			-			-
Income (loss) before equity in earnings of Medusa Spar LLC		2,037			(1,143	)		5,844			1,144
Equity in earnings of Medusa Spar LLC		93			218			209			335
Net income (loss) available to common shares	$	2,130		$	(925	)	$	6,053		$	1,479

Net income (loss) per common share:
Basic	$	0.07		$	(0.04	)	$	0.21		$	0.07
Diluted	$	0.07		$	(0.04	)	$	0.21		$	0.07

Shares used in computing net income (loss) per common share:
Basic		28,762			21,645			28,750			21,626
Diluted		29,583			21,645			29,406			21,626

Callon Petroleum Company

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Six-Months Ended June 30,
	2010			2009
Cash flows from operating activities:
Net income	$	6,053		$	1,479
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation, depletion and amortization		14,245			18,285
Accretion expense		1,202			1,833
Amortization of non-cash debt related items		221			3,168
Amortization of deferred credit		(1,796	)		-
Equity in earnings of Medusa Spar LLC		(209	)		(335	)
Non-cash charge for early debt extinguishment		179			-
Non-cash charge related to compensation plans		2,049			1,184
Payments to settle asset retirement obligations		(180	)		(2,601	)
Changes in current assets and liabilities:
Accounts receivable		53,362			6,441
Other current assets		658			(868	)
Current liabilities		(921	)		(28,993	)
Change in gas balancing receivable		285			155
Change in gas balancing payable		(249	)		(123	)
Change in other long-term liabilities		(115	)		16
Change in other assets, net		(780	)		(189	)
Cash provided by (used in) operating activities		74,004			(548	)

Cash flows from investing activities:
Capital expenditures		(19,987	)		(21,829	)
Investment in restricted assets related to plugging and abandonment obligations		(300	)		-
Distribution from Medusa Spar LLC		818			986
Cash used in investing activities		(19,469	)		(20,843	)

Cash flows from financing activities:
Borrowings from senior secured credit facility		-			9,337
Payments on senior secured credit facility		(10,000	)		(4,337	)
Redemption of remaining 9.75% senior notes		(16,052	)		-
Proceeds from exercise of employee stock options		5			-
Cash (used in) provided by financing activities		(26,047	)		5,000

Net change in cash and cash equivalents		28,488			(16,391	)
Cash and cash equivalents:
Balance, beginning of period		3,635			17,126
Less: Cash held by subsidiary deconsolidated at January 1, 2010		(311	)		-
Balance, end of period	$	31,812		$	735

Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties in Texas, Louisiana and 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 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.