8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report

October 20, 2016

(Date of earliest event reported)

Callon Petroleum Company

(Exact name of registrant as specified in its charter)

Delaware	001-14039	64-0844345
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

200 North Canal St.

Natchez, Mississippi 39120

(Address of principal executive offices, including zip code)

(601) 442-1601

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

As previously disclosed in its Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission on September 6, 2016 and October 25, 2016, Callon Petroleum Company (the “Company”) entered into a definitive purchase and sale agreement with Plymouth Petroleum, LLC (the “Plymouth Acquisition”) to acquire 6,904 gross (5,952 net) surface acres primarily located in Howard County, Texas (the “Acquired Properties”). On October 20, 2016, the Company completed the Plymouth Acquisition for a purchase price of approximately $340 million in cash, subject to customary post-closing adjustments, with an effective date of September 1, 2016. The Company acquired an 86% average working interest (65% average net revenue interest) in the acquisition.

This Current Report on Form 8-K/A provides financial statements of the Acquired Properties and the pro forma financial statements required by Item 9.01 of Form 8-K. The pro forma financial statements also reflect an unrelated acquisition in May 2016 of certain undeveloped acreage and producing oil and gas properties for total cash consideration of $220 million and 9,333,333 shares of common stock (the “Big Star Acquisition”) that was previously reported in the Company’s Current Reports on Form 8-K filed on April 19, 2016, May 31, 2016 and September 6, 2016 and Form 8-K/A filed on August 4, 2016. This Current Report on Form 8-K/A should be read in connection with the Current Reports on Form 8-K filed on September 6, 2016 and October 25, 2016, which provide a more complete description of the Plymouth Acquisition.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

Audited Statements of Revenues and Direct Operating Expenses of the Acquired Properties for the year ended December 31, 2015 and Unaudited Statements of Revenues and Direct Operating Expenses of the Acquired Properties for the nine months ended September 30, 2016 and 2015, are attached hereto as Exhibit 99.1.

(b) Pro forma financial information.

Unaudited Pro Forma Consolidated Financial Statements of the Company as of September 30, 2016 and for the year ended December 31, 2015 and for the nine months ended September 30, 2016, are attached hereto as Exhibit 99.2.

(d) Exhibits

Exhibit Number	Title of Document
23.1	Consent of BDO USA, LLP
99.1	Audited and Unaudited Statements of Revenues and Direct Operating Expenses
99.2	Unaudited Pro Forma Consolidated Financial Statements

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 hereunto duly authorized.

	Callon Petroleum Company
	(Registrant)
December 13, 2016	By:	/s/ Joseph C. Gatto, Jr.
		Joseph C. Gatto, Jr.
		President, Chief Financial Officer and Treasurer

Exhibit Index

Exhibit Number	Title of Document
23.1	Consent of BDO USA, LLP
99.1	Audited and Unaudited Statements of Revenues and Direct Operating Expenses
99.2	Unaudited Pro Forma Consolidated Financial Statements

EX-23.1

Exhibit 23.1

Tel: 713-960-1706 Fax: 713-960-9549 www.bdo.com 2929 Allen Parkway 20th Floor Houston, TX 77019-7100

Consent of Independent Auditor

Callon Petroleum Company

Natchez, Mississippi

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 ASR (No. 333-210612), Form S-8 (No. 333-212044), Form S-8 (No.333-109744), Form S-8 (No.333-176061), Form S-8 (No.333-100646), and Form S-8 (No.333-188008) of Callon Petroleum Company (“Callon”) of our report dated December 13, 2016, relating to the statement of revenues and direct operating expenses associated with the oil and natural gas properties acquired by Callon from Plymouth Petroleum, LLC and additional sellers that exercised their “tag-along” rights, included in Callon’s current report on Form 8-K/A filed on December 13, 2016.

/s/ BDO USA, LLP

BDO USA, LLP

Houston, Texas

December 13, 2016

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

BDO is the brand name for the BDO network and for each of the BDO Member Firms.

EX-99.1

Exhibit 99.1

Acquired Properties

Statements of Revenues and Direct Operating Expenses

For the Year Ended December 31, 2015 and

For the Nine Months Ended September 30, 2016

CONTENTS

	Page
Independent Auditor’s Report		1
Financial Statements
Statement of Revenues and Direct Operating Expenses		2
Notes to the Statement of Revenues and Direct Operating Expenses		3
Unaudited Statement of Revenues and Direct Operating Expenses		7
Notes to the Unaudited Statement of Revenues and Direct Operating Expenses		8

Independent Auditor’s Report

Board of Directors and Stockholders of

Callon Petroleum Company

Natchez, Mississippi

We have audited the accompanying statement of revenues and direct operating expenses of the oil and natural gas properties (the “Acquired Properties”), as defined in Note 1, acquired on October 20, 2016 by Callon Petroleum Company for the year ended December 31, 2015, and the related notes to the statement of direct revenues and operating expenses.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the statement of revenues and direct operating expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement of revenues and direct operating expenses that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the statement of revenues and direct operating expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues and direct operating expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statement of revenues and direct operating expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the statement of revenues and direct operating expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement of revenues and direct operating expenses.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the statement of revenues and direct operating expenses statements referred to above present fairly, in all material respects, the revenues and direct operating expenses of the Acquired Properties for the year ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As described in Note 1, the 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 Callon Petroleum Company’s Form 8-K/A and is not intended to be a complete presentation of the results of the operations of the Acquired Properties. Our opinion is not modified with respect to this matter.

Houston, TX

December 13, 2016

1

Acquired Properties

Statement of Revenues and Direct Operating Expenses

(in thousands)

	For the Year Ended December 31, 2015
Revenues	$	11,547
Direct operating expenses:
Lease operating expenses		1,309
Production taxes		765
Total direct operating expenses		2,074
Revenues in excess of direct operating expenses	$	9,473

See accompanying Notes to the Statement of Revenues and Direct Operating Expenses.

2

Acquired Properties

Notes to the Statement of Revenues and Direct Operating Expenses

(Unless otherwise indicated, dollar amounts included in the notes are presented in thousands)

NOTE 1 - Summary of Significant Accounting Policies

Basis of Presentation

On September 6, 2016, Callon Petroleum Operating Company, a wholly owned subsidiary of Callon Petroleum Company (“Callon” or the “Company”), entered into a definitive purchase and sale agreement with Plymouth Petroleum, LLC, and additional sellers (the “Sellers”) that exercised their “tag-along” sales rights, to acquire surface acres primarily located in Howard County, Texas (the “Acquired Properties”), for an aggregate purchase price of $340 million in cash, subject to customary post-closing adjustments, with an effective date of September 1, 2016 (the “Acquisition”). The Acquisition closed on October 20, 2016.

The Acquired Properties were not accounted for as a separate subsidiary or division during the periods presented. Accordingly, complete financial statements under U.S. generally accepted accounting principles (“GAAP”) are not available or practicable to obtain for the Acquired Properties. The Statement of Revenues and Direct Operating Expenses is not intended to be a complete presentation of the results of operations of the Acquired Properties and may not be representative of future operations as they do not include general and administrative expenses, effects of derivative transactions, interest income or expense, depreciation, depletion and amortization, provision for income taxes and other income and expense items not directly associated with revenues from natural gas, natural gas liquids (“NGLs”) and crude oil. The accompanying Statement of Revenues and Direct Operating Expenses are presented in lieu of the full financial statements required under Rule 3-05 of the Securities and Exchange Commission (the “SEC”) Regulation S-X.

Revenue Recognition and Natural Gas Balancing

Revenue is recognized under the entitlement method of accounting in the accompanying Statement of Revenues and Direct Operating Expenses. Under this method, revenue is deferred for deliveries in excess of the Acquired Properties’ net revenue interest, while revenue is accrued for the undelivered volumes. Revenues related to the sales of hydrocarbons totaled approximately $11.5 million for the year ended December 31, 2015. The Acquired Properties had no significant imbalances during the periods presented.

Direct Operating Expenses

Direct operating expenses are recognized when incurred and include amounts incurred to bring crude oil, natural gas, and natural gas liquids to the surface, gather, transport, field process, treat and store.

Concentration of Credit Risk

Arrangements for oil and natural gas sales are evidenced by signed contracts with determinable market prices, and revenues are recorded when production is delivered. A significant majority of the purchasers of these products have investment grade credit rating and material credit losses have been rare.

The Acquired Properties had revenues from four purchasers, which accounted for approximately 100% of total oil and gas revenues for the year ended December 31, 2015. This concentration of customers may impact the Acquired Properties’ overall business risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. The Sellers believe this risk is mitigated by the size, reputation and nature of its purchasers. All of the Acquired Properties’ revenues are from oil and gas production in Texas. These concentrations may also impact the Acquired Properties by changes in the Texas region.

3

NOTE 2 - Subsequent Events

The Company has evaluated subsequent events through December 13, 2016, the date the accompanying Statement of Revenues and Direct Operating Expenses were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the accompanying Statement of Revenue and Direct Operating Expenses.

NOTE 3 - Contingencies

The activities of the Acquired Properties’ working interest may become subject to potential claims and litigation in the normal course of operations. The Sellers do not believe that any liability resulting from any pending or threatened litigation will have a material adverse effect on the operations or financial results of the Acquired Properties’ working interests.

NOTE 4 - Supplemental Oil and Gas Information (Unaudited)

The following tables summarize the net ownership interest in the proved oil and gas reserves and the standardized measure of discounted future net cash flows related to the proved oil and gas reserves for the Acquired Properties. Natural gas volumes include natural gas liquids.

Proved reserves as of December 31, 2015 were estimated by qualified petroleum engineers of the Company using historical data and other information from the records of the Sellers.

Numerous uncertainties are inherent in establishing quantities of proved reserves. The following reserve data represents estimates only, and should not be deemed exact. In addition, the standardized measure of discounted future net cash flows should not be construed as the current market value of the Acquired Properties or the cost that would be incurred to obtain equivalent reserves.

All information set forth herein relating to the proved reserves as of December 31, 2015, including the estimated future net cash flows and present values, from those dates, is taken or derived from the records of the Sellers of the Acquired Properties. The estimates of reserves attributable to the Acquisition may include development plans for those properties which are different from those that the Company will ultimately implement. These estimates were based upon review of historical production data and other geological, economic, ownership, and engineering data provided related to the reserves. No reports on these reserves have been filed with any federal agency. In accordance with the SEC’s guidelines, estimates of proved reserves and the future net revenues from which present values are derived were based on an unweighted 12-month average of the first-day-of-the-month price for the period, and held constant throughout the life of the Acquired Properties. Operating costs, development costs, and certain production-related taxes, which are based on current information and held constant, were deducted in arriving at estimated future net revenues.

4

The proved reserves of the Acquired Properties, all held within the United States, together with the changes therein are as follows:

	Changes in Reserve Quantities For the Year Ended December 31, 2015
Proved developed and undeveloped reserves:
Oil (MBbls):
Beginning of period		2,611
Revisions to previous estimates		(55	)
Extensions and discoveries		10,505
Production		(246	)
End of period		12,815
Natural Gas (MMcf):
Beginning of period		4,812
Revisions to previous estimates		(1,269	)
Extensions and discoveries		12,000
Production		(253	)
End of period		15,290

	Reserve Quantities For the Year Ended December 31, 2015
Proved developed:
Oil (MBbls)
Beginning of period		980
End of period		2,556
Natural gas (MMcf)
Beginning of period		2,413
End of period		3,641
MBOE:
Beginning of period		1,383
End of period		3,163
Proved undeveloped reserves:
Oil (MBbls)
Beginning of period		1,631
End of period		10,259
Natural gas (MMcf)
Beginning of period		2,399
End of period		11,649
MBOE:
Beginning of period		2,031
End of period		12,200

Future cash inflows are computed by applying a 12-month average of the first day of the month commodity price adjusted for location and quality differentials for 2015 to year-end quantities of proved reserves. Future development costs include future asset retirement costs. Future production costs do not include any general and administrative expenses. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair value of the Acquired Properties.

5

The discounted future cash flow estimates do not include the effects of derivative instruments. The average price used per commodity follows:

	2015
Average 12-month price, net of differentials, per Mcf of natural gas	$	3.60
Average 12-month price, net of differentials, per barrel of oil	$	46.87

Standardized measure of discounted future net cash flows relating to proved reserves was as follows (in thousands):

	Standardized Measure For the Year Ended December 31, 2015
Future cash inflows	$	655,656
Future costs -
Production		(146,125	)
Development and net abandonment		(152,295	)
Future net inflows before income taxes		357,236
Future income taxes		(105,727	)
Future net cash flows		251,509
10% discount factor		(169,882	)
Standardized measure of discounted future net cash flows	$	81,627

The principal changes in standardized measure of discounted future net cash flows were as follows (in thousands):

	Changes in Standardized Measure For the Year Ended December 31, 2015
Standardized measure at the beginning of the period Changes	$	56,607
Sales and transfers, net of production costs		(9,473	)
Net change in sales and transfer prices, net of production costs		(42,464	)
Extensions, discoveries, and improved recovery, net of future production and development costs incurred		88,363
Changes in future development cost		11,743
Revisions of quantity estimates		(3,315	)
Accretion of discount		7,368
Net change in income taxes		(16,530	)
Changes in production rates, timing and other		(10,672	)
Aggregate change		25,020
Standardized measure at the end of period	$	81,627

6

Acquired Properties

Unaudited Statement of Revenues and Direct Operating Expenses

(in thousands)

	For the Nine Months Ended September 30, 2016
Revenues	$	15,275
Direct operating expenses:
Lease operating expenses		1,601
Production taxes		927
Total direct operating expenses		2,528
Revenues in excess of direct operating expenses	$	12,747

See accompanying Notes to the Statement of Revenues and Direct Operating Expenses.

7

Acquired Properties

Notes to the Unaudited Statement of Revenues and Direct Operating Expenses

(Unless otherwise indicated, dollar amounts included in the notes are presented in thousands)

NOTE 1 - Summary of Significant Accounting Policies

Basis of Presentation

On September 6, 2016, Callon Petroleum Operating Company, a wholly owned subsidiary of Callon Petroleum Company (“Callon” or the “Company”), entered into a definitive purchase and sale agreement with Plymouth Petroleum, LLC, and additional sellers (the “Sellers”) that exercised their “tag-along” sales rights, to acquire 6,904 gross (5,952 net) surface acres primarily located in Howard County, Texas (the “Acquired Properties”), for an aggregate purchase price of $340 million in cash, subject to customary post-closing adjustments, with an effective date of September 1, 2016. The acquisition closed on October 20, 2016.

The Acquired Properties were not accounted for as a separate subsidiary or division during the periods presented. Accordingly, complete financial statements under U.S. generally accepted accounting principles (“GAAP”) are not available or practicable to obtain for the Acquired Properties. The Statement of Revenues and Direct Operating Expenses is not intended to be a complete presentation of the results of operations of the Acquired Properties and may not be representative of future operations as they do not include general and administrative expenses, effects of derivative transactions, interest income or expense, depreciation, depletion and amortization, provision for income taxes and other income and expense items not directly associated with revenues from natural gas, natural gas liquids (“NGLs”) and crude oil. The accompanying Statement of Revenues and Direct Operating Expenses are presented in lieu of the full financial statements required under Rule 3-05 of the Securities and Exchange Commission (the “SEC”) Regulation S-X.

In the opinion of management, the accompanying unaudited Statement of Revenues and Direct Operating Expenses reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Acquired Properties’ revenues and direct operating expenses for the periods indicated.

Revenue Recognition and Natural Gas Balancing

Revenue is recognized under the entitlement method of accounting in the accompanying Statement of Revenues and Direct Operating Expenses. Under this method, revenue is deferred for deliveries in excess of the Acquired Properties’ net revenue interest, while revenue is accrued for the undelivered volumes. The revenue received from the sale of NGLs is included in natural gas sales. The Acquired Properties had no significant imbalances during the periods presented.

Direct Operating Expenses

Direct operating expenses are recognized when incurred and include amounts incurred to bring crude oil, natural gas, and natural gas liquids to the surface, gather, transport, field process, treat and store same.

Concentration of Credit Risk

Arrangements for oil and natural gas sales are evidenced by signed contracts with determinable market prices, and revenues are recorded when production is delivered. A significant majority of the purchasers of these products have investment grade credit rating and material credit losses have been rare.

8

NOTE 2 - Subsequent Events

The Company has evaluated subsequent events through December 13, 2016, the date the accompanying Statement of Revenues and Direct Operating Expenses were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the accompanying Statement of Revenue and Direct Operating Expenses.

NOTE 3 – Contingencies

The activities of the Acquired Properties’ working interest may become subject to potential claims and litigation in the normal course of operations. The Sellers do not believe that any liability resulting from any pending or threatened litigation will have a material adverse effect on the operations or financial results of the Properties’ working interests.

9

EX-99.2

Exhibit 99.2

CALLON PETROLEUM COMPANY, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On September 6, 2016, Callon Petroleum Operating Company, a wholly owned subsidiary of Callon Petroleum Company (“Callon” or the “Company”), entered into a definitive purchase and sale agreement with Plymouth Petroleum, LLC, and additional sellers that exercised their “tag-along” sales rights, to acquire 6,904 gross (5,952 net) surface acres primarily located in Howard County, Texas (the “Acquired Properties”), for an aggregate purchase price of $340 million in cash, subject to customary post-closing adjustments, with an effective date of September 1, 2016 (the “Plymouth Acquisition”). The Plymouth Acquisition closed on October 20, 2016.

On September 12, 2016, the Company completed an underwritten public offering of 29,900,000 shares of common stock for total estimated net proceeds (after underwriters’ discounts and estimated offering expenses) of approximately $421.9 million (the “Equity Offering”). A portion of the proceeds from the Equity Offering were used to fund the Plymouth Acquisition.

We derived the unaudited pro forma consolidated financial statements from the historical consolidated financial statements of the Company and the Statements of Revenues and Direct Operating Expenses for the Acquired Properties for the respective periods. The pro forma consolidated Statement of Operations also reflects an unrelated acquisition in May 2016 of 17,298 gross (14,089 net) acres primarily located in Howard County, Texas for total cash consideration of $220 million and 9,333,333 shares of common stock with an effective date of May 1, 2016 (the “Big Star Acquisition”) that was previously reported in the Company’s Current Report on Form 8-K/A filed on August 4, 2016 and on Form 8-K filed on September 6, 2016. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2015 and nine months ended September 30, 2016 give effect to the Plymouth Acquisition, the Equity Offering, and the pro forma adjustments relating to the Big Star Acquisition as if they occurred on January 1, 2015. The unaudited pro forma consolidated balance sheet as of September 30, 2016 gives effect to the Plymouth Acquisition as if it occurred on September 30, 2016.

The pro forma adjustments are based on available information and certain assumptions that we believe are reasonable as of the date of this Current Report on Form 8-K/A. Assumptions underlying the pro forma adjustments related to the Acquired Properties are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma consolidated financial statements. The pro forma adjustments reflected herein are based on management’s expectations regarding the Plymouth Acquisition, the Big Star Acquisition, the Equity Offering discussed above. The Plymouth Acquisition will be accounted for under the purchase method of accounting, and which involves determining the fair values of assets acquired and liabilities assumed. The purchase price allocation for the Plymouth Acquisition included in the unaudited pro forma financial statements is preliminary and based on management’s best estimates as of the date of this Current Report on Form 8-K/A. The preliminary purchase price allocation is subject to change based on numerous factors, including the final adjusted purchase price and the final estimated fair value of the assets acquired and liabilities assumed. Any such adjustments to the preliminary estimates of fair value reflected in the accompanying unaudited pro forma consolidated financial statements could be material.

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and do not purport to indicate the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the Plymouth Acquisition, the Equity Offering and the Big Star Acquisition been consummated on the dates or for the periods presented. The unaudited pro forma consolidated financial statements should be read in conjunction with the audited December 31, 2015 consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed on March 3, 2016, the unaudited September 30, 2016 consolidated financial statements contained in the Company’s Quarterly Report on Form 10-Q filed on November 2, 2016, the audited statements of revenues and direct operating expenses for the Big Star Acquisition for the year ended December 31, 2015 filed with the Company’s Current Report on Form 8-K/A on August 4, 2016, the unaudited pro forma statements of operations for the Big Star Acquisition for the year ended December 31, 2015 filed with the Company’s Current Report on Form 8-K/A on August 4, 2016, the unaudited pro forma statements of operations for the Big Star Acquisition for the six months ended June 30, 2016 filed with the Company’s Current Report on Form 8-K on September 6, 2016, the audited statements of revenues and direct operating expenses for the Acquired Properties for the year ended December 31, 2015 filed with this Current Report on Form 8-K/A, and the unaudited statements of revenues and direct operating expenses for the Acquired Properties for the nine months ended September 30, 2016 filed with this Current Report on Form 8-K/A.

1

CALLON PETROLEUM COMPANY

Unaudited Pro Forma Consolidated Balance Sheet

as of September 30, 2016

($ in thousands, except par and per share values and share data)

	Historical			Acquired Properties Adjustments			Pro forma
ASSETS
Current assets:
Cash and cash equivalents	$	325,885		$	(306,987	) (b)	$	18,898
Accounts receivable		56,172			—			56,172
Fair value of derivatives		3,502			—			3,502
Other current assets		1,712			—			1,712
Total current assets		387,271			(306,987	)		80,284
Oil and natural gas properties, full cost accounting method:
Evaluated properties		2,593,798			63,568	(a)		2,657,366
Less accumulated depreciation, depletion, amortization and impairment		(1,901,102	)		—			(1,901,102	)
Net oil and natural gas properties		692,696			63,568			756,264
Unevaluated properties		393,875			276,207	(a)		670,082
Total oil and natural gas properties		1,086,571			339,775			1,426,346
Other property and equipment, net		12,816			—			12,816
Restricted investments		3,329			—			3,329
Deferred financing costs		3,431			—			3,431
Fair value of derivatives		57			—			57
Acquisition deposit		32,700			(32,700	) (b)		—
Other assets, net		1,429			—			1,429
Total assets	$	1,527,604		$	88		$	1,527,692
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	99,026		$	—		$	99,026
Accrued interest		5,950			—			5,950
Cash-settleable restricted stock unit awards		8,269			—			8,269
Asset retirement obligations		3,529			—			3,529
Deferred tax liability		42			—			42
Fair value of derivatives		7,786			—			7,786
Total current liabilities		124,602			—			124,602
Secured second lien term loan, net of unamortized deferred financing costs		290,085			—			290,085
Asset retirement obligations		1,934			88	(a)		2,022
Cash-settleable restricted stock unit awards		7,042			—			7,042
Fair value of derivatives		2,936			—			2,936
Other long-term liabilities		286			—			286
Total liabilities		426,885			88			426,973
Stockholders’ equity:
Preferred stock, series A cumulative, $0.01 par value and $50.00 liquidation preference, 2,500,000 shares authorized: 1,458,948 shares outstanding		15			—			15
Common stock, $0.01 par value, 300,000,000 shares authorized; 161,036,233 shares outstanding		1,610			—			1,610
Capital in excess of par value		1,535,661			—			1,535,661
Accumulated deficit		(436,567	)		—			(436,567	)
Total stockholders’ equity		1,100,719			—			1,100,719
Total liabilities and stockholders’ equity	$	1,527,604		$	88		$	1,527,692

2

CALLON PETROLEUM COMPANY

Unaudited Pro forma Consolidated Statements of Operations for the Year Ended December 31, 2015

($ in thousands, except per share data)

	Historical			Big Star Acquisition			Pro forma Adjustments (Big Star Acquisition)			Acquired Properties			Pro forma Adjustments (Acquired Properties)			Pro forma
Operating revenues:
Oil sales	$	125,166		$	*		$	—		$	*		$	—		$	*
Natural gas sales		12,346			*			—			*			—			*
Total operating revenues		137,512			19,447	(c)		—			11,547	(d)		—			168,506
Operating expenses:
Lease operating expenses		27,036			4,304	(c)		—			1,309	(d)		—			32,649
Production taxes		9,793			842	(c)		—			765	(d)		—			11,400
Depreciation, depletion and amortization		69,249			—			15,374	(c)		—			(1,163	) (e)		83,460
General and administrative		28,347			—			—			—			—			28,347
Accretion expense		660			—			5	(c)		—			4	(e)		669
Write-down of oil and natural gas properties		208,435			—			(68,205	)		—			—			140,230
Rig termination fee		3,075			—			—			—			—			3,075
Acquisition expense		27			—			—			—			—			27
Total operating expenses		346,622			5,146			(52,826	)		2,074			(1,159	)		299,857
Income (loss) from operations		(209,110	)		14,301			52,826			9,473			1,159			(131,351	)
Other (income) expenses:
Interest expense, net of capitalized amounts		21,111			—			(15,644	) (c)		—			(981	) (f)		4,486
Gain on derivative contracts		(28,358	)		—			—			—			—			(28,358	)
Other income, net		(198	)		—			—			—			—			(198	)
Total other income		(7,445	)		—			(15,644	)		—			(981	)		(24,070	)
Income (loss) before income taxes		(201,665	)		14,301			68,470			9,473			2,140			(107,281	)
Income tax expense		38,474			—			—			—			—	(g)		38,474
Net income (loss)		(240,139	)		14,301			68,470			9,473			2,140			(145,755	)
Preferred stock dividends		(7,895	)		—			—			—			—			(7,895	)
Income (loss) available to common stockholders	$	(248,034	)	$	14,301		$	68,470		$	9,473		$	2,140		$	(153,650	)
Loss per common share:
Basic	$	(3.77	)													$	(1.18	)
Diluted	$	(3.77	)													$	(1.18	)
Shares used in computing loss per common share:
Basic		65,708						34,633	(c)					29,900	(h)		130,241
Diluted		65,708						34,633	(c)					29,900	(h)		130,241

* No pro forma for oil and natural gas sales.

3

CALLON PETROLEUM COMPANY

Unaudited Pro forma Consolidated Statements of Operations for the Nine Months Ended September 30, 2016

($ in thousands, except per share data)

	Historical			Big Star Acquisition			Pro forma Adjustments (Big Star Acquisition)			Acquired Properties			Pro forma Adjustments (Acquired Properties)			Pro forma
Operating revenues:
Oil sales	$	117,093		$	*		$	—		$	*		$	—		$	*
Natural gas sales		14,677			*			—			*			—			*
Total operating revenues		131,770			9,200	(i)		—			15,275	(j)		—			156,245
Operating expenses:
Lease operating expenses		24,229			2,193	(i)		—			1,601	(j)		—			28,023
Production taxes		8,153			590	(i)		—			927	(j)		—			9,670
Depreciation, depletion and amortization		49,318			—			6,349	(i)		—			6,404	(k)		62,071
General and administrative		19,755			—			—			—			—			19,755
Accretion expense		762			—			(27	) (i)		—			(8	) (k)		727
Write-down of oil and natural gas properties		95,788			—			—			—			—			95,788
Acquisition expense		2,410			—			—			—			—			2,410
Total operating expenses		200,415			2,783			6,322			2,528			6,396			218,444
Income (loss) from operations		(68,645	)		6,417			(6,322	)		12,747			(6,396	)		(62,199	)
Other (income) expenses:
Interest expense, net of capitalized amounts		10,502			—			(6,760	) (i)		—			(726	) (l)		3,016
(Gain) loss on derivative contracts		11,281			—			—			—			—			11,281
Other income, net		(299	)		—			—			—			—			(299	)
Total other (income) expenses		21,484			—			(6,760	)		—			(726	)		13,998
Income (loss) before income taxes		(90,129	)		6,417			438			12,747			(5,670	)		(76,197	)
Income tax (benefit) expense		(62	)		—			—			—			—	(m)		(62	)
Net income (loss)		(90,067	)		6,417			438			12,747			(5,670	)		(76,135	)
Preferred stock dividends		(5,471	)		—			—			—			—			(5,471	)
Income (loss) available to common stockholders	$	(95,538	)	$	6,417		$	438		$	12,747		$	(5,670	)	$	(81,606	)
Loss per common share:
Basic	$	(0.85	)													$	(0.72	)
Diluted	$	(0.85	)													$	(0.72	)
Shares used in computing loss per common share:
Basic		112,925															112,925
Diluted		112,925															112,925

* No pro forma for oil and natural gas sales.

4

1. Basis of Presentation

On September 6, 2016, Callon Petroleum Operating Company, a wholly owned subsidiary of Callon Petroleum Company (“Callon” or the “Company”), entered into a definitive purchase and sale agreement with Plymouth Petroleum, LLC, and additional sellers that exercised their “tag-along” sales rights, to acquire 6,904 gross (5,952 net) surface acres primarily located in Howard County, Texas (the “Acquired Properties”), for an aggregate purchase price of $340 million in cash, subject to customary post-closing adjustments, with an effective date of September 1, 2016 (the “Plymouth Acquisition”). The Plymouth Acquisition closed on October 20, 2016.

On September 12, 2016, the Company completed an underwritten public offering of 29,900,000 shares of common stock for total estimated net proceeds (after underwriters’ discounts and estimated offering expenses) of approximately $421.9 million (the “Equity Offering”). A portion of the proceeds from the Equity Offering were used to fund the Plymouth Acquisition.

We derived the unaudited pro forma consolidated financial statements from the historical consolidated financial statements of the Company and the Statements of Revenues and Direct Operating Expenses for the Acquired Properties for the respective periods. The pro forma consolidated Statement of Operations also reflects an unrelated acquisition in May 2016 of 17,298 gross (14,089 net) acres primarily located in Howard County, Texas for total cash consideration of $220 million and 9,333,333 shares of common stock (the “Big Star Acquisition”) that was previously reported in the Company’s Current Report on Form 8-K/A filed on August 4, 2016 and on Form 8-K filed on September 6, 2016. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2015 and nine months ended September 30, 2016 give effect to the Plymouth Acquisition, the Equity Offering, and the pro forma adjustments relating to the Big Star Acquisition as if they occurred on January 1, 2015. The unaudited pro forma consolidated balance sheet as of September 30, 2016 gives effect to the Plymouth Acquisition as if it occurred on September 30, 2016.

The unaudited consolidated pro forma financial statements are presented for illustrative purposes only and do not purport to represent what the Company’s financial position or results of operations would have been if the Plymouth Acquisition, the Equity Offering and the Big Star Acquisition had occurred as presented, or to project the Company’s financial position or results of operations for any future periods. The pro forma adjustments related to the Acquired Properties are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments related to the Acquired Properties are directly attributable to the Plymouth Acquisition, the Equity Offering and the Big Star Acquisition and are expected to have a continuing impact on the Company’s results of operations. In the opinion of management, all adjustments necessary to present fairly the unaudited consolidated pro forma financial statements have been made.

2. Preliminary Purchase Accounting

The Plymouth Acquisition closed on October 20, 2016, for an aggregate purchase price of $340 million in cash, subject to customary post-closing adjustments. The Plymouth Acquisition will be accounted for using the purchase method of accounting. Accordingly, the assets acquired and liabilities assumed are presented based on their estimated acquisition date fair values. The purchase price allocation relating to the Plymouth Acquisition below is preliminary and based on management’s best estimates as of the date of this Current Report on Form 8-K/A. The preliminary purchase price allocation is subject to change based on numerous factors, including the final adjusted purchase price and the final estimated fair value of the assets acquired and liabilities assumed. Any such adjustments to the preliminary estimates of fair value could be material.

The following table summarizes the estimated acquisition date fair values of the net assets acquired in the Plymouth Acquisition (in thousands):

Evaluated oil and natural gas properties	$	63,568
Unevaluated oil and natural gas properties		276,207
Asset retirement obligations		(88	)
Net assets to be acquired	$	339,687

5

3. Pro Forma Adjustments

Pro forma Consolidated Balance Sheet as of September 30, 2016

(a) To record the estimated fair value of the assets acquired and the liabilities assumed in the acquisition.

(b) On September 12, 2016, the Company completed an underwritten public offering of 29,900,000 shares of common stock at $14.60 per share, resulting in net proceeds of $421.9 million. A portion of the proceeds from the Equity Offering were used to fund the Plymouth Acquisition.

Pro forma Statement of Operations for the year ended December 31, 2015

(c) To record the historical revenues and direct operating expense and pro forma adjustments related to the Big Star Acquisition previously reported in the Company’s Current Report on Form 8-K/A filed on August 4, 2016 and on Form 8-K filed on September 6, 2016.

(d) To record the historical revenues and direct operating expenses related to the Acquired Properties.

(e) To record depreciation, depletion, and amortization and accretion of the asset retirement obligations related to the Acquired Properties.

(f) To record a $1.1 million reduction of interest expense related to the borrowings under Credit Facility. The net cash impact of the above pro forma adjustments would have been used to pay down the Credit Facility. Offsetting the reduction of interest expense was a $0.1 million of estimated interest costs capitalized to unevaluated oil and gas properties. The Company capitalizes interest on unevaluated oil and gas properties. Capitalized interest cannot exceed gross interest expense.

(g) The Company typically provides for income taxes at a statutory rate of 35%, but as a result of the write-downs of oil and natural gas properties recognized in the third and fourth quarters of 2015, the Company has incurred a cumulative three year loss resulting in no income tax expense.

(h) On September 12, 2016, the Company completed an underwritten public offering of 29,900,000 shares of common stock at $14.60 per share, resulting in net proceeds of $421.9 million. Proceeds from the offering were used to fund the acquisition and related deposit.

Pro forma Statement of Operations for the nine months ended September 30, 2016

(i) To record the historical revenues and direct operating expense and pro forma adjustments related to the Big Star Acquisition which were previously reported in the Company’s Current Report on Form 8-K/A filed on August 4, 2016 and on Form 8-K filed on September 6, 2016.

(j) To record the historical revenues and direct operating expenses related to the Acquired Properties.

(k) To record depreciation, depletion, and amortization and accretion of the asset retirement obligations related to the Acquired Properties.

(l) To record a $0.5 million reduction of interest expense related to the borrowings under Credit Facility. The net cash impact of the above pro forma adjustments would have been used to pay down the Credit Facility. In addition to the reduction of interest expense was a $0.2 million of estimated interest costs capitalized to unevaluated oil and natural gas properties. The Company capitalizes interest on unevaluated oil and natural gas properties. Capitalized interest cannot exceed gross interest expense.

(m) The Company typically provides for income taxes at a statutory rate of 35%, but as a result of the write-down of oil and natural gas properties recognized in the second half of 2015 and the first quarter of 2016, the Company has incurred a cumulative three year loss resulting in no income tax expense.

6

4. Supplemental Oil and Gas Disclosures

The following table sets forth unaudited pro forma information with respect to the Company’s estimated proved reserves, including changes therein, and proved developed and proved undeveloped reserves for the year ended December 31, 2015, giving effect to Big Star Acquisition and the Plymouth Acquisition as if they occurred on January 1, 2015. The estimates of reserves attributable to the Big Star Acquisition and Plymouth Acquisition may include development plans for those properties which are different from those that the Company will ultimately implement. Reserve estimates are inherently imprecise, require extensive judgments of reservoir engineering data and are generally less precise than estimates made in connection with financial disclosures.

	Changes in Reserve Quantities
	Historical			Big Star Acquisition(a)			Acquired Properties (a)			Pro forma
Proved developed and undeveloped reserves:
Oil (MBbls):
Proved reserves as of December 31, 2014		25,733			10,478			2,611			38,822
Revisions to previous estimates		(1,632	)		5,792			(55	)		4,105
Sale of reserves in place (net of purchases)		2,909			—			—			2,909
Extensions and discoveries		19,127			9,810			10,505			39,442
Production		(2,789	)		(458	)		(246	)		(3,493	)
Proved reserves as of December 31, 2015		43,348			25,622			12,815			81,785
Natural Gas (MMcf):
Proved reserves as of December 31, 2014		42,548			18,047			4,812			65,407
Revisions to previous estimates		4,870			7,287			(1,269	)		10,888
Sale of reserves in place (net of purchases)		2,810			—			—			2,810
Extensions and discoveries		19,621			15,326			12,000			46,947
Production		(4,312	)		(854	)		(253	)		(5,419	)
Proved reserves as of December 31, 2015		65,537			39,806			15,290			120,633

(a) Proved reserves related to NGL volumes for the Big Star Acquisition and Acquired Properties are included in natural gas volumes.

The following tables present the unaudited pro forma standardized measure of future net cash flows related to proved oil and gas reserves together with changes therein, as defined by ASC Topic 932, for the year ended December 31, 2015, giving effect to the Big Star Acquisition and Plymouth Acquisition as if they occurred on January 1, 2015. Future production and development costs are based on current costs with no escalations. Estimated future cash flows have been discounted to their present values based on a 10% annual discount rate. We have assumed the federal tax rate of 35% on the Big Star Acquisition and Acquired Properties. The disclosures below do not purport to present the fair market value of the Company’s oil and gas reserves. An estimate of the fair market value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, a discount factor more representative of the time value of money, and risks inherent in reserve estimates.

	Standardized Measure
	For the Year Ended December 31, 2015
	Historical			Big Star Acquisition(a)			Acquired Properties			Pro forma
Future cash inflows	$	2,227,463		$	1,320,143		$	655,656		$	4,203,262
Future costs -
Production		(827,555	)		(355,048	)		(146,125	)		(1,328,728	)
Development and net abandonment		(239,100	)		(294,638	)		(152,295	)		(686,033	)
Future net inflows before income taxes		1,160,808			670,457			357,236			2,188,501
Future income taxes		—			(54,703	)		(105,727	)		(160,430	)
Future net cash flows		1,160,808			615,754			251,509			2,028,071
10% discount factor		(589,918	)		(466,729	)		(169,882	)		(1,226,529	)
Standardized measure of discounted future net cash flows	$	570,890		$	149,025		$	81,627		$	801,542

7

The following table presents unaudited pro forma changes in the standardized measure of discounted future net cash flows for the year ended December 31, 2015 relating to proved oil and natural gas reserves of the Company, the Big Star Acquisition and the Acquired Properties.

	Changes in Standardized Measure
	For the Year Ended December 31, 2015
	Historical			Big Star Acquisition			Acquired Properties			Pro forma
Standardized measure at the beginning of the period	$	579,542		$	123,415		$	56,607		$	759,564
Changes
Sales and transfers, net of production costs		(110,476	)		(17,573	)		(9,472	)		(137,521	)
Net change in sales and transfer prices, net of production costs		(286,660	)		(123,284	)		(42,465	)		(452,409	)
Net change due to purchases and sales of in place reserves		37,616			—			—			37,616
Extensions, discoveries, and improved recovery, net of future production and development costs incurred		184,469			116,430			88,363			389,262
Changes in future development cost		108,216			27,736			11,743			147,695
Revisions of quantity estimates		(12,625	)		60,431			(3,315	)		44,491
Accretion of discount		62,968			17,076			7,368			87,412
Net change in income taxes		35,407			(12,715	)		(16,530	)		6,162
Changes in production rates, timing and other		(27,567	)		(42,491	)		(10,672	)		(80,730	)
Aggregate change		(8,652	)		25,610			25,020			41,978
Standardized measure at the end of period	$	570,890		$	149,025		$	81,627		$	801,542

The historical twelve-month average prices of oil and natural gas used in determining standardized measure as of December 31, 2015, were:

	Historical		Big Star Acquisition		Acquired Properties
Average 12-month price, net of differentials, per Mcf of natural gas	$	2.73	$	3.33	$	3.60
Average 12-month price, net of differentials, per barrel of oil	$	47.25	$	46.31	$	46.87

8